Trump order unlikely to impact domestic generic industry working on razor-thin profits

New Delhi: The domestic generic drugmakers are unlikely to be impacted by the US announcement of a 30-day deadline for companies to lower the cost of prescription medicines, industry experts say.

The executive order inked by US President Donald Trump, which entails the US health department to broker new prices for prescription drugs, is, however, likely to have an adverse impact on the innovator drug firms.

"The generics industry is unlikely to be impacted, as it operates on razor-thin margins. In the US, the generics industry represents 90 per cent of prescription volumes while accounting for only 13 per cent of the market value," IPA Secretary General Sudarshan Jain said in a statement.

The generics industry plays a pivotal role in ensuring medicines remain affordable and accessible, and further details on implementation mechanisms will bring more clarity, he added. Jain noted that the order emphasises that the cost of the innovation should be shared equitably among all stakeholders.

"Innovator companies are expected to be affected, with a 30-day window to align their US prices with Most-Favoured-Nation (MFN) pricing," he added.

He further stated that the executive order seeks to balance innovation, access and overall healthcare costs.

Research and development in life sciences demands long-term commitment, substantial investment, and carries high risk.

The IPA is a network of 23 leading Indian drugmakers, most of whom are major exporters to the US.

India is the largest supplier of generic medicines with a 20 per cent share in the global supply by manufacturing 60,000 different generic brands across 60 therapeutic categories.

Indian products are shipped to over 200 countries around the globe, with Japan, Australia, West Europe and the US as the main destinations.

India has the highest number of United States Food and Drug Administration (USFDA) compliant Pharma plants outside of USA.

As per the fiscal year 2022 report on State of Pharmaceutical Quality published by USFDA, India boasts of more than 600 USFDA registered manufacturing sites, constituting nearly 12.5 per cent of all registered manufacturing sites operating outside the US.

Economic think tank GTRI has noted that the order to cut prescription drug prices by 30-80 per cent could lead to a global price adjustment with pharma firms pushing lower-cost countries like India to raise prices. India's pharmaceutical laws fully comply with the WTO's (World Trade Organisation) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

However, India has long resisted pressure to adopt TRIPS-plus provisions, additional patent protections often pushed by developed countries through FTAs.

These include data exclusivity, automatic patent term extensions, patent linkage, broader patentability criteria, and evergreening practices. India does not allow data exclusivity. Instead, it permits regulatory bodies to rely on existing clinical trial data to approve generic medicines, ensuring faster and cheaper access.

Saurabh Agarwal, Tax Partner, EY, said that while the move promises major savings for American consumers, it could face industry pushback and cause price increases in lower-cost countries as manufacturers seek to recover losses and R&D costs from these countries.