India hopes Trump’s order will not hit its cheap generic drug exports

India is hopeful that US President Donald Trump’s executive order requiring federal agencies to buy certain essential drugs and medical supplies locally may not substantially affect exports from the country because of their low price, government officials have said.

“A clause in the US President’s executive order, that specifies that the provisions of local buying would not apply in case it causes the cost of procurement to increase by more than 25 per cent, may lead to exclusion of most low cost pharmaceuticals shipped from India,” an official told BusinessLine .

The Centre, however, will scrutinise the order, watch out for more clarifications from the US government, and also hold discussions with the industry on its full implications.

More clarity needed

“Right now, it is not even clear what drugs are covered under the order. We just know that the US Food and Drug Administration will decide which medicines are to be subject to the new requirements. We have to wait and watch a bit and also talk to the US government if needed,” the official said.

Many in the Indian industry also share the government’s optimism and believe that a bulk of Indian exports may not get hit by the order as not only were they cheap but also the restrictions were only on government purchases. Indian exporters received just a small percentage of orders from federal agencies, they said.

It is important for India to ensure that the US market for its pharmaceuticals remains intact as it is the country’s largest buyer accounting for $6.7 billion of exports in 2019-20.

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According to R Uday Bhaskar, Director-General, Pharmaceutical Export Promotion Council (Pharmexcil), the US decision will not have any impact on Indian pharmaceutical exports to the US as it is mostly related to the organisational and institutional supply.

The value of US generic market is about $69 billion of which India exported just about 10 per cent in the last fiscal. “Out of this, Indian pharmaceutical export to organisations is almost negligible. In a way we are not fully connected with it,” Bhaskar said adding that there was no need for concern.

Speaking from the US, Vinita Gupta, Lupin Chief Executive Officer, said, “We actually think this as an opportunity for larger industry players who have manufacturing sites in both countries.”

Limited to US govt purchases

The US effort is focused on essential medicines, Covid products and limited to government purchases, she explained, adding that companies got only a small percentage of this when they supplied from India.

In fact, there could be an “incremental opportunity”, she said, adding that the US Government was cognisant of the role India played in the supply chain and drug-pricing. The US Government move would cover Covid products, anti-infectives etc, and the next few weeks and months would give a clearer picture, she indicated.

“The cost dynamics, too, work in favour of Indian drug makers as the cost variation for essential drugs could be to the tune of 30 per cent to 45 per cent,” pointed out a Hyderabad-based manufacturer. Since the clause in the order talks about ensuring that the cost of local procurement should not exceed 25 per cent of the cost of imported generics, most of India’s shipments should be exempted, he added.

In fact, it is China, and not India, which is the main target of the decision, some in the government like to believe, as it is also the largest exporter of pharmaceuticals to the US in volume terms.

Interestingly, China was the only country that Trump named while discussing the order at a Whirlpool Corp. Manufacturing facility in Ohio.

“India supplied adequate quantities of Hydroxychloroquine and Paracetamol to the US over the past few months to help it deal with the Covid-19 pandemic. There is a level of trust that the US has with India which is lacking with China,” the official said.

(With inputs from G Naga Sridhar and PT Jyothi Datta)