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Critical Topics and Their Significance for the UPSC CSE Examination on May 14, 2025

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Most Favoured Nation (MFN)

For Preliminary Examination: Current events of national and international Significance

For Mains Examination: GS II - Policies and Politics

Context:

Global pharma companies could ramp up pressure on India to raise the prices of drugs in India and other developing markets, as US President Donald Trump’s new executive order is set to force companies to align US drug costs with cheapest ones abroad.

Read about:

What does Most Favoured Nation mean?

What is the Priority Watch List watch list?

Key takeaways:

• India’s generic pharmaceutical sector, known for supplying affordable medication not just domestically but also to countries like the United States and the United Kingdom, has long drawn criticism from major pharmaceutical firms in developed economies.
• These companies claim that India’s relatively lenient intellectual property (IP) laws put them at a disadvantage in the global market. This tension was highlighted when the U.S. added India’s patent framework to its "Priority Watch List" for intellectual property concerns—an action that holds considerable implications for drug production. This development coincided with an executive order issued by then-President Donald Trump.
• Ajay Srivastava, who leads the Global Trade and Research Initiative (GTRI), commented that Trump's move to implement a Most Favoured Nation (MFN) pricing policy should serve as a serious alert for India. He noted that pharmaceutical firms facing tightening price regulations in Western countries may seek to make up for lost revenue by pushing for price hikes in countries like India.
• India’s pharmaceutical legislation is aligned with the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Nonetheless, India has consistently resisted adopting enhanced IP provisions, often known as "TRIPS-plus" standards.
• These include stricter patent enforcement mechanisms—such as data exclusivity, automatic extensions of patent duration, patent linkage, broader eligibility for patenting, and evergreening tactics—that are typically promoted by developed countries through bilateral Free Trade Agreements (FTAs).
• In a statement on social media, Trump announced the launch of a Most Favoured Nation pricing policy, which would require the United States to pay the same price for prescription drugs as the country offering the lowest rate globally.
• He claimed that this would immediately slash drug prices in the U.S. by 30% to 80%, and predicted that pharmaceutical prices would rise globally in response, ultimately creating what he termed a "fair" pricing model for the American public.
• Trump further questioned why identical drugs—produced by the same manufacturers in the same facilities—are often sold at significantly higher prices in the U.S. compared to other countries, sometimes five to ten times more expensive.
• According to international trade analysts, while this policy might offer short-term relief for American consumers, it is expected to disrupt global pricing structures. Major pharmaceutical companies are likely to intensify their efforts to raise prices in low-cost markets like India, since these countries would influence the pricing benchmarks in the highly profitable American market