Trump's ‘most favoured nation’ policy set to shake up global pharma markets

US President Donald Trump’s soon-to-be-announced pharma pricing policy will likely impact not just generic drug makers–most of them from India–but also foreign multinational companies selling innovative drugs globally.

On Sunday, with Trump posting on social media platform Truth Social that “prescription drug and pharmaceutical prices will be reduced, almost immediately, by 30% to 80%”, a widespread impact on medicine prices that go beyond the US market is anticipated.

“I will be instituting a most favoured nation's policy whereby the United States will pay the same price as the nation that pays the lowest price anywhere in the world,” he had added in the post. Trump signalled that the decision would result in medicine prices rising throughout the world to equalise the prices paid in the US, and “for the first time in many years, bring fairness to America”.

This means is that if a company is charging ‘X’ for a particular medicine in a particular country and charging ‘2X’ in the US, they will have to bring down the price by 50% in the American market immediately. Hence, the executive order is expected to have a ripple effect on pharma markets globally.

A day after the announcement, the Indian pharma stocks plunged even as the market rose in reaction to an otherwise favourable geopolitical and economic situation.

According to Indian Brand Equity Foundation’s February 2025 pharma report, Indian pharmaceutical sector meets 40% of the generic drug demand in the US and 25% of all medicines in the UK. The report also says India has the highest number of pharmaceutical manufacturing facilities that comply with the US Food and Drug Administration (USFDA) and has 500 active pharmaceutical ingredient (API) producers that make for around 8% of the worldwide API market.

Most of these Indian companies have domestic as well as US businesses. If they have differential pricing strategies and sell the same medicine at a higher price in America than they charge in India or any of the 200-plus countries that they export to, the pharma firms will be compelled to charge the lowest price they have in the US as well.

Multinational firms across the globe are also likely to be impacted as not every company charges the same in every market they operate. Of late, foreign multinational pharmaceutical companies have been preferring to keep the prices the same with extra patient access programmes to cushion the impact to the customer in a different way. These programmes aim to reduce the cost of medication for patients, often providing financial assistance or direct access to medications at reduced or no cost.

Whether Trump’s new order will consider effective pricing to the customer as the base rate or not will have to be seen. If that is the case, innovator companies will be the most hit. Trump’s forecast that his medicine pricing decision will compel pharma companies to increase drug prices in other markets to minimise their losses has to be seen in this context.

As the fine print of Trump’s new order is awaited, what is certain is that countries, including India will have to relook their domestic drug pricing strategies and rules to protect their companies as well as their patients.