28 May 2025, NIICE Commentary 11065
Vaishnavi Thamizhkodi. V.B.
Affordable medicine, like food or shelter, is not a luxury; it’s a necessity. And yet, in the global pharmaceutical trade, access to life-saving drugs often depends less on compassion and more on contracts, tariffs, and pricing. Every country wants to buy drugs at the best price that other countries pay for the same medicine. This sounds fair, but has a ripple effect on the global supply chain. The U.S. takes centre stage to debate its drug policy on “Most Favoured Nation (MFN)” pricing. Meant to control the ballooning domestic drug costs, the MFN pricing approach ties that the price Americans pay less for prescription drugs to the lowest price paid by other wealthy nations. On its face, this seems like a step toward equity, a way for American consumers to get access to prescription drugs at an effective cost. But looking back at the layers, a more complex and troubling picture emerges; its effect on the global south is undeniable.
Especially when you consider India. India is not just a country of over a billion people; it’s the pharmacy of the developing world. Its generic drug manufacturers supply more than 60% of the world’s vaccines and a vast share of essential medications to the global south countries. When the U.S. alters its pharmaceutical pricing mechanisms, particularly through MFN policies, the ripple doesn’t stop at U.S. pharmacies. It surges across ocean trade routes and supply chains, squeezing margins, disrupting exports, and ultimately threatening access for millions in the Global South.
A Policy Designed for Fairness That Feels Anything But
Under MFN pricing, the U.S. government would benchmark drug prices against those in nations like Germany, Canada, or the UK with tightly regulated pharmaceutical markets. This could force pharmaceutical companies to either lower their U.S. prices or lose access to the world’s largest healthcare market. For American consumers, that’s a win. For pharmaceutical companies and their suppliers, many of them based in India, it’s a potential disaster. To maintain profit margins, global drug firms may renegotiate supplier contracts, demand even lower production costs, or reduce their reliance on Indian manufacturers altogether. That could mean fewer contracts for Indian pharma companies, especially the smaller generics firms that form the backbone of medicine production for the Global South.
India Caught Between Economic Interests and Ethical Imperatives
For India, MFN pricing is more than a trade issue, it’s a geopolitical dilemma. On the one hand, India is eager to deepen its economic and strategic ties with the U.S., especially amid rising tensions with China. On the other hand, its generics industry is deeply rooted in the ethos of accessibility and equity, particularly for the Global South. If U.S. policies begin to treat India merely as a low-cost manufacturing hub rather than a vital partner in global health, friction is inevitable. India may seek to pivot toward regional markets or strengthen South-South cooperation. But such transitions take time, and time is a currency that is not available to the patients whose lives depend on uninterrupted access to affordable medication.
Global South, Global Costs
Like U.S. tariffs on East Asia, MFN pricing exposes a central contradiction of global economics: the decisions of a few rich nations often dictate the fate of billions. While MFN pricing aims to reduce inequality within the United States, it risks exporting that inequality to poorer nations. It turns a domestic policy solution into an international disruption. Worse still, it entrenches a dynamic where the Global South bears the cost of the Global North’s reform. Countries across Africa, Latin America, and Southeast Asia have grown reliant on the affordability and availability of Indian generics. If that supply falters because the economics no longer work under U.S.-driven pricing models, those countries have no immediate alternatives. They don’t have the negotiating power of the European Union or the purchasing volume of U.S. insurers. What they do have is vulnerability, and policies like MFN pricing exploit it, however, unintentionally.
The Other Way
There is nothing inherently wrong with wanting to lower drug prices in the U.S. In fact, it’s a moral imperative. But how those savings are achieved matters. Instead of relying solely on pricing benchmarks that place downward pressure on supply chains, the U.S. could explore collaborative solutions: shared R&D investments with Indian firms, public-private partnerships that protect generic production for the Global South, or patent pooling mechanisms that reward innovation while preserving access. Such policies require more complexity, more foresight, and more dialogue. But they also distribute both responsibility and benefit more fairly. They transform a zero-sum model into a shared equity system. And in a world as interconnected as ours, that’s not just idealism; it’s realism.
The Price of a Pill, the Cost of a Policy
When we talk about Most Favoured Nation pricing, we must also ask: favoured by whom? And at what cost? Just as tariffs on East Asian goods echo in the fields of Kenya and the factories of Bangladesh, pharmaceutical pricing policies in Washington ripple into the homes of patients, nurses, and families across the Global South. These are not theoretical consequences. They are lived realities.
Vaishnavi Thamizhkodi. V.B. is pursuing her Master’s in International Relations at Loyola College, Chennai.
