Syllabus: GS2/Issues Related To Health
Context
- The recent announcement of 100% tariffs on imports of patented medicines by the United States (US) has effectively weaponised access to healthcare in the US.
| Tariff Breakdown By US – Cap of 15% Tariff: On Imports From European Union and Japan (together they account for nearly 75% of US pharma imports); – 100% Tariffs: Remaining countries; |
US Pharma Landscape
- Patented Drugs Vs Generics: Patented drugs account for around 10% of household medical spending, representing about 87% of spendings in pharmaceuticals.
- However, Generic drugs account for 90% of prescriptions in the US, but only about 13% spend on it.
- Domestic Innovation vs. Foreign Production: US leads in drug discovery and intellectual property, but much of the manufacturing — especially for complex biologics and specialty drugs — is outsourced to global Contract Development and Manufacturing Organizations (CDMOs).
- Global Sourcing: The US imports a significant portion of its patented drugs from countries like Switzerland, the UK, and Singapore.
Possible Implications
- Economic Fallout: According to an Ernst & Young study, 25% tariff on patented drugs could raise annual drug costs by $51 billion.
- The financial burden on American patients and insurers could be even more staggering with the new 100% tariff.
- On Insurance Companies: They may pass on the increased costs to policyholders, exacerbating the already high out-of-pocket expenses for life-saving treatments.
- Supply Chain Vulnerabilities: The US pharmaceutical supply chain is deeply intertwined with global partners.
- Disruptions due to tariffs could lead to shortages or delays in critical treatments.
Impacts on India’s Pharma Industry
- India is the largest supplier of generic medicines to the US, accounting for over $10.5 billion in exports in FY25.
- India’s generics industry remains exempt from the new tariffs.
- Contract Drug Manufacturing Organizations (CDMOs) may face pressure as the US pushes for domestic production.
Concerns For India
- Issue of Uncertainty: There is uncertainty around Active Pharmaceutical Ingredients (APIs) — dominated by India and China.
- Any expansion of tariffs to include generics or biosimilars could severely disrupt one of India’s strongest export sectors.
- Limited Exposure to Patented Drugs: Indian companies like Sun Pharma have modest exposure to the patented drug market in the US, with only 17% of their revenue tied to such products.
| Patent vs Generic Drugs – Patented Drugs: These are medicines protected by intellectual property rights, typically for 20 years. 1. These drugs are usually expensive due to monopoly pricing and high development costs. 2. Medicines Patent Pool (MPP) of WHO: It facilitates voluntary licensing of patented drugs to improve access in low- and middle-income countries. – Generic Drugs: These are copies of patented drugs made after the patent expires. 1. They contain the same active ingredients and are therapeutically equivalent. 2. These drugs are significantly cheaper due to competition and absence of R&D costs. 3. They need to meet rigorous standards for safety, efficacy, and bioequivalence. 4. International Nonproprietary Names (INN) System of WHO: It ensures that generic drugs are clearly identified and safely prescribed worldwide. – The Indian Pharmacopoeia Commission promotes rational use of generics and sets national standards for drug quality. 1. India is a global hub for generic drug production, supplying affordable medicines to over 200 countries. |
Way Forward
- Countries heavily reliant on US demand need to accelerate efforts to diversify their export markets and forge alternative trade alliances.
- Indian firms may need to consider shifting manufacturing to US-based facilitiesor CDMO partners to bypass future trade barriers and remain competitive under the new regime.
- It needs to expand its pharmaceutical footprint in Africa, Latin America, and the Middle East—regions where demand for affordable medicines is growing.
| Daily Mains Practice Question [Q] Discuss how the recent imposition of 100% tariffs on imported patented drugs by the United States reflects the weaponisation of health care. What role can India play in mitigating its impact on access to affordable medicines? |
