A recent study by the Global Trade Research Initiative (GTRI) has expressed fears that the United States' attempt to cut drug prices may have an unintended consequence of major drug companies raising prices in less expensive markets such as India.
The potential knock-on effect is the result of a new executive order issued by US President Donald Trump to bring American drug prices in line with the lowest prices achieved across other developed countries.
President Trump's executive order puts in place a "Most Favored Nation" (MFN) pricing policy, which states that the US will not pay more for a drug than what is charged in any other nation. Although this action is aimed at giving immediate relief to American patients by dramatically lowering the cost of prescription drugs—as much as 30% to 80% in some estimates—the GTRI cautions against unintended worldwide repercussions.
The GTRI report opines that the lower profitability for pharmaceutical firms in the high-margin US market will push them to look for higher income in other markets, especially developing nations such as India, where drug prices are much lower. GTRI founder Ajay Srivastava said this may set off a "global price recalibration," with pharma multinationals increasing pressure on India to hike prices, possibly through new patent regulations and trade talks.
Srivastava highlighted that the spotlight of pharmaceutical intellectual property rights is moving from court fights to trade talks. With more global pharma companies using Free Trade Agreements (FTAs) to drive "TRIPS-plus" requirements—such as data exclusivity and extended patent life that can delay generic competition—India's historic opposition to these efforts will be pivotal.
India's present patent system strictly adheres to the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). It facilitates speedy approval of generics through the use of existing clinical data, eliminates the "evergreening" of patents, and gives preference to public health by providing easy access to cheap essential medicines. This system has made India the world leader in generic drug manufacture, exporting inexpensive, life-saving drugs across the globe.
The GTRI report emphasizes India's pharmaceutical industry's critical role in global health, from antiretrovirals for HIV to low-cost cancer treatments. Any compromise in India's patent regime due to pressure from global price setting has the potential for disastrous consequences on access to low-cost medicines not just in India but throughout the developing world.
Saurabh Agarwal, a tax partner at EY India, also shared these fears, saying that while the US action might generate short-term gains for American consumers, it could bring pricing pressures to lower-cost countries as producers seek to recover losses and R&D expenses from such markets.
The GTRI calls on India to meet this possible pressure with strategic vision and unshakeable determination, underscoring the need to preserve its existing patent regime to defend its indigenous pharmaceutical sector and its pivotal position in global healthcare.
With India and the US said to sign a bilateral trade deal sometime later this year, the question of drug pricing and patent legislation is likely to be one of the focal points of the negotiations. The world waits to observe how India will maneuver in this tricky situation to protect its role as the pharmacy of the Third World.