President Trump’s New Drug Pricing Policy: Is Indian Pharma at Risk?
Shamsuzzaman Ansari
Associate Professor (Pharmaceutical Management) | Pharma Business Consultant | Competitive Intelligence | Forecasting
On May 12, 2025, the United States (US) President Donald Trump signed an executive order directing pharmaceutical companies to reduce the prices of prescription drugs to align with the lowest prices available globally. He announced the implementation of a “Most Favored Nation” (MFN) pricing policy, under which the US would pay no more than the country that pays the least for a given drug. The MFN principle, a key component of the World Trade Organization (WTO), advocates equal treatment among trading partners and prohibits discriminatory pricing practices.
Justifying the decision, President Trump stated, “Everybody should equalize. Everybody should pay the same price.” The policy has the potential to cut drug prices in the US by as much as 90%. The executive order grants pharmaceutical companies a 30-day window to comply, after which they may face regulatory consequences if they fail to meet the requirements. While full details are awaited, the directive is expected to primarily impact branded and innovative drugs, with limited effect on generic manufacturers. While the move may provide short-term cost relief to the US government, it is likely to face industry resistance and possible legal challenges, similar to those during Trump’s previous term. Innovative pharmaceutical companies argue that such pricing policies threaten investment in research and development, especially for treatments targeting rare and complex diseases. Analysts suggest that the order represents a scaled-down version of earlier proposals and may ultimately have limited impact on most drug manufacturers.
What prompted Trump to issue the new executive order on drug pricing?
The driving force behind President Trump’s new executive order on drug pricing lies in the persistent and disproportionate cost burden on the US compared to other nations. A 2022 study by the Assistant Secretary for Planning and Evaluation (ASPE), in collaboration with RAND Health Care, revealed that drug prices in the US, including both branded and generic medication were on average, 2.78 times higher than in other Organization for Economic Co-operation and Development (OECD) countries. The disparity was even greater for branded drugs, which were found to be at least 3.22 times more expensive in the US. Compounding this issue is the widespread practice among large pharmaceutical companies of entering into financial agreements with potential generic competitors to delay their market entry. These so-called "pay-for-delay" deals effectively extend monopolistic control over high-priced branded drugs. A notable example is the agreement between Novartis and Sun Pharmaceutical, which postponed the US launch of generic imatinib for six months beyond the expiration of Novartis’s Gleevec patent. The executive order also highlighted the global imbalance in pharmaceutical profits, noting that the US, despite comprising less than 5% of the world’s population, accounts for nearly 75% of the global pharmaceutical industry's profits. Data from the European Federation of Pharmaceutical Industries and Associations (EFPIA) further supports this, indicating that North America (the US and Canada) remained the world's largest pharmaceutical market in 2023, commanding a 53.3% share, far ahead of Europe, China, and Japan.
This move builds upon previous legislative efforts, such as the Inflation Reduction Act of 2022, which granted Medicare the authority to negotiate drug prices for selected medications. Trump had made a similar attempt during his first term in 2020, but that effort was thwarted by legal challenges and strong opposition from the pharmaceutical industry and was eventually abandoned by the Biden administration. In this context, the 2025 executive order marks a renewed and more forceful effort to tackle the persistent problem of high drug prices in the US. It seeks to align domestic prices with international standards and curb industry practices that hinder fair market competition. While the order proposes benchmarking US prescription drug prices against those in other countries, it does not specify which nations will be included; however, it is expected that comparisons will primarily involve developed countries.
Implications for India’s Pharmaceutical Sector
India’s pharmaceutical industry exports medicines to over 190 countries, with the US alone accounting for more than one-third of these exports. According to The Hindu, India’s drug and pharmaceutical exports reached a record $30 billion in FY2025, reflecting a 9.39% growth over FY2024. These exports are predominantly composed of generic medicines. The newly announced executive order by the US government is expected to primarily affect branded and innovative drugs, with limited or no immediate impact on generic manufacturers, including those based in India. Generic drugs typically operate on thin profit margins and are already priced comparably across most OECD countries. However, a few Indian companies such as Sun Pharma, which derives approximately 20% of its revenue from specialty or branded drugs, may experience some pressure. In the US, generics constitute around 90% of prescription volumes but only 13% of the total pharmaceutical market value. This underscores the sector’s critical role in ensuring affordability and accessibility. Given the current information, the generic segment is expected to remain largely unaffected, though further clarity will emerge once implementation details are released.
In the long run, Indian Contract Development and Manufacturing Organizations (CDMOs) may benefit due to cost advantages associated with manufacturing in lower-cost destinations like India. This could influence long-term capital allocation strategies in favor of Indian CDMOs. Conversely, Trump's drug price reduction plan could potentially trigger a global price realignment, prompting multinational pharmaceutical companies to pressure lower-cost countries like India to raise domestic prices to offset losses. Such a scenario could increase the financial burden on Indian consumers and public healthcare expenditure. Additionally, India remains on the US Trade Representative’s “Priority Watch List” for intellectual property rights (IPR), which could lead to increased pressure from US-based pharma companies for stronger patent protections and higher pricing for patented drugs. Indian stakeholders are also closely monitoring another key issue: the potential imposition of tariffs on pharmaceutical imports into the US While details remain unclear, Trump has previously indicated that such tariffs could reach unprecedented levels.
References:
4. https://aspe.hhs.gov/reports/comparing-prescription-drugs
6. https://www.bakerinstitute.org/research/cancer-rx-prices-availability
This executive order marks a significant turning point. For pharma players in the Rare Disease and Oncology space, relying on historical pricing models is no longer an option. Proactive strategic re-evaluation based on granular market data is paramount to adapt to a potentially converging global pricing landscape.
Shamsuzzaman, this executive order could dramatically alter global pharma pricing dynamics. Indian manufacturers may face pressure to reduce export prices, impacting profitability. However, it also opens dialogue on affordability and access. The key question: can Indian pharma maintain its innovation edge while navigating tighter margins and shifting global regulatory expectations?
Masters in Pharmaceutics | Regulatory Affairs | Project Management | ICH | US-FDA | EMA | APAC | Saudi | CIS | RoW | Bioequivalence | Human | Veterinary | Herbal | Dental
4moVery thoughtful!
Assistant Professor |Jamia Millia Islamia
4moInsightful
Hospital and Health Management | PGDM 2024-26 | Health IT Enthusiast | Anesthesia and Operation Theatre Technologist |
4moThank you for sharing such thought provoking insights sir.