On Monday, May 9, the Indian pharmaceutical sector faced intense selling pressure after U.S. President Donald Trump reiterated his intention to bring down prescription drug prices in the U.S., making them among the lowest globally. The announcement, made via Trump’s Truth Social account, has triggered a wave of concern among Indian pharma exporters, especially those heavily reliant on the U.S. generic drug market.

Nifty Pharma Index Plunges as Export Fears Rise

At 9:40 am IST, the Nifty Pharma index recorded a 1.7% drop, with key constituents like Sun Pharmaceuticals, Biocon, Lupin, and Aurobindo Pharma falling as much as 5%. This was in stark contrast to the overall optimistic market sentiment, making pharma the only sectoral laggard of the day.

The Indian pharma industry has significant exposure to the U.S. market, particularly in generic drugs. Any drastic reform in U.S. drug pricing mechanisms directly impacts the topline of these companies.

Trump’s Criticism of Pharma Pricing Sparks Alarm

In his post, Trump wrote:

“For many years, the world has wondered why prescription drugs and pharmaceuticals in the United States were so much higher in price than they were in any other nation... Sometimes being five to ten times more expensive than the same drug, manufactured in the exact same laboratory or plant, by the same company.”

Trump squarely blamed pharmaceutical companies for exploiting American consumers, dismissing their long-standing argument that high prices were necessary to recover research and development costs.

He described this justification as a “scam” and labeled American patients as the “suckers” bearing the cost burden for the rest of the world.

Executive Orders Targeting Pharma Sector

The policy statement follows two executive orders signed by Trump on May 5, further escalating the pressure on the pharmaceutical industry:

1. First Order: Promotes domestic drug manufacturing by easing regulatory barriers and prioritizing U.S.-based supply chains.

2. Second Order: Restricts funding for scientific research deemed risky, particularly studies aimed at enhancing virus pathogenicity, citing biosecurity concerns.

These moves collectively signal a hard stance on import dependence, particularly from countries like India and China, which dominate the supply of active pharmaceutical ingredients (APIs) and key starting materials (KSMs).

Brokerage Commentary: Nuvama Raises Red Flags

Post-announcement, Nuvama Institutional Equities expressed concern, stating:

“The policy initiatives, if implemented fully, may lead to increased compliance and operational costs for foreign manufacturers, including those in India. We expect generic pharma to continue to underperform due to uncertainty.”

The brokerage highlighted that the new executive order is designed to fast-track the local manufacturing of APIs, KSMs, and associated raw materials in the U.S., addressing what the U.S. government views as a national security risk.

Reshaping of U.S. Generic Drug Supply Chain

The greatest risk, according to analysts, lies in the potential restructuring of the U.S. generic drug supply chain. The executive directive encourages government agencies to push aggressively for “reshoring” manufacturing to the U.S.

If implemented, this could:

• Reduce demand for Indian generic exports.

• Increase competition from U.S.-based players.

• Create logistical challenges for Indian pharma companies trying to comply with newer rules.

India’s Dependency on U.S. Market – A Structural Risk

India is one of the largest exporters of generic medicines to the U.S. The U.S. market accounts for over 30-40% of revenues for several leading Indian pharmaceutical firms. The Food and Drug Administration (FDA) approvals are crucial for drug launches and generics market participation.

Any increase in:

• Regulatory hurdles

• Cost compliance

• Preference for domestic over foreign products

...could erode Indian companies’ profitability and market share in the U.S.

Past Precedents: Trump’s Longstanding Battle With Big Pharma

This is not the first time Trump has clashed with the pharmaceutical industry. During his previous presidency, Trump had:

• Attempted to allow drug imports from Canada to promote competitive pricing.

• Proposed Most Favored Nation (MFN) pricing models, ensuring Americans pay no more than the lowest global price for drugs.

• Tried to enable Medicare drug price negotiations.

While some of these policies were held up in courts or overturned, they demonstrate Trump’s consistent focus on lowering drug prices and challenging the pharma lobby.

Investor Sentiment and Stock Market Reactions

The bearish outlook was clearly visible on Monday’s trading screen:

• Sun Pharma: Fell over 4%

• Biocon: Down by 3.5%

• Lupin: Dropped around 5%

• Aurobindo Pharma: Lost close to 4.8%

The Nifty Pharma index, which had been relatively stable over the past month, turned negative, suggesting that investors are pricing in policy risk and expecting continued volatility.

Conclusion: Tough Road Ahead for Indian Pharma

With Trump once again making pharmaceutical reforms a campaign and policy centerpiece, Indian drug makers could face:

• Margin compression

• Market access challenges

• Increased uncertainty over U.S. policy shifts

Unless there's a clear roadmap or favorable bilateral understanding, Indian pharma’s dependency on U.S. demand may turn into a liability in the coming quarters.

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