Pharmaceuticals - Trump signs executive orders for lowering drug prices - ICICI Securities

US president Trump has signed four executive orders aimed at reducing drug prices substantially for US citizens. US government has been working on various measures for several years to reduce drug prices and these orders are the culmination of it. These orders include 1) Federal community health centers to pass on the huge discounts on insulins and EpiPens to patients, 2) allowing import of prescription drugs from Canada and other countries into US, 3) removing middlemen who get huge discounts/rebates from drug companies, and 4) to end global freeloading on US citizens where price differential is significant as compared to other countries for same drugs.

- Four orders signed to reduce drug prices in US: President Trump signed four executive orders to lower the drug prices for US citizens.

- Federal community health centres would require to pass on discounts received from pharma companies to the patients on insulin and EpiPens. This is because these products have become very expensive for patients to afford. We believe this may benefit generic insulin companies with higher volumes albeit at lower pricing.

- Allowing safe and legal import of drugs from Canada and other countries where prices of same drugs from same plants are much lower, by states, wholesalers and pharmacies. We don't expect any material negative impact on generic companies from this order.

- To prevent middlemen (PBMs) who make significant money in form of discounts or rebates, from than pharma companies. These discounts or rebates can be passed onto patients directly, thereby making drugs affordable.

- To end global freeloading on backs of American patients. The prices of prescription drugs charged in US are several times higher than that in other foreign countries for the same drug from same plant. This order may have some impact if it was meant for generic drugs, although it's not specified in the order.

- Our view: We believe this development could be sentimentally negative for the pharma generic industry but nothing specifically has been outlined for generic drugs, unless its added in the future. We don't expect any negative impact from the first three orders on generic drug companies. The fourth order may impact if it is meant for generic drugs, although it's not specified in the order. We believe this is targeted towards patented drugs as the generic market is already very competitive and several drugs are in shortage. We continue to remain positive on the sector and maintain Sun Pharma, Alkem Labs and Abbott India as top picks.

Shares of 20 MICRONS LTD. was last trading in BSE at Rs.30.2 as compared to the previous close of Rs. 31.25. The total number of shares traded during the day was 13402 in over 259 trades.

The stock hit an intraday high of Rs. 31 and intraday low of 29.2. The net turnover during the day was Rs. 398860.

Source : Equity Bulls

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