US Targets Reduction in Drug Prices While India Remains Protected

US President Donald Trump has taken a significant step to address the high cost of prescription drugs by signing an executive order aimed at reducing prices to levels comparable to those in other developed countries. The order, announced on Monday, targets major pharmaceutical companies, particularly those based in Europe, with the potential to lower drug prices by as much as 90% for certain medications. This move has raised concerns among Indian pharmaceutical companies, which play a crucial role in supplying affordable generics to the US market.

Executive Order Details

The executive order is designed to combat what Trump describes as “price-gouging and profiteering” by large pharmaceutical firms. The initiative aims to cut prescription drug prices by at least 59%, with some drugs potentially seeing reductions of up to 90%. The focus is particularly on high-cost innovative drugs produced by major companies, especially those in Europe. Trump highlighted the stark price differences between the US and other countries, citing a weight loss injection that costs $88 in London but a staggering $1,300 in the US. This disparity underscores the need for reform in the American pharmaceutical pricing system, which often sees patients paying nearly three times more than their counterparts in other developed nations.

Impact on Indian Pharmaceutical Sector

Industry analysts suggest that India’s pharmaceutical sector, which exports approximately $9 billion worth of products and fulfills about 35% of US prescriptions with affordable generics, may be insulated from the immediate effects of this order. Indian generics are already competitively priced due to market pressures and cost efficiencies. This aligns with the US government’s goal of making healthcare more accessible. However, the announcement did lead to a temporary decline in domestic pharmaceutical stocks, with companies like Sun Pharma experiencing a drop of over 3% before recovering by the end of the trading day.

Market Reactions and Future Implications

The executive order’s announcement, shared initially on Trump’s social media platform, resulted in a notable reaction in the stock market. While the BSE Healthcare index closed slightly up, major players like Sun Pharma and Lupin saw declines in their stock prices. Analysts noted that the order instructs the US administration to negotiate drug prices directly with pharmaceutical companies, ensuring that the US, as the world’s largest drug purchaser, secures the best possible deals. If negotiations fail, a “most favored nation policy” will be implemented, mandating that the US pays the same price as the lowest-paying country globally.

Legal Challenges Ahead

Despite the ambitious goals of this executive order, experts caution that it may face significant legal hurdles. A similar policy proposed during Trump’s first term encountered legal challenges and was ultimately rescinded by the Biden administration. There is a possibility that Big Pharma will mount renewed legal battles against this latest initiative. Additionally, concerns have been raised about potential drug shortages if companies decide to limit supply in response to enforced price cuts. As the situation unfolds, the pharmaceutical industry will be closely monitoring the implications of this order on both domestic and international markets.

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