Explained | Why Sun Pharma is offering cheaper drugs to Trump administration?

Sun Pharmaceutical Industries on Tuesday announced it has entered into an agreement with the US government led by President Donald Trump to prioritise access to affordable medicines for American patients.

The deal by a drug major with the US government to lower prices of its innovative drugs in the US is in line with the lowest prices paid by other developed nations, under the most favoured nation (MFN) pricing framework. Sun Pharma has also committed to applying MFN pricing to future launches of innovative medicines, the company said on 1 September.

As part of the agreement, signed during a ceremony at the White House, Mumbai-based Sun Pharma, India's largest drugmaker, will extend ‘Most Favoured Nation’ (MFN) pricing to state Medicaid programmes, the company said in a regulatory filing on Tuesday, 1 September.

Why is Sun Pharma offering cheaper drugs to Trump administration? Mint explains.

The commitment to MFN pricing will also apply to Sun Pharma's future innovative medicine launches in the US market, the filing said. The MFN pricing generally ensures that a buyer receives the lowest price available for a drug.

Sun Pharma and the eight other drugmakers will collectively invest at least $19.6 billion in US manufacturing in the near term, according to a White House fact sheet. They will also contribute active pharmaceutical ingredients (APIs) to the Strategic Active Pharmaceutical Ingredients Reserve (SAPIR) in the US.

The US currently stands as Sun Pharma's largest market for innovative medicines, contributing about 27 per cent of the company's total global revenue.

Sun Pharma initially built its US presence on a foundation of high-quality generics, followed by an increasing emphasis on innovative and speciality medicines. The company ranks second in prescriptions in US dermatology and continues to expand across dermatology, immunology, cutaneous oncology, and ophthalmology, Mint reported earlier.

Sun Pharma’s innovative product portfolio continues to outpace its US generics sales, with global innovative medicines sales growing 12.8% year-on-year to $351 million in the first quarter of FY27, accounting for 21.9% of total sales.

Sun Pharma currently ranks second by prescriptions in the US dermatology segment and is expanding into immunology, cutaneous oncology, and ophthalmology, it said in the filing, adding that its global innovative medicines portfolio now accounts for about 22 per cent of total company sales.

Shares of Sun Pharmaceutical Industries Ltd were trading 0.60 per cent down at 1,944.25 on the BSE on Tuesday.

That deal is significant because Sun Pharma is not just an Indian company exporting low-cost generic medicines to America. The company's US business has increasingly shifted towards higher-value medicines in areas such as dermatology, immunology, oncology and ophthalmology.

The timing of the deal is also significant. Earlier in April, the Trump administration imposed a 100% tariff on branded drugs, with companies signing such agreements exempted from the levy. The government also said in July that it would impose 100% tariffs on generics from 2028, a move that could disproportionately affect Indian drugmakers and raise costs for US patients.

Earlier this year, Sun decided to acquire US-based Organon at an enterprise value of $11.75 billion, giving it a much larger portfolio of branded medicines, women's health products and biosimilars. That makes its long-term exposure to the American healthcare market considerably bigger.

MFN pricing could mean that medicines supplied through Medicaid have to be offered at much lower prices. That could put pressure on margins – the amount a company earns after accounting for costs, experts said.

Medicaid sales are potentially a “low margin proposal”, although it increases the patient reach, Shrikant Akolkar, veteran pharma analyst with Nuvama Institutional Equities, told India Today.

Sun Pharma initially built its US presence on a foundation of high-quality generics, followed by an increasing emphasis on innovative and speciality medicines. The company ranks second in prescriptions in US dermatology and continues to expand across dermatology, immunology, cutaneous oncology, and ophthalmology.

Sun Pharma’s innovative product portfolio continues to outpace its US generics sales, with global innovative medicines sales growing 12.8% year-on-year to $351 million in the first quarter of FY27, accounting for 21.9% of total sales.