“While Indian pharmaceutical firms that have substantial manufacturing and R&D presence in the US will continue supplying, irrespective of the current order, it would also be difficult to move generic manufacturing to the US due to the cost differential,” said an official. Indian pharma firms have substantial presence in generics segment.
US President Donald Trump has signed an executive order that requires Washington to develop a list of essential medicines and buy them as well as medical supplies from American companies instead of from foreign countries like China.
“As China is almost the global single source for fermentation-based API, the order targets such procurement. Hence, the impact will primarily be in high-tech areas like API manufacturing coming from China,” the official said.
India exported pharmaceutical products worth $6.33 billion to the US in FY20. India believes that development of API and critical medicine manufacturing in the US may be a strategic positive for India in terms of national security considerations and also provide non-China sources.
It is also confident that India and Indian pharmaceutical companies have a “deep and positive relationship” with the US, as was exemplified by India’s supply of hydroxychloroquine (HCQ) to it and other countries as Covid-19 treatment.
“This relationship will grow beyond the current executive order,” the official said.
However, trade experts said India should clarify with the US the impact of this move on its pharma industry once the negotiations for a free trade agreement (FTA) begin.
This is crucial as the US said in the order: “United States Trade Representative shall, to the extent permitted by law, take all appropriate action to modify United States Federal procurement product coverage under all relevant FTAs and the WTO Agreement on Government Procurement to exclude coverage of Essential Medicines, Medical Countermeasures, and Critical Inputs.”
“How will be benefit from an FTA with the US if pharma is not part of it? This issue should come up in the FTA talks because we will lose market access,” said an expert on trade issues. “Like India, the US is protecting its domestic industry from China. Now, both can’t challenge each other on their respective protectionist measures,” said another trade expert.