US drug pricing order – Implications for India’s pharma sector

The recent US executive order on prescription drug pricing, signed by President Trump on May 12, 2025, aims to align American drug prices with those in other developed nations through a “most-favored-nation” (MFN) framework. While the policy is designed to cut costs for US patients, its effects are likely to have far reaching impact globally, presenting both challenges and opportunities for India’s pharmaceutical sector.

Key elements of the US executive order

• MFN pricing mandate: The order directs US agencies to ensure Americans pay no more for prescription drugs than the lowest price paid by other developed countries.
• Importation pathways: The order allows for importing lower-priced drugs from other countries if US manufacturers do not comply with price targets.
• Trade enforcement: The US Trade Representative is instructed to examine and address foreign government practices that may disadvantage US pharmaceutical interests.
• Implementation timeline: The Department of Health and Human Services (HHS) is to issue price alignment targets by June 2025.

Potential challenges for Indian pharmaceutical sector

• Trade policy uncertainty: India is a major supplier of generic drugs and APIs to the US, with exports to the US valued at over $10 billion annually. The order’s focus on “unfair” pricing practices could lead to increased scrutiny of India’s drug pricing regulations, such as the Drug Price Control Order (DPCO). While India is not specifically named, any US trade actions targeting countries with price controls could impact Indian exports. This coupled with the US Commerce Department’s Section 232 investigation into pharmaceutical imports (April 2025) whereby US could impose tariffs of up to 25% on APIs and finished drugs, adds to such trade uncertainty.
• Impact on generic drug exports: Although the MFN policy is primarily aimed at patented drugs, changes in global pricing benchmarks could indirectly affect Indian generic manufacturers. If reference prices in developed markets rise due to US pressure, Indian exporters may face increased competition or reduced margins in those markets.
• Regulatory and compliance pressures: The order’s provisions for direct-to-consumer sales and importation waivers could open new channels for Indian manufacturers, but these come with significant regulatory requirements, including compliance with US Food and Drug Administration (FDA) standards. This may require additional investment and operational adjustments.

Opportunities for Indian pharma

• Strengthening API supply chains: With the US seeking to diversify its pharmaceutical supply chains and reduce reliance on China, India’s established API manufacturing sector could benefit from increased demand. Indian companies that invest in quality and compliance may find new partnership opportunities with US companies. US companies may also look at backward integration opportunities in India leveraging the country’s extensive infrastructure, skilled workforce and cost efficiencies. Many multinational pharma companies already operate successfully in India and further investment can help US firms ensure supply chain resilience, access to cost efficient inputs and a presence in one of the world’s largest medicine producers.
• Potential for new market access: If the US moves forward with importation of lower-priced drugs from countries with robust regulatory systems, Indian manufacturers with operations or partnerships in those countries could indirectly access the US market. This may also be an opportunity for Indian manufacturers to focus on other developed economies and the large domestic market as a hedge against the trade uncertainties in the US. 
• Acceleration of biosimilars and complex generics: The order’s emphasis on antitrust enforcement and reducing barriers to competition may facilitate faster entry of biosimilars and complex generics, areas where some Indian companies have been investing.

Conclusion

The US MFN drug pricing order introduces both uncertainty and opportunity for India’s pharmaceutical sector. While there are risks of increased trade scrutiny and regulatory hurdles, India’s strengths in generics and APIs, combined with investment in and focus on quality and compliance, can help the industry adapt. Continuous monitoring of US policy implementation, strategic engagement and diversification will be key to ensuring timely response to turn these global policy shifts into long-term growth opportunities for the Indian pharmaceutical sector.