Chill, trimmed pill prices won't hurt us

In his by-now familiar conveyor belt of executive orders, Donald Trump's latest EO seeking international consumer price parity for prescription drugs sold in the US is welcome for many Americans for whom access to medicine has become a veritable luxury. However, implementing the order could be tricky. Enforcement action would involve export controls and import facilitation, which may be beyond the scope of existing US law. The move is likely to face legal challenges, as did an earlier attempt by Trump during his first term in office, to lower drug costs. The administration, however, has leverage through anti-competitive action against Big Pharma, and in curbing practices like the delayed introduction of cheaper generics. US drug companies have not faced adverse market reaction to the EO, suggesting the effort may not be strong enough to squeeze margins.

Indian drug exporters to the US operate mainly in the generics segment, which operates at low spreads. These are, therefore, unlikely to be affected by Trump's order. Washington will seek to increase imports from developed economies like Germany, Britain and France. Which means Indian pharmaceutical firms are unlikely to gain any special access to the US market in the branded segment. Besides, the US has flagged, during negotiations with China over reciprocal tariffs, pharmaceuticals as a sector that will continue to face safeguard duties.

This sensitivity has so far not been extended to generic imports from India that are duty-exempt. The US will seek reciprocal treatment for its pharma exports to India, which face tariff barriers. India has carved out a niche for itself as a supplier of affordable medicine across the world. It can use this 'pharmacy of the world' rep as leverage for preferential tariff treatment. Trump's effort to keep a lid on US healthcare spending will not be served by making Indian generics expensive. It helps to have a supply of cheap Indian generics on hand as Trump tries to trim what he sees as padded profits of the US drug industry.