Trump's pharma move could raise drug prices in India

While the move may offer immediate relief to American patients, it is likely to trigger a global price recalibration with pharmaceutical giants intensifying pressure on lower-cost markets like India to raise their prices by tightening patent laws through trade negotiationsAjay Srivastava, Global Trade Research Initiative (GTRI) founder

New Delhi: US President Donald Trump on Monday signed a new executive order directing pharmaceutical companies to pin the cost of drugs sold in the American market to the lowest price paid by other countries for the same drug, a move that may lead to significant increase in medicine prices in India.

Trump has decided to institute “most favoured nation (MFN)” policy, which specifies that the US will pay “the same price as the nation that pays the lowest price anywhere in the world.”

This means if a particular drug is sold at say Rs 500 in the Indian market the drugmakers cannot sell the same product at higher price in the American market.

“Prescription drug and pharmaceutical prices will be reduced, almost immediately, by 30% to 80%. Prices will rise throughout the world in order to equalise and, for the first time in many years, bring fairness to America,” Trump said in a social media post.

Analysts said the US President’s new move would force drugmakers to increase prices in India and other markets in order to bring equalisation.

“While the move may offer immediate relief to American patients, it is likely to trigger a global price recalibration with pharmaceutical giants intensifying pressure on lower-cost markets like India to raise their prices by tightening patent laws through trade negotiations,” said Global Trade Research Initiative (GTRI) founder Ajay Srivastava. The reduced margins in the US market will force pharma companies to hike prices in the Indian and other markets to recover losses.

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

Srivastava said pharma prices would now dominate the bilateral trade agreement negotiations. India and the US are set to sign a bilateral trade agreement by September-October this year. “The world depends on India’s generics. Preserving this model is not only in India’s interest, it's a moral and global necessity."