Daraprim price hike could affect the pharmaceutical industry

October 12
10:23 PM 2015

The overnight price hiked of Daraprim drug by the start-up, Turing Pharmaceutical is creating a big impact to the pharmaceutical sectors worldwide. The company which is own by a former hedge fund manager had acquired the right of the drug in August and immediately increases its price. The move is causing a backlash to pharmaceutical industry creating most of the shares down in a massive sell-off.

Shares heavily affected by the move is Valeant whose shares fell from $229 to $178.38 as September 30 according to the Business Insider. However, analyst including from Morgan and Stanley said that the downtrend is temporary and will not be affecting the global industry in a long term. The analyst told Business Insider that only a few companies have a direct impact to the problem.

The New York Times reported that the price has been increased to more than 5,000 percent from its previous $13.50 to $750 per pill. The drug which has been used to treat toxoplasmosis including AIDs, cancer and Malaria is a drug that is in high demand in the pharmaceutical industry and even politician are against the move.

One of the presidential candidates, Hilary Clinton also comments on the situation describing it as outrageous according to Yahoo News. She was reported to even call for a hearing to get more details regarding the issue. However, it is unlikely that any new law will be passed on soon but the issue will surely trigger the government to enforce a stricter law regarding drug pricing.

Business as usual for health care industry and only companies relying on drug pricing for profit instead of research will be heavily affected. The Daraprim is only one drug out of many and the overall drug industry is still making profit and investors should not be worried much about it according to the analyst.

The Morgan and Stanley's analyst also pointed out two companies that are high likely be affected. This includes Eli Lilly, Mallinckrodt, and Valeant which saw their potential earnings per share might drop as much as 10 percent.

The Daraprim has been exchanged ownership since it was discovered as companies are allowed to hold right for the drug only for a certain period of time. Martin Shkreli, the CEO of Turing Pharmaceutical said in an interview that the price for the drug is still considered as undervalued. He added that the revenue obtained from the selling of the drug will go towards research to produce another drug that is better than the Daraprim.

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