Trump's 50% pharma tariffs impact global drug prices, with India's generic drugs less affected, but the industry faces challenges from Chinese competition.
India’s pharmaceutical exports face uncertainty as Trump’s 50% tariffs on branded drugs could reshape the global market, with China also posing competition.
US President Donald Trump's imposition of 50% tariffs on branded and patented pharmaceutical exports to the US has rattled the global pharma industry and investors. The price of many patented life-saving drugs will increase sharply in the US. Since Indian exports are mostly generic drugs, our exports are less affected at present. There is ambiguity over whether complex generics and specialty medicines might be affected. Meanwhile, Zydus Lifesciences, with 100% of earnings dependent on the US market, Dr Reddy's, with 47%, Sun Pharma, with 37%, and Cipla, with 30% of earnings dependent on the US market, had a sharp sell-off in their share prices.
Trump Administration's Policy: Trump's policies aim to reduce the US trade deficit, stop drug imports from China, and move manufacturing back to the US. Although the tariff focuses on branded and patented drugs, it creates uncertainty. The US has already imposed 100% tariffs on Russian, Chinese, and some European pharma products. India's share of US pharma imports is 6%, compared to 25% from Ireland, 18% from Switzerland, and 12% from Germany. However, a substantial part of US imports of generic drugs, over 30%, comes from India, which is critical for the US. Other major pharma suppliers to the US are the Netherlands (6.3%), Belgium (5.2%), Italy (4.9%), China (3.8%), and Japan (3.1%).
The threat of tariffs puts the $8.4 billion export revenue under risk, which is especially serious as the Indian pharma industry has a debt of $16 billion, and profits are under severe pressure.
Chinese Competition: The government must also monitor competition from China. China is the largest API supplier globally, including to India. The Chinese pharma industry, the world's second-largest with a value of $160 billion, is challenging India's market share in generics and APIs, mainly due to higher volume and lower price. The Chinese government strongly supports its pharma industry with subsidies, infrastructure, and an 'Innovate in China' policy, with annual R&D spending of $20 billion, compared to India's $2 billion.
India's Strengths: India is a global leader in generic drugs and vaccines. The highly successful movie,
'Dying to Survive', a true story of a man who smuggles unapproved, but affordable cancer drugs from India, is getting rave reviews. Global Times, the official Chinese English paper, reported that "Gleevec, a leukemia drug, costs 3,783 US dollars each month in China, whereas the Indian generic version costs just 100 yuan". India is the main supplier of low-priced, high-quality drugs and vaccines to the World Health Organization, 'Doctors Without Borders', and nations around the world. The Indian pharmaceutical industry had a major role in facilitating the containment of HIV/AIDS worldwide with the supply of affordable generic anti-retroviral (ARV) drugs.
INNOVATE TO SURVIVE AND GROW: Ethics, sustainability, and innovation are needed to compete globally. The US has 6 of the 10 largest pharmaceutical companies globally, accounting for 45% of the global $1.6 trillion pharma revenue.
The Indian pharma industry needs to focus on innovating and exporting higher-value products like specialty generics, biosimilars, and innovative medicines. Drug discovery software with artificial intelligence and machine learning can be used to discover and produce new drugs at a global scale. High value exports will fund further pharma research and development to discover novel, effective, and safe drugs and efficient drug manufacturing.
Dr. P.S. Venkatesh Rao is a Consultant Surgeon, Former Faculty CMC (Vellore), AIIMS - New Delhi, and a polymath in Bengaluru.
