August 3, 2017 / 10:48 AM / in 6 months

Drug pricing pressure weighs on AmerisourceBergen forecast

(Reuters) - Drug distributor AmerisourceBergen Corp (ABC.N) cut its fiscal 2017 revenue growth forecast on Thursday and warned investors of the continuing fall in generic drug prices, adding that the pace of branded drug price increases could slow further.

AmerisourceBergen’s shares plunged as much as 11 percent. Rivals McKesson Corp (MCK.N) and Cardinal Health (CAH.N) were also lower.

The pharmaceutical supply chain, including pharmacy benefit managers and drug distributors, has been under pressure due to intense scrutiny over soaring drug prices.

Softer branded drug price increases hurt the quarter and will be one of the bigger impacts on revenue for 2017, AmerisourceBergen Chief Financial Officer Tim Guttman said on a conference call with analysts.

The company said it now expects revenue growth of about 5 percent for the fiscal year, down from its earlier forecast of revenue growth of 5.5 percent to 6.5 percent.

Guttman said the company’s forecast for branded drug price increases for fiscal 2018 is likely to be at the low end of or slightly below its fiscal 2017 range.

AmerisourceBergen said it continues to expect a 7 percent to 9 percent increase in branded drug prices for the year ended Sept. 30, 2017.

To make matters worse, stubbornly low generic drug prices have not recovered so far, with the world’s biggest generic drugmaker Teva Pharmaceutical Industries (TEVA.TA) on Thursday reporting a steep plunge in profit, due to weaker prices in the United States.

“We have yet to see generic deflation ease from its current high single digits,” Guttman added.

Leerink analyst David Larsen said the results this quarter were slightly disappointing, though not entirely unexpected, given Cardinal Health and McKesson’s recent reports.

    “We are disappointed that pricing trends remain headwinds into the next year ... higher operating costs are worrisome.”

    McKesson Corp (MCK.N) last week posted a lower-than-expected quarterly profit, hurt by a slowdown in branded drug price inflation, while Cardinal Health (CAH.N) on Wednesday forecast fiscal year 2018 profit well below analysts’ estimates.

    AmerisourceBergen said operating income in its pharmaceutical distribution unit fell 8.7 percent, hurt by “lower price appreciation”.

    Revenue rose 5 percent to $38.71 billion in the third quarter ended June 30.

    Excluding items, the company earned $1.43 per share, beating analysts’ average estimate of $1.37, according to Thomson Reuters I/B/E/S.

    AmerisourceBergen shares were down 11 percent at $81.23. McKesson and Cardinal were both down about 3 percent.

    Reporting by Anuron Kumar Mitra, Writing by Ankur Banerjee in Bengaluru; Editing by Martina D'Couto

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