News

India’s Pharma Sector Unfazed by U.S. Drug Pricing Order, Says CRISIL

Generics dominance and API resilience shield Indian drugmakers from impact of Trump-era policy, says the CRISIL report.

• By Pooja Chaturvedi Sah
• New Delhi
• Jun 03, 2025

News

Indian pharmaceutical exports are likely to remain stable despite the United States’ push to slash prescription drug prices, according to a detailed analysis by CRISIL Ratings. The U.S. government’s “Most Favoured Nation” (MFN) pricing model, aimed at bringing down branded drug prices by up to 80%, will have only a marginal impact on India’s pharma sector, the report found.

The MFN model, introduced via an executive order during U.S. President Donald Trump’s term, intends to benchmark U.S. drug prices against the lowest charged in comparable developed economies. However, CRISIL notes that India’s exports are largely made up of generic medicines — which are not the primary target of the new pricing framework.

Generics Dominate India’s U.S. Exports and Stay Insulated

According to CRISIL, nearly 85% of Indian pharmaceutical exports to the U.S. consist of formulations, mainly in the form of low-cost generic drugs. These already make up about 90% of prescription volumes in the U.S. but account for only 13% of total spending — a reflection of their razor-thin pricing.

“Since generics are already priced much lower than branded drugs and global peers, there’s minimal scope for further reductions that would impact Indian exporters,” said the report. Indian companies, it noted, are therefore well-shielded from the brunt of the MFN rule.

High-Margin Branded Drugs in U.S. Are the Real Target

The executive order focuses on innovator drugs — high-margin, patented medicines developed by originator companies — which currently face little or no generic or biosimilar competition. These are priced significantly higher and form the core of the U.S. pricing challenge.

Indian pharmaceutical companies have only a niche presence in this segment. “Some Indian formulation firms may see pricing headwinds in the branded innovator space, but this accounts for a small share of their revenues, typically under 10%,” CRISIL stated.

API Exports from India Remain Steady

The report also emphasized that exports of active pharmaceutical ingredients (APIs), which make up about 15% of India’s total pharma exports, are expected to stay unaffected. Since APIs do not make up a significant cost component for high-margin branded drugs, their pricing is unlikely to come under strain.

This reaffirms India's strength as a global API supplier — a strategic advantage further reinforced by the government’s production-linked incentive (PLI) schemes and push for self-reliance in pharma manufacturing.

Outsourcing Opportunities May Boost Indian CMOs

The MFN policy, while introducing pricing challenges for innovator drugs, may indirectly benefit Indian contract manufacturing organizations (CMOs). As multinational pharma giants look to cut costs, outsourcing production to India could increase.

“This shift could drive higher volumes for Indian CMOs,” the report noted, adding that India’s strong regulatory track record and manufacturing base make it an attractive partner. However, CRISIL warned that aggressive price negotiations may compress margins in the near term.

Long-Term Impact on Future Generics Needs Monitoring

While the immediate impact on Indian pharma players is expected to be minimal, the report flagged one area of concern: future generics. If innovator drug prices are sharply cut, the potential savings from introducing generics after patent expiry could narrow — affecting the commercial incentive for developing them.

“The shrinking price gap between patented drugs and their generic counterparts could slow the pipeline of new generics,” CRISIL cautioned. This would require close monitoring, particularly for companies betting on U.S. launches post-patent cliffs.

Policy Details and Timelines Will Determine Final Impact

CRISIL underlined that the eventual impact will depend on how the MFN model is implemented — including which drugs are covered, how much price reduction is mandated, and how the cost burden is shared across the supply chain.

“At this stage, the overall exposure of Indian pharma companies remains low, and their strong financial profiles are expected to absorb any marginal shocks,” the agency concluded. CRISIL affirmed that it will continue monitoring the situation to assess any evolving credit risk.

Bottom Line: India’s pharmaceutical industry — built on a robust generics backbone, resilient API exports, and a growing contract manufacturing base — is well-positioned to weather global pricing headwinds, including those posed by U.S. reforms.