 "drugs, pharma")
US President Donald Trump signing an executive order (EO) to bring the prices of prescription drugs in America in line with those paid by comparable nations is likely to have a two-pronged impact on India. First, multinational firms may look to raise drug prices in other markets, including India, thereby affecting Indian patients. Second, Indian drug exporters are expected to face pricing pressure in the US in the medium term.
On May 11, Trump announced plans to sign what he called “the most consequential EO in US history”, aiming to reduce prescription drug and pharmaceutical (pharma) prices in the US by 30–80 per cent with near-immediate effect.
Expressing frustration over American consumers paying more for medicines than people in other countries, he said drugs in the US were sometimes “five to 10 times” more expensive than the same drug manufactured in the “exact same laboratory or plant, by the same company”.
Reacting to the news, Nifty Pharma fell in early trade, even as the broader market cheered the India–Pakistan ‘understanding’. It recovered during the day and ended marginally up, but several pharma stocks, including Sun Pharmaceutical Industries, Glenmark, and Ajanta Pharma, fell on the bourses.
Monday’s EO directed the US Trade Representative and the Secretary of Commerce to act against foreign countries that purposefully and unfairly undercut market prices, driving price hikes in the US.
The EO also instructs the administration to communicate price targets to pharma manufacturers, asserting that America, the world’s largest purchaser and funder of prescription drugs, should get the best deal.
The Secretary of Health and Human Services will set up a mechanism allowing American patients to buy drugs directly from manufacturers at a Most Favoured Nation (MFN) price, bypassing middlemen. Trump had previously said the move would lead to higher drug prices in other countries as part of a broader global price alignment.
According to recent data, Americans pay over three times what other OECD countries pay for brand-name drugs. The Presidential EO noted that the US has less than 5 per cent of the world’s population but funds roughly 75 per cent of global pharma profits.
Analysts believe companies like Sun could be among the hardest hit, given their sizable branded business in the US market.
“Players like Sun, which have over $1 billion in branded business in the US, may feel the impact if this policy is introduced and enforced strictly. The generics market could also come under pressure in the medium term, as generics are prescription medicines too,” said Shrikant Akolkar, analyst at Nuvama Institutional Equities.
According to Grand View Research, an India- and US-based market research and consulting firm headquartered in San Francisco, the US pharma market is expected to be worth $634.32 billion in 2024 and projected to grow at a compound annual growth rate of 5.7 per cent from 2025 to 2030. The branded segment accounted for a 66.86 per cent revenue share in 2024.
While several Indian companies draw around a third of their consolidated revenues from the US, most are suppliers of generics, not branded products. India supplies nearly 50 per cent of the generic drugs used in the US, which remains the largest destination for Indian pharma exports, accounting for 36 per cent. Indian companies export close to $10 billion worth of drugs to the US.
Trump had earlier said that the new policy would implement an MFN pricing model, ensuring the US pays no more than the lowest price charged for the same drug elsewhere in the world. He believes this would lead to higher drug prices in other countries to narrow the global pricing gap.
An April report by IQVIA noted that more Medicare (federal health insurance) patients have been facing annual drug costs above $2,000 as prices continue to rise.
“Net medicine spending increased by $50 billion (11.4 per cent) in aggregate, from $437 billion in 2023 to $487 billion in 2024. The majority of this growth came from 31 products, each with more than $500 million in sales growth, contributing $50 billion in total,” the report said.
Analysts believe the MFN pricing model may primarily target high-cost innovator drugs.
Nirali Shah, pharma analyst at Ashika Group, told Business Standard, “While the MFN drug pricing model is primarily aimed at high-cost innovator drugs sold under Medicare, at this stage, it’s more of a strategic watch list item than a direct earnings threat. Companies with broader exposure to branded products or physician-administered therapies may need to monitor policy evolution more closely.”
While medicine prices may drop in the US, Indian patients may end up paying more for innovator drugs. Currently, several cancer drugs and biologics are still under patent in India.
The Global Trade Research Initiative (GTRI) said that while the move may bring immediate relief to American patients, it is likely to trigger a global price recalibration, prompting pharma giants to exert pressure on lower-cost markets like India to raise prices by tightening patent laws through trade negotiations.
Ajay Srivastava, founder of GTRI, said that India has so far resisted foreign lobbying to amend its patent laws.
“But that changed with the India–UK free trade agreement. For the first time, India agreed to provisions beyond its Trade-Related Aspects of Intellectual Property Rights (TRIPS) commitments, signalling a troubling policy shift. This concession hands a victory to global pharma companies and opens the door to further demands in ongoing negotiations with the European Union and the US,” he said.
If India concedes to demands for data exclusivity or longer patent terms, it could stifle competition, delay generic entry, and make essential medicines unaffordable for millions, both in India and across the Global South, he added.
Domestic drugmakers, however, may resort to compulsory licensing to produce essential innovator drugs. An industry observer noted that some companies like Natco Pharma and Cipla may explore this route to bring more affordable medicines to Indian consumers. Shares of both Cipla and Natco rose on Monday.
