Limited Impact on Indian Pharma Companies Despite US Push to Cut Drug Prices

US President Donald Trump’s bold executive order to slash prescription drug prices in the United States may make headlines, but its ripple effect on Indian pharmaceutical companies will likely be minimal, according to a fresh report released by Crisil Ratings.

Titled as a move to make healthcare more affordable for Americans, Trump’s directive introduces the Most Favoured Nation (MFN) pricing model — a strategy aimed at cutting prices of branded prescription medications by 30% to 80%. However, Crisil’s findings suggest a limited impact on Indian pharma companies, primarily because India’s exports are dominated by low-cost generic formulations, which already operate on slim profit margins.

India’s Pharma Exports: High Volume, Low Margin

India ships out around 54% of its pharmaceutical output, with nearly a third directed to the United States. A staggering 85% of these exports are generic drug formulations, which account for 90% of US prescription volumes, but just 13% of total spending. These generics, already priced competitively, are unlikely to be affected by further price cuts.

“Generic prices in the US are already among the lowest globally. The MFN pricing model, which aims to match drug prices to those in peer nations, mainly targets high-margin innovator brands, not generics,” Crisil noted in the report, reinforcing the assessment of limited impact on Indian pharma companies.

Targeting Innovator Drugs, Not Generics

Trump’s executive order zeroes in on branded innovator drugs without biosimilar or generic alternatives, putting pricing pressure on products with the highest margins. According to the US Department of Health and Human Services (HHS), initial steps will involve identifying manufacturers who must align prices with global peers.

Given that Indian pharmaceutical firms have a minimal footprint in the innovator drug segment, the bulk of India’s pharmaceutical exports remains outside the policy’s crosshairs. “The MFN model is unlikely to significantly affect the bulk of India’s exports,” Crisil emphasized.

Indirect Concerns and Narrow Risks

However, the report did signal indirect vulnerabilities. As branded drugs face price reductions, upcoming generic versions of these products may see lower price differentials, reducing future revenue potential when those drugs go off-patent.

“While generics will remain largely unaffected, the growth trajectory for soon-to-be-off-patent drugs may flatten due to reduced arbitrage,” said Crisil, urging stakeholders to monitor these developments closely.

A few Indian firms that have carved niche positions in branded formulations might feel the pinch. Yet, these are outliers in an otherwise generics-driven export profile.

APIs and CMOs: Marginally Touched, Possibly Empowered

Active Pharmaceutical Ingredients (APIs), which form 15% of India’s pharma exports, are also expected to weather the policy change comfortably. Since APIs are not the primary cost drivers in high-margin innovator drugs, they face little pricing pressure from the MFN policy.

On the flip side, Contract Manufacturing Organisations (CMOs) in India—accounting for about 8% of the domestic pharmaceutical landscape—could find new opportunities. As global pharma giants look to cut production costs, outsourcing to cost-efficient players like Indian CMOs may surge.

“The policy may create opportunities for CMOs, though profit margins could shrink as contract rates are renegotiated,” Crisil cautioned, reflecting both the potential and constraints of this development.

Also Read : Madhur Jaffrey CBE: The Actress, Author, and Ambassador of Indian Culture