A bitter pill: Indian pharma industry, Trump’s tariff and a Congress that campaigned on cheaper care
India isn’t a country known for its quality of life, but it is a country that makes the ability to fight for that life surprisingly affordable. A life-saving blood cancer drug that costs around Rs 300 per pill in India can cost as much as Rs 85,000 for the same medication in the US.For decades, India’s pharmaceutical industry has built its global position on a simple formula of affordability. Its generic drugmakers helped make treatments accessible to millions of patients, including those in the US, where low-cost imports have become an important part of the healthcare system.But now that model is under immense pressure, one that could collapse any non-established player in the market and usurp India from its position as the ‘world’s pharmacy’.US president Donald Trump wants to use steep tariffs to push pharmaceutical companies to manufacture generic drugs in the US, a step integral to his America First policy and quest to negate America’s dependence on any external industry. But the blue wave that just swept both chambers of Congress has heavily campaigned on healthcare affordability. Trump’s current proposal will create manufactured inflation and a huge price hike in the cost of medicines, so how do the Democrats keep their campaign promise but also work towards reducing US’s dependence on imported medicines.For Indian drugmakers, the challenge is no longer just how to remain competitive in the world’s largest pharmaceutical market. It is how to do so when both sides of American politics are questioning the reliance on overseas production, even as they promise patients cheaper medicines.
Trump’s current proposal
In a July 21 social media post, Trump said tariffs on imported generics would stay at zero until August 2028, then rise to 100 percent for a year and 200 percent after that. The 200 percent stage would begin after his term has ended, as the New York Times noted. The stated aim is to push companies to build plants in the US.But the proposal has not yet been formally implemented, and important questions remain over its eventual scope, including how it would treat active pharmaceutical ingredients and different parts of global supply chains.
The timing currently gives Indian companies a window to assess their options, but it does not remove the uncertainty a lot of manufacturers are almost sure to face. The US is a major export market for Indian generic manufacturers, while generic medicines account for more than 90% of prescriptions filled in the country.The importance of these imports is reflected in the economics of the American drug market. While branded medicines in the US are often more expensive than in comparable countries, unbranded generics are an exception.“For every dollar the other countries on average pay for these drugs, in the US, consumers pay 67 cents. Unbranded generics made up 90 percent of US prescription volume, compared with 41 percent of volume in the other countries,” says Saptarshi Ghosh, a geopolitics analyst.“This is where Indian pharma companies have played an important role in keeping prescription drug prices low,” he says.For some of India’s biggest drugmakers, the US brings in 30 to 50 percent of revenue. Indian pharma exports to the US fell nearly 10 percent to $9.47 billion in FY26, Pharmexcil says, a drop it puts down to price erosion, a high base and inventory corrections. Analysts see Lupin, Aurobindo, Dr Reddy’s, Granules and Glenmark as more exposed, and Sun, Cipla, Zydus and Torrent as better placed. Cipla says 35 to 40 percent of what it sells in the US is made there.A sharp increase in import duties could force companies to absorb additional costs, raise prices, consider moving some production closer to the American market or completely remove themselves from the market if absorption is not an option that works for them.
How does the political shift in Congress affect their calculations?
Democrats have made restoring enhanced Affordable Care Act subsidies and reversing Republican cuts to Medicaid early priorities for the next Congress. About 90 percent told CNN’s exit poll that the cost of living was a crucial or major factor in their vote, and 85 percent told NBC’s that they were concerned about healthcare costs. House Democratic leader Hakeem Jeffries has said the party’s first healthcare priorities are undoing Republican Medicaid cuts and restoring the enhanced Affordable Care Act premium credits, followed by lowering the Medicare eligibility age and adding hearing, vision and dental coverage.Their healthcare agenda also proposes expanding the savings from Medicare drug-price negotiations to people with private insurance. The party has presented these measures as part of a wider effort to make healthcare more affordable, alongside proposals to cap out-of-pocket expenses and widen access to benefits.
But lowering insurance premiums through ACA subsidies, restoring Medicaid funding and reducing prescription drug prices are distinct policy interventions. Nor does the existing Medicare drug-price negotiation programme amount to government price-setting for every medicine imported into the US.Under the Inflation Reduction Act, Medicare can negotiate prices for selected high-expenditure drugs that do not face generic or biosimilar competition. Once a generic or biosimilar version is approved and marketed, the original drug can become ineligible for selection or be removed from the programme.The Democrats’ proposal to extend negotiated-price savings to people with private insurance would broaden the reach of the existing framework. But it would not automatically bring all Indian-made generic medicines under Medicare price negotiation.For Indian manufacturers, companies with portfolios spanning generics, branded medicines and complex products such as biosimilars may face different kinds of pricing pressure. For manufacturers focused on commodity generics, the more immediate questions concern tariffs, competition, procurement costs and the economics of producing medicines for the American market.But there is a broader shift in American politics and debate that could act as leverage for Indian manufacturers. Democrats and Republicans differ sharply over how to make healthcare affordable, but both have reasons to favour a larger domestic pharmaceutical manufacturing base. For Republicans, reshoring is tied to economic and national security. For Democrats, the argument sits alongside a promise to reduce healthcare costs and strengthen the public health system.The next Congress faces a difficult balance act, especially since the voters have brought them in based on their promises. They need to figure out how to reduce dependence on imported medicines without making those medicines more expensive for American patients.
Why will it be hard to keep India out of the picture
India’s cost advantage comes from an established manufacturing ecosystem, skilled labour, supplier networks and the ability to produce at scale. Recreating that ecosystem in the US would take investment and time, and could raise production costs.India’s generics sector grew out of a patent regime that, for decades, allowed Indian manufacturers to develop their own processes for making medicines whose products were protected by patents elsewhere. The 1970 Patents Act helped create the conditions for that model; the 2005 amendments brought India into line with the product-patent requirements of the WTO’s TRIPS agreement, while provisions such as Section 3(d) sought to prevent patents from being extended without a meaningful improvement in therapeutic efficacy.But India has also faced some well deserved scrutiny over their manufacturing stemming from issues like quality failures, including Indian-made cough syrups linked to child deaths overseas.Affordability cannot sustain trust especially in a political scenario where dependence is weakness. All economies aspire to be self-sustained and hold a trade edge over their partners.For Indian companies, the next phase of their US strategy may therefore require more than defending their price advantage. They will have to decide whether to invest in American manufacturing, how much of their production to retain in India, and whether a local manufacturing presence could protect market access if tariffs are eventually imposed. They will also need to assess how a wider Democratic push to reduce drug prices could affect products beyond the generic medicines that form the backbone of India’s exports.India’s leverage in these talks rests on keeping production costs low. Washington wants cheaper medicines, and it also wants to make more of them at home. For an industry built on supplying the world with affordable drugs, those two ambitions may prove hard to reconcile.
Source: timesofindia.indiatimes.com