The executive order announced by US president Donald Trump to slash prescription drug prices is unlikely to have a material near-term impact on Indian pharmaceutical companies, though it may influence their longer-term revenue strategies and capital allocation, says India Ratings and Research (Ind-Ra) in a research note.
“While we do not expect a material immediate impact on the US generics business of Indian pharma companies, its revenue growth and capital allocation strategies may likely be impacted, if the executive order gets implemented. Generic price realisations in the US generic market may not be the highest in the world. We expect contract development and manufacturing organisation (CDMO) players to benefit,” said Nishith Sanghvi, director for corporates at Ind-Ra.
The order, expected to be signed shortly, proposes a 30% to 80% reduction in prescription drug prices in the US and introduces a most favoured nation (MFN) clause, under which the US would pay no more than the lowest price charged in any other country.
Ind-Ra notes that Indian pharma firms, largely focused on generics, may not see an immediate financial setback, as generics typically account for only 5% of total prescription drug spending and are already significantly cheaper.
However, the long-term effects could be more substantial. Should the executive order come into force, Indian companies may face shrinking market opportunities and pressure to revise their research and development (R&D) and investment priorities, depending on how pricing is impacted across therapeutic areas. The agency underlined that CDMO companies based in India stand to gain due to the cost advantages of manufacturing in the country and their established expertise in complex chemistry.
Ind-Ra emphasised that US price realisations for generics are not necessarily the highest globally, and cross-country comparisons need to factor in each market’s regulatory framework and payor structures. The potential effect of the MFN policy will also depend on how pricing benchmarks are selected across these diverse systems.
An analysis by Ind-Ra of 15 listed Indian pharmaceutical companies with exposure to the US market showed that around 35% of their revenue is derived from that country. After a decline in FY21–22, the share of US sales has rebounded in the last three years, helping to lift earnings margins. The report also notes that past price compressions have already led some generic players to exit the US market, creating shortages when prices dropped below sustainable levels—an indicator that there may be limited room left for further generic price cuts.
India exported pharmaceuticals worth around US$22 billion (Rs1.9tn-trillion) in FY23-24, with about US$8bn (billion) (or about Rs70bn) sent to the US, its largest export destination. In contrast, the US imported pharmaceutical goods worth US$212bn in 2024, with India supplying 6% of that total, making it the fifth-largest source. This asymmetric dependence underscores the strategic importance of the US market for Indian drugmakers, as any sustained policy shift there could pose significant challenges for the sector.
