US President Donald Trump has signed an executive order aimed at reducing drug costs for Americans, by up to 80% immediately.
The move immediately hit Australia's pharmaceutical industry as 3 ASX pharmaceutical stocks crashed up to 10% shortly after the announcement.
Telix Pharmaceuticals Ltd (ASX: TLX) shares dropped 8.7% on Monday, to $24.47. The stock price has since recovered some losses, increasing 3.6% to $25.36 and has continued an upward trajectory today. It still has some way to go before it reaches the $29-mark seen earlier this month.
Similarly, Neuren Pharmaceuticals Ltd (ASX: NEU) shares dropped 9.56% at the close on Monday, to $12.02. The company share price has recovered some losses over the past 24 hours, rising 2.6% at the close yesterday. There are indications of another small increase today.
Clarity Pharmaceuticals Ltd (ASX: CU6) also followed the same trend. Its shares dropped 8.64% on Monday to $2.22 before rising 15.3% yesterday. The pharmaceuticals stock has experienced a steady decline since October last year before bottoming out in April.
Image source: Getty Images
What is Trump's executive order, and why is it affecting ASX pharmaceutical stocks?
As news.com reported:
What that means, in essence, is the US government will buy drugs at the lowest price they're being purchased for in other countries…Mr Trump is of the opinion that this will lead to lower prices in the United States, and that pharmaceutical companies will compensate by charging the rest of the world more.
The order, which has been described as a "game changer", casued an immediate drop of share prices for 3 ASX pharmaceutical stocks following fears that they will be forced to lower their drug prices.
"Starting today, the United States will no longer subsidise the health care of foreign countries, which is what we were doing, we're subsidising others' health care, in countries where they pay a small fraction of what, for the same drug, that what we pay," US President Trump told reporters Monday at the White House.
He said that big pharmaceutical companies will either have to abide by his new principle voluntarily. If not, he'll use the power of the federal government to ensure "we are paying the same price of other countries".
The President tried to implement something similar during his first term in office, but was prevented by the courts. He slammed the idea as ineffective when Kamala Harris suggested it during last year's election campaign. Now he appears to have recommitted to the policy.
