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Explained: Will Trump’s order to buy American medicines impact Indian pharma industry?

The US is the largest market for India’s pharmaceutical products. It is said that every third pill sold in America is made in India.

Written by Prabha Raghavan , Edited by Explained Desk | New Delhi |
Updated: August 9, 2020 10:33:28 am
Donald Trump, Trump order on essential drugs, US essential drugs, India US trade of medicines, Covid essential drugs, Indian Express The US, like India, seems to have realised the need to maintain domestic capacities of essential medicines. (Getty Images/Representational)

US President Donald Trump has signed an order aiming to boost domestic production of “essential medicines” and “critical” drug inputs. What would this move mean for India, which is one of the largest overseas suppliers of medicines to the US?

What does Trump’s order say?

The US President on Thursday directed each executive department and agency involved in medicine procurement to identify vulnerabilities in supply chains for essential drugs. The order mandates the creation of a list of essential medical products and directs the fast-tracking of regulatory clearances for domestic producers.

Federal agencies are to consider a “variety” of actions to increase their procurement of such products and their critical ingredients from domestic sources while protecting the country’s service members, veterans and their families from increases in drug prices. They also have to ensure that the measures they implement do not interfere with America’s ability to respond to the Covid-19 outbreak.

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Why led to the move?

The US, like most countries, is dependent on countries like China and India for critical products like medicines. This dependence put the Trump administration in a tight spot during the pandemic, which highlighted the extent of their presence in global supply chains.

For instance, when China’s Hubei province went into lockdown earlier this year, it strained India’s supply of certain critical medicines, including paracetamol, to the world. At that time, India restricted exports of 13 critical key ingredients, ranging from essential antibiotics to vitamins, as well as the medicines made from these. This is because India is heavily dependent on China for these ingredients and wanted to safeguard its own domestic supply until Hubei’s lockdown was lifted.

When Trump began touting hydroxychloroquine as a ‘miracle’ in Covid-19 treatment, India was found to be the largest supplier. Trump in April held calls with Prime Minister Narendra Modi to release stocks of this drug to the US and, at one point even threatened retaliatory action if restrictions were not lifted.

Like India, the US seems to have realised the need to maintain domestic capacities of essential medicines.

“These domestic supply chains must be capable of meeting national security requirements for responding to threats arising from CBRN threats and public health emergencies, including emerging infectious diseases such as COVID-19,” stated Trump’s order. “It is critical that we reduce our dependence on foreign manufacturers for Essential Medicines, Medical Countermeasures, and Critical Inputs to ensure sufficient and reliable long-term domestic production of these products, to minimize potential shortages, and to mobilize our Nation’s Public Health Industrial Base to respond to these threats.”

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How important is the US as a pharma market for India?

The US is the largest market for India’s pharmaceutical products. It is said that every third pill sold in America is made in India. According to the Pharmaceutical Export Promotion Council of India (PHARMEXCIL) India’s pharmaceutical exports to the US are ex-factory valued at around $6 billion.

Unlike China, which is heavily present in the global pharmaceutical supply chain as a producer of key drug ingredients, India is known as an exporter of finished pharmaceutical products. Its generic drugs are popular in the US due to their low cost, which makes them more affordable.

How will this order impact Indian drug makers?

Trump’s order does not specify any one country, though industry executives and government officials here claim it will mainly target China. Several experts tracking India’s pharmaceuticals industry feel the move could also be posturing by Trump before the presidential election in November.

Regardless of the motive, in the short term, the order is not likely to impact Indian pharmaceutical firms, they say. A major reason is that Indian drugs are “largely” not involved in US public procurement processes, according to PHARMEXCIL chairman Dinesh Dua. “As the USA is a member of the WTO procurement agreement, they don’t encourage Indian companies to participate in public procurement processes and mainly involve the US, EU and other members,” he said.

Another reason is because of some exemptions that the order gives. For instance, the order will not apply in cases where procuring domestic essential medicines will bring costs for the agency up over 25%. Nor does it apply in cases where there are no sufficient domestic alternatives.

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However, some are cautious about possible larger consequences. “This won’t be limited to federal procurement. There are other bills being worked on which will mandate CMS (the Centers for Medicare & Medicaid Services) to buy local. That is a very large segment. This order is just a sense of what is to come,” said public health activist Dinesh Thakur, who studies the US and Indian pharma markets and their regulations.

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