Trump's speech had an ominous message for Indian drugmakers

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  • Trump's State of the Union address signalled more curbs on drug prices
  • Indian drugmakers have already lost a lot of revenue due to falling drug prices in America
  • USFDA has doubled its generic drug approvals leading to higher competition and lower prices
  • There may be more pain in the offing for Indian drug exporters to the US
Donald Trump's State of the Union address had a warning sign for Indian pharmaceutical companies. While Trump was delivering his speech, the index of stocks from the Indian pharmaceutical space, Nifty Pharma, tumbled as much as percent in early trade in Mumbai on Wednesday.

"Already, as a result of my administration’s efforts, in 2018 drug prices experienced their single largest decline in 46 years. But we must do more," the US President said.

India is one of the largest generic drug exporters to the US. The last couple of years have been difficult for Indian companies as the American regulator, US Federal Drug Administration (USFDA) opened doors to more competition to curtail drug prices. The approvals for generic drugs went up to 781 in the year ended September 2018, from just about 409 four years ago.

That forced Indian companies to sell their drugs cheaper to retain market share. They slashed prices by over 10% on an average.

But Donald Trump is not done cracking down yet. "It is unacceptable that Americans pay vastly more than people in other countries for the exact same drugs, often made in the exact same place. This is wrong, unfair, and together we can stop it. And we will stop it fast."

Indian companies have exited several products where pricing was unsustainable in the last couple of years. "If you are asking whether the pricing environment has stabilized, I am not sure, I can say that as yet," Umang Vohra, the chief executive officer (CEO) at Cipla told analysts last month.

Not just for the companies, the falling price of drugs in US is bad for the economy too. Pharmaceuticals make for a big chunk of India's exports and US is the biggest market.

Over 30% of India's drug exports go to the US, and revenue from that market fell over 7% in 2018-19 due to the pricing pressure, according to the exporters' lobby Pharmexil. Indian commerce ministry officials hope the country’s pharmaceutical exports to record at least $19 billion this fiscal, up from $17.27 billion from a year ago. Trump administration's policy may pose a big challenge.

SEE ALSO:
Oracle in US hired more Indians than any other race-- but paid them 25% less than whites



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