Trump’s planned drug price cuts trigger decline in share prices: Will Indian pharma be impacted?

Trump said in a post on social media site Truth Social that he would sign an executive order at 9 am on Monday morning to bring down the prices of prescription drugs and pharmaceutical prices by 30% to 80% “almost immediately." He said the objective is for the US to pay the same price as the nation that pays the lowest price for a drug anywhere in the world.

It was unclear whether the order would include generic versions of medicines that make up the bulk of the volume of drugs in the US and are priced about 80% cheaper than their branded counterparts.

Shares of Sun Pharmaceutical Industries Ltd fell as much as 5.8%, while those of Biocon Ltd, Suven Pharmaceuticals Ltd, Aurobindo Pharma Ltd, Lupin Ltd, Divi’s Laboratories Ltd and Glenmark Pharmaceuticals Ltd declined by 1% to 3%.

However, experts said the order may not have a significant impact on Indian companies, which sell the bulk of generic drugs in the US.

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“It's going to be more painful for the innovators," said Vishal Manchanda, senior vice president of institutional research at Systematix Group, referring to companies that spend billions of dollars on research and testing to produce new, patented drugs. “What he is saying is the US is paying more than other countries and they need to bring parity there. This is largely true for patented drugs. If you look at generic drugs, they are more or less [priced] the same in the US or Europe."

“Branded drugs will get impacted if this is implemented strictly," said Shrikant Akolkar, vice president and pharma analyst at Nuvama Institutional Equities, adding that the impact on generics will be less negative.

Similar costs in US, Europe

“Technically, generics are also prescription drugs, [but] they are already lower in price… they may have some impact if their prices are higher than Europe," he said.

Manchanda said Indian manufacturers export generics at similar costs to the US and Europe and price parity may already exist. Fierce competition among generic drug companies drives prices down quickly in the US.

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Innovator drugs, however, are priced 2-3 times higher in the US than in other countries. Sun Pharma, which has a significant specialty drug portfolio in the US, may be impacted more than other Indian companies that only supply generics. Sun Pharma did not respond to Mint’s query until publishing time.

The US accounts for 40% of the world’s generic drug market by value. Generic drugs in the US make up 90% of prescriptions, but only about 18% of drug spending. Over 45% of generics and 15% of biosimilars by volume in the US originate from India, given the country’s low-cost manufacturing that ensures affordability.

The US has historically been one of the most significant markets for Indian generic drugmakers and is India’s largest overseas market for pharmaceuticals. Of the country’s overall pharma exports of $27.9 billion in FY24, $8.7 billion, or 31%, were to the US, according to industry body Pharmexcil (Pharmaceuticals Export Promotion Council of India).

If the US imposes price controls, potential future market opportunities for generics in the US will also decline, Akolkar pointed out. This could add to worries of Indian generic drug companies, which are reeling from uncertainty over potential import tariffs on pharmaceutical products. 

Trump has indicated that special tariffs will be imposed on pharma products imported into the country, with the intention of bringing manufacturing back to the US. However, it is unclear whether generic medicines will be affected. Indian companies have previously said that should tariffs be imposed, they would pass on the additional costs to US consumers.

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Experts are sceptical about the implementation of the drug price control policy. During his first term as President in 2020, Trump tried to impose a similar rule for certain prescription drugs. This was blocked by the federal courts and later rescinded by the Biden government in 2021. 

In 2022, the Biden administration signed the Inflation Reduction Act, which empowered Medicare to negotiate prescription drug prices.

“We will have to wait and see what drugs would qualify for price reductions," Manchanda said.