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Time of India
03-06-2025
- Business
- Time of India
Trump's prescription drug price cuts unlikely to hit Indian pharma exports significantly: Crisil Ratings
US President Donald Trump 's executive order on reducing prescription drug prices will have a limited impact on Indian pharma companies, according to a report by Crisil Ratings . Citing the reason behind its observation, the credit rating firm in its report said that despite India exporting over half of its pharmaceutical output, the bulk comprises low-priced generic drugs, which already operate on razor-thin margins, leaving little room for further price cuts to materially affect revenues. In over half of the pharmaceutical output, one-third goes to the United States. India exports 54 per cent of its pharmaceutical production, of which nearly a third is to the US. Around 85 per cent of the exports to the US comprise formulations, largely generics, while sales from biosimilars and innovator drugs remain low. Also Read: US FDA approves Moderna's next-gen COVID vaccine for adults 65 or older Generic pharma drugs account for 90 per cent of the prescription sales volume but only 13 per cent of the value spending in the US. Generic drug prices in the US are very low and have lower prices in comparison to economically peer countries. Live Events The executive order issued in the United States aims to reduce the prices of prescription drugs by 30-80 per cent through the adoption of a Most Favoured Nation (MFN) pricing model. The US Department of Health and Human Services (HHS) has outlined the initial steps to be taken to implement this policy, involving identification of manufacturers expected to align the prices of branded products, which do not currently have generic or biosimilar competition, with the lowest price among a set of economic peer countries of the US. Trump's executive order primarily targets high-margin branded innovator drugs and excludes generics and biosimilars. "The MFN model is unlikely to significantly affect the bulk of India's exports," the report added. Also Read: Zydus gets USFDA nod for generic IBS-D treatment drug It further added, "However, potential indirect impact, through lower growth prospects for upcoming generic versions of innovator drugs going off patent, due to lower price differential post price reductions of the innovator drugs, would bear watching." However, a few formulation companies with niche presence in the branded innovator drug segment can face some pricing risk. "API exports (15 per cent of India's pharma exports) are expected to be broadly unaffected, as it is not a major cost for high-margin originator drugs, abating concerns of pricing pressure," the report added. Additionally, the policy may create opportunities for contract manufacturing organisations, which constitute 8 per cent of India's pharma market. "The policy may create opportunities for CMOs ( 8 per cent of India's pharma market), with orders expected to improve as global pharma companies seek to lower production costs by outsourcing. While this could support volumes, the pressure on pricing may result in renegotiation of contract rates, compressing margins," the report further added.
Yahoo
21-05-2025
- Business
- Yahoo
Can pharma tariffs 'Make America Manufacture Again'?
As President Trump continues to signal import tariffs on pharmaceuticals to bolster US manufacturing, experts warn this could hike costs and crush biotech, but also spur reconsideration of biopharma production. Following blanket 'Liberation Day' tariffs announced on April 2, Trump stated at an April 6 fundraiser, 'We're going to be announcing very shortly a major tariff on pharmaceuticals; and when they hear that, they will leave China.' While there have been no details released since, the administration has announced other policies like an executive order on the Most Favoured Nation (MFN) model, which, if enforced, will also have a major impact on US pharmaceuticals. The US imported a total of $213 billion in pharmaceuticals during 2024, according to the UN Comtrade database. India and China are major suppliers of active pharmaceutical ingredients to the US and the various geopolitical actions, including tariffs, are expected to have implications including potentially higher costs for drugs with more on-shore manufacturing, as per a GlobalData Strategic Intelligence report. GlobalData is the parent company of Pharmaceutical Technology. For these countries and others, no tariffs are currently imposed on pharma products. As the sector waits for more clarity, experts question if pharma tariffs will coax manufacturers to the US from abroad and instead warn they are likely to simply disrupt the industry, hitting biotech hardest. Tariffs on pharma imports, as a measure to encourage nearshored manufacturing, are more than offset by the costs of relocation for drug companies, as per Mina Tadrous, assistant professor of drug policy at the University of Toronto in Canada. Tadrous describes Trump's proposed tariffs as 'an attempt to have a very simple, shortcut, aggressive policy that doesn't actually address the real issue,' which he says is the vast time and money needed to establish US-based pharma manufacturing. The time taken to recoup these costs ranges from 8–10 years, well over Trump's remaining time in office, according to Nilanjan Banik, PhD, professor of economics at Mahindra University, Hyderabad, India. Banik does envision long-term relocation, not to the US, but from high-tariff to low-tariff countries, highlighting Apple's plans to move phone production from China to India. But Tadrous says that with this strategy of supply chain optimisation would come a risk of supply disruption and subsequent drug shortages. However, there are signals that pharma companies are preparing to nearshore operations in the US, according to John Singer, founder of life sciences consultancy Blue Spoon Consulting. He notes Eli Lilly's commitment to invest an extra $27 billion in US plants, in February. Since then, Novartis, Sanofi, and others have made similar pledges. 'Part of me also believes that a lot of this is just political signaling,' says Tadrous. He posits that companies may be making unbinding commitments to curry favor with the current administration, able to backpedal should tariffs be dropped. In Singer's view, the MFN executive order is evidence of Trump's unpredictable stance towards pharma and a cue for companies to avoid committing too heavily to nearshoring production. Nearshoring of manufacturing has been on the rise before Trump's tariffs were proposed. 'In the Biden administration, there was a push to have more nearshoring,' Tadrous states. 'The Europeans are also doing the same things. Canadians have been thinking about it as well.' He says drug shortages in recent years, most starkly seen during the Covid-19 pandemic, made clear the vulnerabilities in drug supply for many regions and spurred governments to seek greater independence of production. Despite growing regional focus, Banik maintains that the US is still the pivotal market for pharmaceuticals as the world's greatest drug consumer. He estimates tariffs may amount to as low as 20% of manufacturers' marginal costs as an added expense of producing pharmaceuticals for the US. Even with import tariffs, the country is too profitable for pharma and biotech to ignore. However, it is unclear if the US can successfully compete as a broad drug manufacturer. For Banik, many Asian countries hold too strong an advantage in generics manufacturing due to low labour costs and growing specialist talent pools for the US to challenge them. But for biologics and other advanced therapies, Tadrous says the US is well positioned to build on its already strong production capabilities. Should Trump commit to competing for generics production with these countries, he runs the risk of incurring medicine shortages in the US, states Thomas Roades, biopharma policy researcher at the Duke-Margolis Institute for Health Policy in Durham, North Carolina. According to Roades, competition and supply contracts require generics manufacturers to keep prices so low that tariffs may lead them to discontinue certain drugs that have low or no profits, even if they are essential to many patients. Big pharma may be able to reoptimise supply and make gestures towards nearshoring, but for smaller biotechs, tariffs pose an existential threat, according to Jon Ellis, CEO of the Sacramento, California-based cell and gene therapy (CGT) manufacturing specialist Trenchant Biosystems. In his view, the loss of these cutting-edge drug developers would spell a sharp downturn in future innovation, a mantle larger pharma is ill-suited to take up. 'It's not necessarily the impact of tariffs, it's the instability that's caused by not knowing what's going on,' Ellis says. This period of uncertainty, archetypal of Trump's policy, dissuades unsure investors from betting on emerging advanced therapies. Should funding opportunities diminish even further under tariffs, Ellis sees larger companies cheaply buying up broad swathes of biotech, strengthening big pharma's clinical pipelines and R&D at the expense of the sectors' most innovative small players. Singer believes there is reason to suspect the US may risk losing its status as the go-to market for biotech. Innovators, who would otherwise chase FDA approvals, might consider looking to other markets should tariffs prove too constrictive to US business. But for now, Ellis maintains, 'The value of the US is still too great for people to turn off, and I think people in the US will find a way of continuing to innovate.' There is a potential tariff workaround employed by biotechs: regionalised manufacturing. Manufacturing advanced cell and gene therapies for US patients, in particular, already occurs largely in the US, Ellis points out, as these require time-sensitive, cold-chain transport which precludes lengthy international supply. According to Singer, a more regionalised approach to manufacturing could see broader adoption throughout biopharma under US tariffs. However, what works for small biotechs may not on a larger scale. 'If you have any problems setting up manufacturing in one location…50 locations is going to be complicated,' notes Jason Jones, global business development lead at Cellular Origins, a developer of robotically automated CGT manufacturing. Beyond logistics, Jones adds that large producers would have to contend with differences in regional regulation which would place limits on how regional their manufacturing could become while remaining practical. Singer says pharma is exploring innovative ways to manufacture and distribute their products, pointing to Eli Lilly's digital healthcare platform LillyDirect. This service offers users access to healthcare support and, crucially, home delivery of Eli Lilly medicines. In Singer's view, big pharma's forays in direct-to-consumer platforms are emblematic of an industry seeking independent control over its manufacture and distribution. "Can pharma tariffs 'Make America Manufacture Again'?" was originally created and published by Pharmaceutical Technology, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time of India
19-05-2025
- Business
- Time of India
Shapoorji Group Seeks 3-year Reprieve for NBFC
Shapoorji Pallonji Group has asked the Reserve Bank of India (RBI) to give its unit, Sterling Investment Corp , three years to meet enhanced capital adequacy norms in relation to a recent bond issue, said people with knowledge of the matter. Sterling was recently reclassified as a mid-layer NBFC, facing stricter regulatory requirements. RBI has raised concerns over its capital adequacy — tier I-II capital ratios are required to be at least 15% of risk-weighted assets. SP Group has just raised ₹28,500 crore ($3.3 billion) backed by Sterling Investment, a non-banking finance company (NBFC) holding 9.18% stake, valued at $18.6 billion, in Tata Sons. The collateral is meant to reassure investors and support the deal. Shares held by Sterling reflect the historical value of Tata Sons shares; true value will be reflected only in the event of a listing of the Tata group holding company, a banker said. SP Group holds 18.37% in Tata Sons, valued at over $37.4 billion (₹3.2 lakh crore). Shapoorji Pallonji Group has pledged the entire stake as collateral in multiple fundraising transactions. The group will have to secure RBI approval for the three-year deferment within four months of the issuance date, said people close to the matter, failure to do which would constitute a default on the borrowing. The deal was signed on May 15 and settlement is expected to close on May 21, as reported by ET. 'Within four months of the issuance date, SP Group will have to secure approval from RBI for an extended timeline to meet capital adequacy norms under current NBFC regulations,' SP Group has informed investors, according to an official close to the matter. The deal includes stringent creditor protection clauses, including a Most Favoured Nation (MFN) clause—mandating a coupon step-up if future borrowings are priced higher—and a 1% coupon increase in case of covenant breaches. The group faces a repayment obligation of ₹51,000 crore after three years, having recently raised money at a steep yield of 19.75%. As part of the financing structure, SP Group has committed to listing real estate arm Shapoorji Pallonji Real Estate, and raising ₹13,000 crore through asset monetisation within 24 months. Any delay in meeting this timeline would also trigger a default. Large credit funds including Ares Management, Farallon, Davidson Kempner, Cerberus, Pimco, and BlackRock are participating in the debt raise, with Deutsche Bank acting as the sole arranger. The final redemption date for the debentures will be the earlier of—one month prior to the expiry of the RBI extension timeline for capital to risk weighted assets ratio (CRAR) compliance, or three years from the issue date, according to the term sheet reviewed by people cited earlier. SP Group declined to comment. The transaction implies a loan-to-value (LTV) ratio of roughly 14.7%, according to the company's communication to investors. In addition to the Tata Sons stake, the group has also pledged shares of Shapoorji Pallonji Real Estate, valued at $3.2 billion, as part of the funding arrangement. An official close to the lenders said none of them are disputing or discounting the value of the Tata Sons shares. 'Of course, lenders will demand their pound of flesh as the shares are seen as illiquid as of today,' the person said. 'The regulator's decision is awaited on the matter, which will clearly change everything for lenders and investors. There is substantial value in the real estate monetisation plan, which will also serve as liquid collateral post-listing.' SP Group has also urged RBI to support a public listing of Tata Sons, stating that such a move would benefit all stakeholders, including the public. According to people aware of developments, the group has formally communicated this view to the regulator and is relying heavily on the possible listing to improve its financial position. Struggling under a substantial financial burden, SP Group also expressed its concerns to Tata Sons about not being informed of the company's decision to surrender its registration as an upper layer core investment company to RBI. As an 18.37% minority shareholder in Tata Sons, SP Group had reportedly raised its worries about being excluded from discussions on such a strategically important decision.
Time of India
19-05-2025
- Business
- Time of India
Shapoorji Pallonji asks RBI for three-year relief on Sterling Capital rules
Mumbai: Shapoorji Pallonji Group has asked the Reserve Bank of India ( RBI ) to give its unit, Sterling Investment Corp , three years to meet enhanced capital adequacy norms in relation to a recent bond issue , said people with knowledge of the matter. Sterling was recently reclassified as a mid-layer NBFC, facing stricter regulatory requirements. RBI has raised concerns over its capital adequacy — tier I-II capital ratios are required to be at least 15% of risk-weighted assets. SP Group has just raised Rs 28,500 crore ($3.3 billion) backed by Sterling Investment, a non-banking finance company (NBFC) holding 9.18% stake, valued at $18.6 billion, in Tata Sons. The collateral is meant to reassure investors and support the deal. Shares held by Sterling reflect the historical value of Tata Sons shares; true value will be reflected only in the event of a listing of the Tata group holding company, a banker said. Agencies SP Group holds 18.37% in Tata Sons, valued at over $37.4 billion (Rs 3.2 lakh crore). Nod Within Four Months Shapoorji Pallonji Group has pledged the entire stake as collateral in multiple fundraising transactions. The group will have to secure RBI approval for the three-year deferment within four months of the issuance date, said people close to the matter, failure to do which would constitute a default on the borrowing. The deal was signed on May 15 and settlement is expected to close on May 21, as reported by ET. 'Within four months of the issuance date, SP Group will have to secure approval from RBI for an extended timeline to meet capital adequacy norms under current NBFC regulations,' SP Group has informed investors, according to an official close to the matter. The deal includes stringent creditor protection clauses, including a Most Favoured Nation (MFN) clause—mandating a coupon step-up if future borrowings are priced higher—and a 1% coupon increase in case of covenant breaches. The group faces a repayment obligation of Rs 51,000 crore after three years, having recently raised money at a steep yield of 19.75%. As part of the financing structure, SP Group has committed to listing real estate arm Shapoorji Pallonji Real Estate , and raising Rs 13,000 crore through asset monetisation within 24 months. Any delay in meeting this timeline would also trigger a default. Large credit funds including Ares Management, Farallon, Davidson Kempner, Cerberus, Pimco, and BlackRock are participating in the debt raise, with Deutsche Bank acting as the sole arranger. The final redemption date for the debentures will be the earlier of—one month prior to the expiry of the RBI extension timeline for capital to risk weighted assets ratio (CRAR) compliance, or three years from the issue date, according to the term sheet reviewed by people cited earlier. SP Group declined to comment. The transaction implies a loan-tovalue (LTV) ratio of roughly 14.7%, according to the company's communication to investors. In addition to the Tata Sons stake, the group has also pledged shares of Shapoorji Pallonji Real Estate, valued at $3.2 billion, as part of the funding arrangement. An official close to the lenders said none of them are disputing or discounting the value of the Tata Sons shares. 'Of course, lenders will demand their pound of flesh as the shares are seen as illiquid as of today,' the person said. 'The regulator's decision is awaited on the matter, which will clearly change everything for lenders and investors. There is substantial value in the real estate monetisation plan, which will also serve as liquid collateral post-listing.' SP Group has also urged RBI to support a public listing of Tata Sons, stating that such a move would benefit all stakeholders, including the public. According to people aware of developments, the group has formally communicated this view to the regulator and is relying heavily on the possible listing to improve its financial position. Struggling under a substantial financial burden, SP Group also expressed its concerns to Tata Sons about not being informed of the company's decision to surrender its registration as an upper layer core investment company to RBI. As an 18.37% minority shareholder in Tata Sons, SP Group had reportedly raised its worries about being excluded from discussions on such a strategically important decision.
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Business Standard
13-05-2025
- Business
- Business Standard
Generic industry unlikely to be affected by Trump's EO: Indian drug cos
A fresh US executive order (EO) which seeks to bring down prices of prescription drugs in the country by up to 90 per cent -- on par with other developed nations -- will affect innovator companies, while sparing the Indian generic drug makers in the short term. US President Donald Trump signed the EO on Monday, directing the US Trade Representative and the Secretary of Commerce to act against foreign countries that 'purposefully and unfairly undercut market prices', driving price hikes in the US. Indian Pharmaceutical Alliance (IPA), which represents large pharma firms in the country that account for nearly 80 per cent of India's pharma exports by value, felt that the generics industry is unlikely to be impacted as a result of this US move. The EO also instructs the administration to communicate price targets to pharma manufacturers, asserting that America, the world's largest purchaser and funder of prescription drugs, should get the best deal. The Secretary of Health and Human Services will set up a mechanism allowing American patients to buy drugs directly from manufacturers at a Most Favoured Nation (MFN) price, bypassing middlemen. Trump had previously said the move would lead to higher drug prices in other countries as part of a broader global price alignment. The Presidential EO noted that the US has less than 5 per cent of the world's population but funds roughly 75 per cent of global pharma profits. Sudarshan Jain, Secretary General, IPA said, 'The Executive Order issued by the US seeks to balance innovation, access and overall healthcare costs. Research and development in life sciences demands long-term commitment, substantial investment, and carries high risk. The order emphasises that the cost of the innovation should be shared equitably among all stakeholders. Innovator companies are expected to be affected, with a 30-day window to align their US prices with Most-Favoured-Nation (MFN) pricing.' Jain added that the generics industry is unlikely to be impacted, as it operates on razor-thin margins. 'In the US, the generics industry represents 90 per cent of prescription volumes while accounting for only 13 per cent of the market value. The generics industry plays a pivotal role in ensuring medicines remain affordable and accessible. Further details on implementation mechanisms will bring more clarity,' he said. India Ratings and Research (Ind-Ra) felt once implemented the EO will have limited near-term impact on the Indian pharma companies, but it may have a bearing on their long-term capital allocation strategies. 'While we do not expect a material immediate impact on the US generics business of Indian pharma companies, its revenue growth and capital allocation strategies may likely be impacted, if the executive order gets implemented. Generic price realisations in the US generic market may not be the highest in the world. We expect contract development and manufacturing organisation (CDMO) players to benefit,' says Nishith Sanghvi, Director, Corporates, Ind-Ra. However, the ratings agency felt that long-term headwinds for generics were likely. It said they do not expect a material immediate impact on the US generics business of Indian pharma companies. However, the long-term revenue growth and capital allocation strategies may be impacted, given the opportunity size may shrink as the generic business derives their market potential from the sales of prescription products. 'The same shall depend on the scale of price decline in those molecules/therapies and companies' R&D focus areas. Indian pharma companies are primarily involved in generic drugs which are 5 per cent of the prescription drugs cost and over 80 per cent cheaper for insurance payers, compared to prescription drugs, in our view. However, Indian CDMO players may benefit, given the cost arbitrage of manufacturing in lower cost destinations such as India and strong chemistry skills,' it said. Price realisations for generic products may not be the highest in the US generic market in relation to other geographies, analysts felt. Also, price comparisons in various markets may have to be seen in line with the regulatory set up and payer profile in the respective geographies which may have a bearing on the pricing in that market. Analysts also highlighted that there was limited scope to further reduce generic prices. India-Ratings' analysis of 15 listed pharma companies with exposure to the US highlights heavy dependence on the US market at around 35 per cent of the total revenue. 'While the share of US sales had declined during FY21-FY22, it has rebounded markedly during the past three years, leading to an improvement in Ebitda margins. Key generic players have exited the market in the past leading to drug shortages when pricing became non-remunerative. Demand-supply dynamics have a huge bearing on generic pricing for the US market,' it said. This assumes significance in the context of Medicare (federal health insurance) costs in the US going up. An April report by IQVIA noted that more Medicare (federal health insurance) patients have been facing annual drug costs above $2,000 as prices continue to rise. Net medicine spending increased by $50 billion (11.4 per cent) in aggregate, from $437 billion in 2023 to $487 billion in 2024.
