InvestorQ : Why did the pharma stocks correct so sharply in the market as I find that most of the stocks like Lupin, Aurobindo, and Sun Pharma have all corrected?
swati Bakhda made post

Why did the pharma stocks correct so sharply in the market as I find that most of the stocks like Lupin, Aurobindo, and Sun Pharma have all corrected?

Answer
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Dia Deshpande answered.
1 year ago


This correction in pharma stocks is due to a lawsuit that has been filed by US pharma companies against Teva Pharmaceuticals and 19 other companies including many Indian companies for deliberately inflating the prices of medicines. Indian pharma companies export generic medicines to the US, which is their largest market. The lawsuit has named some of the Indian companies like Lupin, Aurobindo, Glenmark, Reddy Labs, and Glenmark etc in the list of companies that have been found to be inflating prices. When the news came out over the week end, only Teva was mentioned but today it was confirmed that most of the large Indian pharma names are also in the list. While Sun Pharma has not been mentioned, its US subsidiary Taro Pharma finds its name in the last. That is what led to this sharp correction.

The NSE Pharma Index was down over 4.4% in a single day after this news was announced. Is it really a worry? In the short to medium term there will be a good deal of pressure on these pharma stocks because the US is very particular about ensuring that global players operating in the US do not fix prices. As of now it is not clear what will be the implications or the penalties but it has surely dampened sentiments of pharma stocks and is best to stay away.