The threat of sector-specific duties is weighing heavily on the mind of Indian pharma. It is obviously bothering the Indian policymakers. The U.S. is India’s largest export market for Indian-manufactured generics. The U.S. accounts for 31.35% of India’s total pharmaceutical exports. Half (47%) of all generics used in the U.S. are imported from India. The global generic market is expected to reach 614 billion in U.S. dollars with a share of 5% in 2030. Issues on the table for trade negotiations with the United States (U.S.) are critical to the viability of Indian pharma. Longer-term concerns and public interest are at stake in the negotiations. India needs to prevent Trump from weaponizing tariffs and bullying the world majority. India matters in the supply of affordable essential medicines to the world.
Several commentators have stated that India should be leveraging the strength of pharmaceutical sector in the bilateral trade agreement (BTA) negotiations with the U.S. But how this can be done is yet not addressed. It is our understanding that this can be duly achieved by pushing Indian generics as a global public good. India will have to recalibrate her trade and investment strategy in the pharmaceutical sector to negotiate with the US with an eye on how to mobilize public across the U.S. and elsewhere.
The two major stated concerns of Trump administration are, the prices of drugs in the U.S. market and the changes sought in intellectual property (IP) regime by the U.S. It is public knowledge that India is willing to make some major concessions to save the exports of Indian-manufactured pharmaceuticals to the U.S. market. India is ready to supply generic medicines at between 20% and 25% of the current reference branded prices, for three years after originator patent expiry. Following the three years, India will introduce an additional 10% to 15% cost reduction for these products over seven years. Generic products already enter the U.S. market at a lower price than the originator. Affordable generic medicines exported from India constitute over 90% of the prescriptions filled in U.S. for Diabetes, Anxiety, Depression and Cancer, overall Indian generic medicines saved U.S. healthcare system 219 billion USD in 2022 and nearly 1.3 trillion USD between 2013 and 2022.
Change strategic direction
India will require the trade negotiators to move away from the transactional approach that is limiting the Indian gains on pharmaceuticals. With the objective of tiding over the immediate challenge, the Indian Pharmaceutical Alliance (IPA), an organisation representing the country’s largest pharmaceutical companies, has been proposing to the government to reduce import tariffs from the current 10% to zero for pharmaceutical imports from the US. While initially the Trump administration exempted Indian-manufactured pharmaceuticals from higher tariffs, the IPA proposal fell flat. As the U.S. concerns are different, President Trump announced a levy of 26% and penalty of another 25% for pharmaceuticals imports coming from India in to the USA market.
India cannot continue to approach BTA negotiations as a transactional game between India and U.S. India has been offering a financial incentive to the U.S. in the pharmaceutical sector. The offer made came amid efforts by Mr. Trump to control drug prices through an Executive Order that aims to reduce prescription drug prices by up to 80% under the Most Favoured Nation rule, which is essentially international reference pricing (IRP). While the overhang of the Indian side concentrating on financial incentives with Mr. Trump is understandable, it is still not smart thinking. The changes sought by the U.S. in the intellectual property rights (IPR) regime seek to extend drug monopolies for the benefit of Big Pharma. It is going to raise medicine prices and prevent market competition. The Big Pharma needs a push back.
India has long resisted foreign pressure to revise its patent laws, despite being part of the agreement, and has the required negotiating capital to make a new strategic move. The Indian government can emphasize the contribution of Indian generics to global public good. India can offer the pathway of joint ventures in the case of pharmaceutical sector to not only the Global South but also to the U.S. and EU. This will only increase the bargaining power of India in bilateral trade negotiations. India should stick to the demand for a comprehensive review of Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement to protect public health from the U.S. in BTA negotiations. It is probable that the US will not offer full parity in terms of export control easing. India can still incentivize the US administration to exempt specific drug categories by taking recourse to the strategic move suggested for the consideration of India’s negotiating team.
West Asia, Central Asia, Africa and South America are growing markets for the Indian generics. India needs to diversify pharmaceutical trade and investment and offer to pursue overseas investments with social impact. India can build bridges with Africa, South America, Central Asia, Russia, China, ASEAN members and benefit the world majority. The U.S., on the negative side, is still seeking to extend the patent exclusivity period for drugs from the current 20-year term to delay the generics originating from India for the world market. The U.S. is seeking higher obligations on test data protection than required under TRIPS. The FTAs have been used to force longer periods of data exclusivity. So far India has maintained its firm stance on test data protection by not accepting such norms. The India-US TRUST (Transforming the Relationship Utilizing Strategic Technology) initiative should be directed in the course of negotiations on bilateral trade with the US to catalyse government-to-government, academia and private sector collaboration in key sectors such as biotechnology.
India should use BTA negotiations to increase access to health technologies and champion public health. The Trump administration’s push for domestic pharmaceutical production has already benefited from a surge of investments from India-based companies aiming to enhance their U.S. manufacturing. Already as such, the Indian pharma has proposed to increase manufacturing investment in the United States Tech transfer for manufacturing purposes in India is again an important interest. Voluntary Licensing (VLs) Agreements need to ensure technology transfer. India should not give up the hard-earned TRIPS flexibilities, including the right to compulsory-licensing (CL) provisions. India should link the reduction in prices for the imports of Indian-manufactured drugs by the U.S. to the demand for technology transfer and collaborative R&D. India should demand the acceptance of a comprehensive review of trade and investment strategy of the world as a whole in the case of pharmaceuticals and vaccines.
The trade deal between India and the U.S. is not just about tariffs. India needs greater access to technology transfer from the U.S. companies seeking relationships with the Indian companies. The Trump administration is targeting Indian companies to promote U.S. manufacturing through the establishment of subsidiaries in the United States. Indian pharma has the potential to emerge as a supplier of global public goods. The Indian policymakers should extend their arm to the pharma in the rest of world markets by taking the path of joint ventures with the pharmaceutical industries of the Global South in particular to create a win-win situation for essential medicine supplies. India should not give into the US administration’s unreasonable demands. India should trade in pharmaceuticals with strategic moves favouring public health. The world majority can be served by offering investment in joint ventures of the Indian pharmaceutical industry with the pharmaceutical industry everywhere in the world.
(Dinesh Abrol is Faculty TRCSS, JNU and Uday Bhaskar Ravi, Former Director General of Pharmaceutical Export Promotion Council)