US drug price overhaul could hit India’s generics industry, warn experts

US President Donald Trump’s recent executive order, aimed at reducing prescription drug prices for Americans, is expected to have significant implications for the global pharmaceutical market, particularly for India’s generics industry. 

The order seeks to align the prices Americans pay for prescription drugs with those in other high-income countries, which could disrupt both pricing models and market access, according to industry leaders. 

By linking US drug prices to those paid in similar economies, the order could alter how pharmaceutical companies price their products in the US, potentially affecting the operations of Indian companies in this market. 

“India accounts for nearly 40% of the generics procured by the US. Given that generics help contain healthcare costs, it is difficult to see how imposing a large tariff would support the United States healthcare system,” said Kiran Mazumdar-Shaw, Executive Chairperson of Biocon Ltd, highlighting India’s role in supplying generics to the US market.

The Executive Order, which directs the US Trade Representative and Secretary of Commerce to ensure foreign countries are not engaging in practices that undercut market prices, seeks to establish a “Most-Favoured-Nation” (MFN) pricing mechanism. 

This would mean that US Medicare payments for certain drugs would be linked to the lowest prices paid by other high-income nations, such as Canada, the United Kingdom, and Germany. Critics argue that while the policy may lower drug prices for US consumers, it could harm foreign drug manufacturers, particularly those based in India, experts have indicated.

Pharmaceutical industry experts have also expressed concerns that any new tariffs or price-setting measures could disrupt the established supply of affordable medicines from India to the US, potentially affecting both costs and access. 

Moreover, experts are concerned about the potential for tariffs on Indian pharmaceutical imports. “The MFN policy aims to lower prescription drug costs in the United States by tying Medicare payments for certain drugs to the lowest prices paid by other high-income countries. While the policy may offer savings to American consumers, it could lead to price hikes in India, as manufacturers might try to recover costs from other countries, including India,” said Saurabh Agarwal, Tax Partner at EY India.

In a counterview, some experts have said that the executive order, particularly the one aimed at lowering the cost of medicines in the US, may not have significant implications for Indian generic pharmaceutical companies. This is, however, subject to the definition of high-income countries.

“Since references will be set for the prices of medicines in ‘high-income countries,’ it remains to be seen if this order includes generic medicines and India. As of now, the order seems to consider branded medicines, which are sold at price multiples compared to other countries,” said Salil Kallianpur, a pharmaceutical analyst.

Kallianpur further explained that if the US were to seek the lowest-cost suppliers, it could boost demand for Indian-made generics. “Since Indian generics are among the least expensive globally, this might increase demand for Indian-made generics if US buyers were forced to seek the lowest-cost suppliers,” he said.

However, he also warned that if the US incentivised domestic generic production through “Buy American” policies, Indian companies might lose market share to US manufacturers.

“Despite the potential challenges, several factors suggest that demand for Indian generic medicines in the US would remain strong. Indian companies benefit from economies of scale, and they have an established market presence and integrated supply chains, making it difficult for other players to enter the market. While Indian generic manufacturers are likely to retain a presence in the US market, they will face challenges adjusting to a lower-price environment,” Kallianpur said.

He also pointed out that with around 40% of US generics coming from India, any policy that disrupts imports—such as tariffs or “America First” production mandates—could negatively impact Indian exporters like Sun Pharma, Dr Reddy’s, Aurobindo, and Cipla.