In a move that has sent shockwaves through global pharmaceutical markets, US President Donald Trump has launched a sweeping offensive against high drug prices in the United States, sparking widespread concern among drugmakers—and triggering a sharp selloff in pharma stocks, including in India.
On Friday, President Trump personally issued formal letters to the chief executives of 17 of the world’s largest pharmaceutical companies, urging them to bring the pricing of drugs sold in the US in line with what other developed nations pay. The most-favored-nation (MFN) pricing model proposed by the Trump administration is seen as a game-changing directive that could put substantial downward pressure on drug pricing, especially for companies heavily reliant on the US market.
The letter, which includes an explicit 60-day ultimatum, instructs companies to voluntarily lower existing drug prices and commit to launching future products at the same price point charged in other developed countries. Failing this, the US government has warned of using “every tool in our arsenal” to counter what it calls “abusive drug pricing practices.”
India’s Pharma Sector Bears the Brunt
Back home, the Nifty Pharma Index plunged over 2.8%, continuing a three-day losing streak, as investors priced in fears of regulatory clampdowns, pricing pressures, and possible US tariffs. The decline was led by Sun Pharma, which saw its stock nosedive nearly 4%, making it the worst performer in the Nifty 50 on the day.
Other notable laggards included Aurobindo Pharma, Gland Pharma, Cipla, Granules India, and Lupin, all of which dropped by over 3%. Analysts have noted that Sun Pharma, in particular, stands to be disproportionately impacted as 20% of its total revenues are derived from the US market.
The sentiment was further dented by brokerage firm Investec, which downgraded Sun Pharma by two notches to a ‘Sell’ rating, citing expected headwinds from the US administration’s aggressive pricing reforms and regulatory stance.
What Trump’s Letter Means for Global Drugmakers
In a briefing following the letter’s release, White House Press Secretary Karoline Leavitt elaborated on the administration’s position, stating,
“According to recent data, Americans are paying more than three times the price for branded medicines compared to citizens in other developed nations. The President is determined to solve this problem and has taken decisive action today.”
The letters have been sent to industry giants including Eli Lilly, Pfizer, Novo Nordisk, and Novartis, demanding swift action. Trump’s letter also calls for drugmakers to offer certain medicines directly to patients at the same prices they provide to insurance firms and third-party payers—a move that could radically reshape the pharmaceutical sales model in the US.
Tariff Threat Looms Large
As if pricing reforms weren’t enough, the pharma industry now also faces the looming threat of new US tariffs. Just days before the letter’s release, US Commerce Secretary Howard Lutnick had hinted at a broader pharmaceutical policy that could be unveiled within two weeks.
Speaking to CNBC International on July 29, Lutnick said,
“If you’re not building your plant in America, where we’re paying for your drugs, you’re going to pay a massive tariff. Why should we pay for drugs that are manufactured overseas and profit others? If we’re footing the bill, they should be made here.”
This potential tariff policy is being seen as part of a broader “America First” industrial strategy, wherein the Trump administration is pushing both price parity and local manufacturing mandates—especially from foreign drug manufacturers with a major presence in India and China.
Analysts Warn of Sustained Pressure
Industry experts have begun to assess the ripple effects of the new developments. Sandeep Bhatia, Managing Director and Head of Equity India at Macquarie Capital, told CNBC-TV18 that the MFN model represents significant pricing pressure for US-bound exports from Indian pharma players.
“There is real fear in the market that under the MFN rule, pricing for Medicaid and other US programs would need to be aligned with what companies charge in places like Europe or Canada. That would directly hurt margins,” Bhatia said.