With the prospective tariffs that Donald Trump is proposing on India coming into play, there is a potentially very large portion of the American population that may have to deal with expensive medical bills. Piyush Goyal came to the US last week and made the effort to have meetings with American officials with the hope of negotiating a trade deal, which Indian communists had thought was going to be postponed after Trump’s announcement of the tariffs on India. The tariffs Goyal wishes to negotiate stem from the ones imposed by India on American imports, which Goyal’s own government claims are set to go into action by April 2.
Trump’s proposal on tariffs is particularly alarming for Goyal because if these are approved, sectors of prescription drugs and pharmaceuticals will incur some tax liabilities that can prevent India from selling more than 15% of the drugs exported to the United States. India stands first by a huge margin when it comes to supplying medicines because it accounts for nearly half of all medicines consumed in the United States. Economically, the elimination of these medicines will lead to an increase in the government’s spending to purchase these medicines for the estimated 90% of Indians that are covered by health insurance. A jaw-dropping number of $219 billion is estimated to have been spent last year due to the lack of Indian generics. The Donald Trump tariffs lead to the overwhelming concern for the decrease of Indian medicines which make healthcare significantly affordable.
Melissa Barber, an expert on drug pricing at Yale, warns that tariffs might worsen an already unbalanced demand and supply framework, hurting the uninsured and low income people even more. The impact might be felt throughout the population, particularly among the chronically ill. The IQVIA study indicates that more than 60% of prescription medicines for hypertension and certain mental health disorders treated in the US are dispensed as Indian manufactured products. The United States’ reliance on India for pharmaceutical supplies is illustrated by the fact that sertraline, the most prescribed antidepressant in the US, in many cases is sold for about half the price non-Indian manufacturers charge.
Peter Maybarduk, an attorney for Public Citizens, one of the consumer advocacy groups, is worried about what these tariffs may lead to. He says one in four patients in the US already have a hard time affording the medicines they need. The strain that Trump’s tariffs on Chinese imports are already putting on the healthcare system due to the fact that 87% of the raw materials used to prepare drugs sold in the US are imported and China controls roughly 40% of the supply is problematic.
Trump intends to stimulate investment in the US by shifting business operations back to the country with the hope of reducing tariffs. Despite major pharma giants like Eli Lilly and Pfizer pledging to shift production towards the US, the global economics regarding cheap drug production add a new level of complexity. As pointed out by Dilip Shanghvi, who is the chairman of India’s leading drugmaking company Sun Pharma, their items which range from $1 to $5 settings in USA cannot relocate production facilities economically. A member of the Indian Pharmaceutical Alliance also said that the cost of production in India is grossly lower than the US by 3 to 4 times.
If the Indian pharmaceutical companies have to face the repercussions, they are going to face a hard time. As the forefront India’s industrial exporter, the pharmaceutical industry accounts for almost 12.7 billion dollars of sales to the US with almost no taxes imposed. On the other side, India imposed a tariff of 10.91% on drugs coming from the US, which creates an unbearable imbalance. Any new sophisticated tariffs from United States may lead to an increase in the production cost of specialty drugs as well as generics, putting the profit margins of Indian firms who are making a killing in the US cardiology, psychiatry, dermatology, and gynecology drugs at risk.
A finance executive from one of the major Indian pharmaceutical companies, now under my concealment agreement, commented that while some increases in tariffs may be offset through other cost reductions, any unreasonable increases will inescapably be transferred to the consumers. For most Indian pharmaceutical companies, North America remains the region from where they derive maximum revenues, as it contributes one third to their earnings and profitability.
The chief executive of Cipla, the third largest drug firm in India, Umang Vohra, recently stated that entrepreneurs ought not to let tariffs reign over their strategies, as these kinds of measures can always be reversed. Nevertheless, a time span of four years can dramatically alter the fortunes of many firms.
In terms of addressing the problems, market specialist Ajay Bagga mentioned that India ought to do away with its tariffs on pharmaceutical products. The influence that such a policy change would bring is negligible, considering that US drug exports to India are less than 500 million dollars. The IPA has also supported the idea of zero duties when it comes to American drug exports in a bid to avert the possibility of adverse consequence from trade tariffs. Indian Premier Narendra Modi’s administration has already removed basic customs duties on thirty-six life-saving medicines in the budget, and Trump’s comments about India suggest he thinks India may be caving to his demands.
People in both nations are closely monitoring the developments of a possible trade deal that might potentially change their way of living and earning. Mark Linscott, a former assistant US trade representative, mentioned that even though new tariffs would be problematic in the short term, he expects forward motion on a trade deal by fall. He stressed that both nations suffer from all sorts of pharmaceutical supply chain interruptions.
