Nifty Pharma Index cracks 2% as Trump proposes drug price cuts; Sun Pharma dips 5%

Stock Market today: Nifty Pharma index cracked more than 2% in the morning trade on Monday as US President Donald Trump indicated his plans to cut drug prices in the US by 30-80%. 

Trump on Sunday said that he plans signing sign an executive order on Monday morning, which, as per news reports, would lead to a cut in prescription drug and pharmaceutical prices by 30% to 80%.

The cut in prescription drug prices would have an immediate impact on Indian pharmaceutical companies selling drugs in the world's largest pharmaceutical market, the US. Indian companies have large exposure to the US markets.

Nifty Pharma index falls

Nifty Pharma index opened at 20,949.70 on Monday and slipped lower to hit an intraday low of 20,576, resulting in a 2% decline compared to Friday's closing price of 21,072.

Sun Pharma led the fall with its share prices declining more than 5%. Others, such as Biocon, Aurobindo Pharma, Lupin and Divis Laboratories, were prominent losers with their share price declining more than 2%.

These companies, along with Zydus Lifesciences , Cipla and a few others, have significant exposure to the US markets, which contributes large part to their earnings.

“President Trump has announced that he will sign an executive order Monday, aiming to lower medication costs. The directive would instruct HHS to benchmark Medicare payments for physician-administered drugs against the lowest international prices. If implemented, this policy would significantly reduce revenue for U.S. pharmaceutical companies and their Indian suppliers,” Devarsh Vakil, Head of Prime Research at HDFC Securities said. He sees a significant hit on stock prices of Indian pharma exporters today.

Why did Sun Pharma share prices fall the most?

Sun Pharmaceutical Industries led the fall as its share price crashed more than 5% during the morning trade on Monday.

Unlike other companies that majorly sell generic drugs, Sun Pharma, having launched a large portfolio of specialty drugs, is targeting growth through the prescription drugs market. Products like Odomzo for basal cell carcinoma, Cequa for dry eye illness, and Ilumya (tildrakizumab) for psoriasis are all part of Sun Pharma's specialised portfolio. They also sell Winlevi (an acne medication) and Absorica LD (Isotretinoin Capsules) for acne. They also offer Levulan, which is keratosis of the face and scalp.

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