Nifty Pharma Rebounds As Asian Drug Stocks Slide On Trump's Drug Price Cut Plans
Pharma stocks rebound in India after early dip; Trump's drug price cut plan hits Asian drugmakers, some fall up to 7% on growth fears
Domestic pharmaceutical and healthcare stocks staged a mild recovery on Monday, May 12, after initially slipping in response to US President Donald Trump's announcement to significantly slash prescription drug prices in the US, aiming to bring them among the lowest globally. In contrast, Asia-based drugmakers extended their slide, with some falling as much as 7% amid concerns over future earnings growth.
According to a report by Moneycontrol.com, Trump took to Truth Social, saying, 'For many years, the world has wondered why prescription drugs and pharmaceuticals in the United States were so much higher in price than they were in any other nation. Sometimes being five to ten times more expensive than the same drug, manufactured in the same laboratory or plant, by the same company."
He blamed pharmaceutical firms for justifying these high costs with research and development expenses, arguing that American consumers were being taken advantage of. 'The pharmaceutical companies would say, for years, that it was research and development costs, all of which were borne by the 'suckers' of America, alone," Trump said.
Despite opening nearly 2% lower, the Nifty Pharma index recovered to trade 0.3% higher at 21,138.90 by 10:45 AM. Leading the rebound were Mankind Pharma, Dr Reddy's, and Granules India, which rose up to 4%, according to Moneycontrol.
However, in broader Asia, sentiment remained negative. Japanese pharma giants such as Chugai Pharmaceutical tumbled up to 7.2%, while Daiichi Sankyo and Takeda Pharmaceutical declined by around 5% each. South Korean stocks like SK Biopharmaceuticals, Celltrion, and Samsung Biologics also dropped more than 3%.
Speaking to Moneycontrol, Vinit Gala, Founder of Xylem PMS, noted that Trump's call for major price cuts is likely more rhetorical than practical: 'It is not something which can be applicable." He pointed out that the cost of US compliance and the complexity of FDA approvals significantly elevate drug prices compared to countries like India.
Gala added that Indian generic drugmakers are likely to be more insulated, as they play a crucial role in driving down prices in the US by introducing alternatives once patented drugs go off-patent. Conversely, Korean drugmakers, which focus on patented biologics, may face more direct challenges.
This move follows two executive orders signed by Trump on May 5. As per Moneycontrol, the first aims to promote domestic drug production by easing regulations and boosting U.S. pharmaceutical supply chains. The second restricts funding for research that may enhance virus pathogenicity, citing biosecurity concerns.
Nuvama Institutional Equities said that 'The policy initiatives, if implemented fully, may lead to increased compliance/operational costs for foreign manufacturers, including those in India." They added that uncertainty around these policies may cause generic pharma stocks to continue underperforming.
The executive orders also stress the urgency of bolstering US manufacturing capacity for APIs (active pharmaceutical ingredients), KSMs (key starting materials), and associated raw materials, highlighting national security risks due to current supply chain delays, Moneycontrol reported.
First Published:
May 12, 2025, 12:00 IST
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