Reckitt Benckiser share price crashed today

The biggest news of the day is the shares in Reckitt Benckiser have fallen sharply. So far today (25th October 2011) shares have fallen by 121p down to 3,325p, a drop of 3.51%. The FTSE 100 has also seen a large overall fall today.

The reason for the drop stems from reforms in the US health care system which affect the pharmaceutical markets.

RB’s 3rd quarter earnings for 2011 have actually beaten forecasts, however, the remainder of 2011 and start of 2012 is going to be more challenging.

share price graph for Reckitt Benckiser Plc

Source: Google Finance

 

Drug Rebates under American Healthcare Reforms

Part of the problem is rebates to be paid out to US users who bought up Suboxone tablets in advance of an anticipated price increase. The health care reforms means that drug makers such as Reckitt Benckiser will have to help finance medicine for low income elderly and disabled clients on the Medicare health care system.

Reckitt Benckiser is also predicting an 80% reduction in American profits if a competitor starts selling an their own version of Suboxone.

The Suboxone Crisis

Suboxone is a pain reliever that is also treats additions. Its main function is to treat opioid addiction but it also works very effectively at treating moderate chronic pain which affects many disabled and elderly people.

As more people live to be older there are more cases of people suffering from chronic illness. The ever increasing obesity epidemic does not help matters either. The result is more people in need of medication to numb the pain that is a long life of ill health.

Reckitt Benckiser were the first to market the drug, originally under the names Temgesic and Buprenex. The actual drug is buprenorphine. This drug replaced Methadone as the main drug to treat addictions.

In short, the American health care reforms have turned a very profitable product into a costly, or at least less profitable, product for Reckitt Benckiser.

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