U.S. President Trump’s “Most Favoured Nation” (MFN) pricing policy seeks to lower prescription drug costs by ensuring the U.S. pays no more than the lowest price worldwide. This could pressure countries like India, a major producer of affordable generics, to raise drug prices — potentially undermining the global competitiveness of Indian generics as pharmaceutical companies push for higher prices in low-cost markets. India’s pharmaceutical industry, vital for affordable global access, could face increased scrutiny over its intellectual property laws. The policy’s impact may lead to changes in trade negotiations and India’s patent system, with concerns over how it could affect competitiveness and public health globally.
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Global pharmaceutical companies are expected to increase pressure on India and other developing nations to raise the prices of medicines, following U.S. President Donald Trump’s announcement of a new drug pricing policy. The executive order, which was aimed at curbing the soaring cost of prescription drugs in the United States, introduced a “Most Favoured Nation” (MFN) pricing model. Under this framework, the U.S. would not pay more for a drug than the lowest price paid by any country in the world.
Trump argued that the move was long overdue, citing the vast discrepancies in global drug pricing. In a social media post, he stated that Americans often pay five to ten times more for the same medication, produced by the same manufacturer in the same facility, compared to consumers in other countries. The MFN policy, he claimed, would cut prescription drug prices in the U.S. by 30% to 80% almost immediately, marking a significant shift in the pharmaceutical pricing landscape.
While the policy promises immediate relief for American patients, international trade experts have warned that it could lead to widespread ripple effects. Specifically, they anticipate a global price recalibration, with multinational drug companies lobbying for higher drug prices in lower-cost regions. India’s generics, known globally for their affordability and scale, are expected to come under intense pressure to raise prices amid shifting global drug pricing policies. The logic is simple: under the MFN rule, low drug prices in India and other similar markets could directly influence prices in the much larger and more profitable U.S. market.
India’s pharmaceutical industry concerns
India’s pharmaceutical industry plays a crucial role not only domestically but also globally, particularly in supplying affordable generic medications to markets in the U.S., UK, and Africa. This cost advantage, however, has made India a frequent target of criticism from Western pharmaceutical giants, who argue that India’s intellectual property regime undermines innovation and competitiveness. These firms often point to India’s strict criteria for patentability and its resistance to practices like “evergreening,” which extend patent life through minor modifications.
Adding fuel to the fire, the United States has placed India on its “Priority Watch List” for intellectual property rights, citing concerns over patent enforcement and regulatory transparency.
The US accounts for nearly one-third of India’s pharmaceutical Industry exports, amounting to approximately US$9 billion in the last fiscal year.
A wake-up call for India
Mr. Ajay Srivastava, head of the Global Trade and Research Initiative (GTRI), sees the MFN move as a ‘wake-up call’ for India.
He stated that Western pharmaceutical companies, facing tighter price controls at home, will redouble efforts to extract higher prices in markets like India.
He noted, “The battleground is no longer just legal—it has moved to trade negotiations. India must respond with strategic clarity and unyielding resolve. As global pharmaceutical firms turn to free trade agreements (FTAs) to extract Trade-Related Aspects of Intellectual Property Rights ‘(TRIPS)-plus’ commitments, India must hold the line on its patent regime—one that enables affordable access, prevents monopolistic extensions, and safeguards public health.”
Mr. Srivastava also noted that pharma prices would now dominate the bilateral trade agreement negotiations. India and the US are set to sign a bilateral trade agreement by September-October this year. “The world depends on India’s generics. Preserving this model is not only in India’s interest, it’s a moral and global necessity,” he said.
India’s pharmaceutical Industry laws are currently aligned with the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). However, developed countries have increasingly pushed for India to adopt “TRIPS-plus” provisions through FTAs. These include measures such as data exclusivity, patent linkage, automatic patent term extensions, broader patentability criteria, and evergreening practices.
Distributors’ margins could shrink
According to a pharma industry executive, the order may not adversely impact Indian generic manufacturers. Instead, the executive believes the pressure will shift to the distribution networks and the manufacturers of patented drugs.
The executive noted that of the US$ 670 billion US pharma market, only 21% consists of generics, while the remaining 79% comprises patented medications. In the generics space, price erosion has already taken place. The real issue is the supply chain, which is controlled by a handful of powerful distributors. These entities often keep their profits offshore, which is something the Trump administration should address. He further pointed out that many patented drug manufacturers are headquartered outside the U.S. in countries like Ireland and various parts of Europe. This allows them to benefit from lower corporate taxes while continuing to generate enormous profits from their U.S. operations.
The Indian Pharmaceutical Association, however, has yet to officially respond to the executive order, but its previous positions suggest strong concern over policies that could impact the competitiveness and profitability of Indian drug manufacturers.
The announcement of the MFN policy had immediate repercussions in financial markets. Concerns over declining profit margins led to a sell-off in pharmaceutical stocks. U.S.-based drug companies saw significant declines in their stock values, and Indian generics stocks also took a hit amid uncertainty over how the new policy might reshape global pricing dynamics.
