An executive order signed by US President Donald Trump requiring that the federal government buys “essential” drugs solely from American companies will have a minimal impact on India, government sources have said, claiming that it was mainly aimed at hurting China.
The so-called “Buy American” order could lead to a seismic shakeup of the drug industry as the US is the biggest export market for the Indian pharmaceutical sector. Government officials, however, said the latest measures are targeted mainly at China due to ongoing US-China hostilities and may even benefit India strategically.
They said the Trump administration order mainly targets procurement in high-tech areas like fermentation-based API (Active Pharmaceutical Ingredient), for which China has been the single source of global supply, and not low-cost generics, where India holds the edge.
If US reduces dependence on China for development of API and critical medicine manufacturing, it could provide India a non-China source for procurement and this will be a strategic positive in terms of national security considerations, officials said.
According to Bloomberg, 70 per cent of India's imports of APIs come from China, and the government has been looking for ways to reduce this dependence.
The government also looked to downplay the impact on India’s own pharmaceutical industry, which had in 2019 exported drugs and pharmaceutical products to the US worth almost six billion US dollars, accounting for a third of the total global exports in the sector.
The order encourages the production of certain drugs and medical supplies in the US, following shortages during the Covid-19 pandemic. It also loosens federal drug-safety and environmental regulations that the Trump administration says disadvantages domestic producers, among other measures.
“We’re dangerously overdependent on foreign nations for our essential medicines, for medical supplies like masks, gloves, goggles and the like, and medical equipment like ventilators,” White House Trade Adviser Peter Navarro said on Thursday.
President Donald Trump also said US will end its reliance on foreign nations for pharmaceuticals and medical supplies, but he had singled out China. Trump asserted that Beijing would have to pay the price for the wound it has inflected on America and the world by spreading the deadly coronavirus.
It remains unclear how broadly the order will be implemented. The order does not specify what drugs it covers, and instead, directs the US Food and Drug Administration to decide which medicines will be subject to the new requirements.
Citing the recent export of anti-malarial drug hydroxychloroquine to the US to aid the fight against Covid-19, the government sources said it reflected the close and positive relationship between Indian pharma companies and the US.
Officials also said that it would be difficult to move generic manufacturing to the US. “Due to cost differential, it will be difficult for US to move sizeable generic manufacturing to US, something Indian pharma specialises in. Hence, the impact will primarily be in high tech areas like API manufacturing coming from China,” an official said.
They also said major Indian pharmaceutical players such as Cipla, Sun Pharma, Dr. Reddy’s etc have a substantial manufacturing as well as Research and Development presence in the US, and hence, they will continue supplying to US markets irrespective of the current order with partial manufacturing in India.
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