• This article tells why U.S. medicine prices are higher, Why Indian Pharma is important for US, why India dominates the generics market and way forward for India/Indian companies and more.

This is the third in a series of articles post Trump Tariffs. One, explained what is trade deficit? Two, looked at both the trade and geo political issues. What does U.S.A. want? What is President’s Trump’s approach and Implications? 15 IDEAS how India can respond. Three, Look at Trade Deficit Numbers after removing APPLE Iphone exports

According to paper dated 7/8/25 by Global Trade Research Initiative, “India exported $9.8 billion in pharmaceuticals with a 5.98% share, and continues to face zero tariffs. Indian giants like Dr. Reddy’s, Aurobindo, and Zydus stand to retain or even grow market share as long as tariffs remain zero.”

Key points are Pharma products face zero tariffs although President Trump ji has threatened to impose higher tariffs. Note that other key nation suppliers like Ireland, Germany and Switzerland enjoy zero tariffs too.

In fact Trump ji recently asked pharma companies to reduces medicine prices in the U.S. and make them comparable to Europe. (sent letters to 17 drug companies)

India has helped reduce medicine prices in USA. Ask any Indian who has travelled to the U.S.-they will tell they buy medicines from India because medicines in U.S. are frightfully expensive.

At the outset, must state that am not a domain expert. This article is a result of speaking with pharma industry professionals and online search. It is not a detailed study on why U.S.A imports medicines from India in large quantities.

This article includes why U.S. medicine prices are higher, Why Indian Pharma is important for US, why India dominates the generics market and way forward for India/Indian companies.

A former colleague sought help of AI Gemini to know why U.S. medicine prices are higher. Key results and more insights below -

1. Regulation and Pricing Policies

In U.S.A. government allows pharma companies to set their own prices. Companies are given patent protection for a limited period which allows them to keep high prices without competition. Investment in research and development is large.

India has a price control mechanism for drugs. Every drug has a pre-determined patent life. Once the patent expires, Indian companies to reverse engineer to produce the same drug under a Generic name and sell at lower prices. Cost of production in India is lower too.

2. Generic Drugs and Competition

Once patent expires, the consumer has buy the Branded Drug i.e. more expensive or a cheaper generic drug.

Conversely, India has become a major global hub for manufacture of generic medicines.  

Note that generic drugs exported contain API (Active Pharmaceutical Ingredients) which India imports in large quantities from China. It is only a few years ago, that the Government of India introduced the PLI (production linked incentive scheme) to incentives Indian companies to produce API.

One never knows, when the Chinese will weaponise API. Imports of API have also contributed to India’s burgeoning trade deficit with China.

3. Research and Development (R&D) Costs

Pharma companies justify high drug prices in the USA by referring to high R&D costs in developing new drugs. They argue that these profits fund future innovation and subtly result in a geo-political advantage for the U.S.

Since Indian companies reverse engineer after expiry of patent, their focus is on manufacture and distribution of already developed drugs. Simply put, focus on quality and production / distribution costs.

Note that manufacturing cost in India, even in U.S.’s FDA approved plants, is still lower that what it is in the U.S. FDA stands for Food and Drug Administration. Understand they have an Office in India and conduct regular audits to certify plants as fit for manufacturing for the U.S. market. India Office

Since India in itself is a huge market (what with 140 crore plus population) Indian pharma companies can spread out fixed cost over larger volumes.

4. Examples of Price Differences

This is straight from the AI Gemini report.

“A 2018 study noted that Gilead's Hepatitis C drug, Sovaldi, was priced at about $1,000 per day in the USA, while it cost around $10 per day in India. A 40mg pill of the stomach-acid drug Nexium was reported to cost $7.78 in the USA, compared to less than 37 cents in India. A bottle of insulin in the USA can have a list price of around $450, requiring a patient without insurance to pay thousands of dollars a month, while the price in other countries is significantly lower.” 

US FDA insistence on following Good Manufacturing Practices by Indian Pharma companies would invariably have benefited Indian pharma companies too.

How do Indian Companies distribute their products in USA?

Industry source states different companies follow different models depending on size and scale of operation.

They could sell directly to Importer, or have their own Warehouse. Next distribute themselves or sell to large Multi city Pharma Stores.

An online search shows that CVS Health, Walgreens, Health Mart, Rite Aid are leading players. Walmart and Kroger have large pharmacy sections within their retail stores. Source Industry sources state that such large stores buy generics from pharma companies in what would the equivalent of an Indian Tendering system.  

An online search showed that, “The United States pharmaceutical wholesale distribution market is dominated by a few large companies, with AmerisourceBergen, Cardinal Health, and McKesson Corporation.” They dominate the prescription market according to article in Commonwealth.org

Why Indian Pharma is important for USA?

According to this Times of India report, USA gets app 40% of its generic medicines from India. India has advantages of cost, skilled manpower and scale. India has app 700 US FDA facilities.

While Trump ji may want to ‘Make in USA’ creating similar ecosystem would take about 3-5 years says the TOI report. Further, it will lead to an increase in Trade Deficit with China since key input API is made by China in large quantities. Due to globalization, different countries have focused on different aspects of the value chain. Creating the entire value chain in USA might not make business sense.

Why India dominates the global generics market?

As per this report (April 25) in BureauInvestigates.com, “India’s then-prime minister Indira Gandhi, who said western pharma companies had been exploiting patent laws to keep drug prices high, was a big advocate for this reform. She saw the Patents Act as a tool to break foreign monopolies, boost local production and secure patients’ access to affordable medicines.

She was right. Production and exports skyrocketed, and Indian pharma companies soon thrived. Even when patent laws were tightened in 2005, the country managed to stay competitive by focusing on making and exporting drugs whose patents had expired. Key to this success were India’s cost-effective labour and manufacturing processes.” 

Perhaps, India’s Y2K moment was CIPLA reducing the cost of HIV treatment drugs.

Conclusion/Way Forward 

Tariffs on Indian pharma products shall increase costs for the U.S. consumer. It is for Trump ji to decide whose benefit he has heart! It will take 3-5 years to set up facilities in the U.S. by which time Trump may no longer be President. Also, this report states that U.S. exports patented and innovative drugs of app $ 800 million, that attract nil or concessional duties. So trade is two-way.

India must not weaponize its pharma supplies like the Chinese have done with magnets or rare earths. Play cool – be alert and aware. Always keep the dialogue open. Our people to people contacts are strong.

Big learning from Trump Tariffs is the need for Indian companies, across the spectrum, to find new markets and de-risk themselves from over-dependence on the U.S. market.  

According to this article in Biospectrumindia.com, “Indian companies to mitigate the effects of US tariffs, need to invest more in innovation - to diversify their product offerings, find new niches and of course novel drug discovery. Pharma companies should also put a greater emphasis on producing innovative generics, biosimilars, and even branded drugs, catering to markets beyond the US. Besides, Indian companies need to implement novel technologies and digital technologies both in production, QC and distribution of products.”

Indian companies can acquire or set up more manufacturing facilities in the U.S. provided it is cost effective. An honest conversation with U.S. officials would help.

I visited the websites of four leading exporters on 8.8.25 at 12.15 noon and found about manufacturing sites in Americas -

1. Lupin-Has presence in North America and Brazil. Visit Lupin USA site

2. CIPLA-Visit Cipla USA site 3 units in Long Island & one in Massachusetts.

3. Dr. Reddy's Laboratories-To know Global Locations For USA site

4. Sun Pharma-To visit USA site

India needs to tell the U.S. how its generic products have reduced cost of healthcare in the U.S. and made medicines affordable for the common man. We need to be aware, humble, innovate and look beyond the U.S. market.

To read all article on Ideas and Policy India  

From FDA India site by Robert MC, Commissioner of Foods and Drugs India’s Unique Opportunity and Important Responsibility as the Pharmacy to the World, “For the U. S., where more than nine out of 10 prescriptions dispensed are generic drugs. And although the Indian pharmaceutical sector is best known for its generic drug production today, the industry is also keenly interested in the development and manufacture of novel therapeutics, vaccines and digital health technologies.” October 2023