Analysts expect Indian drugmakers to strike US deals to avoid tariff blow

If Sun Pharma is able to strike a Pfizer-like deal, it may avoid US tariff in near term, say experts

Indian players may follow in US pharma giant Pfizer’s footsteps and sign deals with the Donald Trump administration agreeing to cut drug prices, which, in turn, may provide some relief from tariffs in an uncertain environment where import of patented drugs would attract 100 per cent tariff, analysts said.

 

Nuvama analysts said that such a move might result in a “temporary removal of overhang on branded pharma” in the US. It is relevant for Sun Pharmaceutical Industries which has exposure to the US innovative drugs market. Ilumya, its largest drug, generates revenue from Medicare Part B (nearly 50-60 per cent), while the Medicaid contribution is likely to be around 5 per cent, according to Nuvama estimates.

 

Medicare is a federal health insurance programme for people aged 65 or older and younger people with certain disabilities or End-Stage Renal Disease (ESRD). Medicaid is a joint federal and state programme that provides health coverage for low-income individuals, children, and families, and

 eligibility varies by state. Medicare eligibility is based on age or disability, while Medicaid eligibility is based on income and household status.

 

“We think if Sun is able to strike a similar deal or take an initiative to manufacture in the US, it may also be able to avoid US tariffs in the near term,” Nuvama said in a note.

 

“Trump is a dealmaker. His playbook is always to create pressure (tariffs, threats, tweets), then strike headline deals that may or may not fully materialise. Deals will take time to implement, if at all,” said Nirali Shah, pharma analyst with Institutional Research, Ashika Group. “This is less about an imminent

structural reset of drug prices and more about ongoing negotiation and political optics. The real impact on pharma economics will be muted near-term, but headline risk and prolonged uncertainty will persist,” she felt.

 

Pfizer has cut a deal in which they have agreed to lower prescription drug prices in the Medicaid programme to what it charges in other developed countries in exchange for tariff-relief. Pfizer will offer the most-favoured-nation (MFN) pricing on all new drugs launched in the US, President Donald Trump has said.

Moreover, the US drugmaker would also be a part of the White House’s direct-to-consumer website for Americans to buy drugs (TrumpRx), that will launch next year.

 

Analysts believe this may lead to an overall increase in out-of-pocket expenses in the US as patients would buy directly from Pfizer on the DTC website.

 

“As per our understanding, prices of DTC drugs are higher than the price of the same drug in insurance programs. Pfizer has stated that DTC purchase discounts will range between 50 per cent and 85 per cent for a majority of Pfizer’s primary care treatments and some select specialty brands. This includes a 40 per cent discount on Xeljanz — JAK inhibitor for rheumatoid arthritis, psoriatic arthritis, etc,” Nuvama said.