President Donald Trump executive orders, aimed at substantially reducing drug prices for the US residents, underscore the campaign pitch of the next election. Pharma pricing has been one of the most widely debated topic in America and we are likely to see some pre-election action on the issue.
Trump said the first order “will require federal community health centers to pass the giant discounts they receive from drug companies on insulin and EpiPens directly to their patients,” while the second allows some drug importation and the third will take discounts away from middlemen such as pharmacy benefits manager and give them to patients.
The fourth order will require that Medicare purchase drugs at the same price as foreign countries pay, Trump said. It “will end global freeloading on the backs of American patients and American seniors.
Though the enforcement of the orders before the November 3 election looks difficult because of legal hurdles and various caveats, if they go through Indian drug manufacturers may stand to benefit in terms of increased market access on the formulation side.
As a result of the orders, the heads of major drug companies have requested a meeting on Tuesday to discuss how to lower drug prices and out-of-pocket expenses for Americans, the president added. If talks are successful, the administration may not need to implement the fourth executive order.
The Trump’s order in general is aimed at reducing the gains of middlemen in the US pharma value chain and to that extent, at least optically, it doesn’t impact manufacturers directly. But the way drug price negotiations are usually done it can have an indirect impact on the large pharma manufacturers.
The most important executive order from the manufactures point of view is the fourth one. Spooked by this order, the stocks of the US-based big pharma companies reacted negatively on Friday. While the order doesn’t distinguish between patented drugs and generic drugs, it is most likely meant for the former as the generic market is already quite competitive.
Since the whole idea of the executive orders is to make drugs affordable, there is a good chance of a revamp of the US medicare and the way drug price negotiations are done. This can have a positive outcome on market access. In our opinion, Indian drug manufactures such as Cadila, Lupin, Cipla, Dr Reddy and Sun Pharma and a few small-sized pharma companies, such as Laurus Labs, may benefit if such an event unfolds. In such a case, volume opportunity may offset the incremental pricing erosion.
Trump over the years often has stated that drug companies are “getting away with murder” and prices are “out of control,” though this year he has been meeting with pharma execs as their companies work on a CoronaVirus vaccine.