Pharma stocks fall sharply as US drug pricing investigation nears completion

Pharma companies like Sun Pharma, Reddy’s Laboratories and Cadila Healthcare fell sharply on Friday as US Presidential elections brought back in focus the debate on drug pricing. 

Media reports suggest that the US Congress investigation into price hikes, that began in October 2014, may be nearing completion, culminating into charges of price collusion against companies / individuals by the year end. 

Shares of Sun Pharmaceutical Industries closed at Rs 654.05 per share on BSE, slumping by Rs 50.95 or 7.23%.

Shares of Dr Reddy’s Laboratories ended at Rs 3089.15 per share, down by Rs 172.85 or 5.30% and that of Cadila Healthcare closed at Rs 394.65 per share, down nearly 0.5%.

Deepak Malik , Rahul Solanki  and Archana Menon  of Edelwiess in a report dated November 4, 2016 said, "Our view is that it may be an uphill task for the Department of Justice to prove that these companies have colluded in taking price hikes and the case may take years to reach any conclusion. However, we believe the drug pricing probe does not warrant the 20-25% fall in stock prices."

Two years ago, the US Congress had begun an investigation into price hikes of 10 generic drugs and had asked 14 generic drugmakers to submit detailed information in this regard. Indian companies—Sun Pharma, Dr. Reddy’s, Cadila—were in this list along with other global generics (Teva, Apotex, Mylan etc.).