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GSK PLC ADR GSK Stock Quote

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Morningstar‘s Stock Analysis GSK

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Diving Into the Drug Pricing Hit From the Inflation Reduction Act, We’ve Reduced Our FVEs by 2%

Karen Andersen, CFA Sector Strategist

Analyst Note

| Karen Andersen, CFA |

After taking a closer look at what we consider the three key elements of the Inflation Reduction Act that will affect the biopharma industry over the next decade, we're reducing our fair value estimates for 17 of the biggest biopharma names in Morningstar's coverage by an average of 2%. We think the step-down in U.S. branded drug sales from capping Medicare price increases to inflation (fully rolled out in 2023), redesigning Medicare Part D (beginning in 2025), and Medicare negotiation (beginning in 2026 for small molecules) will result in a 3% reduction in total sales for these firms by 2031, with firm-level reductions depending on the firm's reliance on the U.S. market, proportion of the portfolio targeting seniors, history of price increases, and relative size of its small molecule and biologics portfolios (as biologics are immune from Medicare negotiation for 13 years instead of nine). Our estimates factor in some ability for the industry to either benefit from certain changes (like potential increased prescription fill rates in Part D with lower out-of-pocket costs) or compensate for headwinds (like responding to inflation caps on price increases with higher launch prices). Overall, we think the effect of the Inflation Reduction Act is manageable for the industry, and we see the competitive advantages and economic moats of these firms remaining intact. 

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Key Statistics GSK

Company Profile GSK

Business Description

In the pharmaceutical industry, GSK ranks as one of the largest firms by total sales. The company wields its might across several therapeutic classes, including respiratory, cancer, and antiviral, as well as vaccines. GSK uses joint ventures to gain additional scale in certain markets like HIV.

Contact
980 Great West Road
Brentford, Middlesex, TW8 9GS, United Kingdom
T +44 2080475000
Industry Drug Manufacturers - General
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Employees 90,083

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