The European Union’s Critical Medicines Act (CMA), aimed at boosting domestic pharmaceutical production and reducing dependence on external suppliers, could emerge as a contentious issue in the EU-India Free Trade Agreement (FTA).

The legislation seeks to strengthen Europe’s pharmaceutical supply-chain resilience through state aid, procurement preferences and incentives for “Made in EU” medicines and active pharmaceutical ingredients (APIs). While the EU argues that the measures are necessary to prevent shortages of critical medicines and enhance health security, Indian pharmaceutical exporters may view the proposals as protectionist and potentially discriminatory.

India is one of the EU’s largest suppliers of generic medicines and APIs, and any move by Brussels to prioritise EU-based manufacturing could negatively affect Indian companies’ access to the European market.

In particular, provisions encouraging public procurement authorities to apply “EU preference” criteria may raise concerns in New Delhi over fair market access and compliance with free trade principles.

Potential Flashpoint in FTA

The issue could become especially sensitive in the FTA’s chapters dealing with public procurement, regulatory standards and industrial policy. India may seek assurances that resilience-related procurement rules will not unfairly disadvantage non-EU suppliers.

At the same time, the EU is unlikely to pursue a complete shift away from Indian pharmaceutical imports, given India’s central role in global generic drug production and its reputation as a relatively reliable supplier. Instead, Brussels appears focused on reducing excessive external dependence and diversifying supply chains following disruptions experienced during the COVID-19 pandemic.

The European Parliament and the Council of the EU, representing the governments of the bloc’s 27 member states, last week reached an agreement aimed at boosting local medicine production through state aid measures and incentives for “Made in EU” pharmaceutical products.

The Critical Medicines Act seeks to address shortages of essential medicines — including antibiotics, insulin and painkillers — by strengthening the security of supply and improving the availability of critical medicines and medicines of common interest across the EU.

Concerns Over ‘EU Preference’

Although official EU statements made no direct mention of non-EU countries being targeted, several Brussels-based media outlets referred specifically to India and China, suggesting that EU officials had raised the issue during background briefings.

“New EU medicines law aims to bypass India, China on key drugs,” headlined the Brussels-based publication Politico.

One of the key objectives of the CMA is to strengthen the resilience of critical medicine supply chains in the EU. To this end, the agreement introduces an obligation for contracting authorities to apply resilience-related requirements in public procurement procedures for critical medicines.

The new rules also seek to incentivise EU-based manufacturing of critical medicines and their active ingredients, thereby reducing the EU’s dependency on non-EU countries. In this context, the agreement between the co-legislators provides flexibility for contracting authorities in implementing the “EU preference” approach.

“Patients should not have to worry about whether critical medicines such as antibiotics will be available at their pharmacy or hospital,” commented Neophytos Charalambides, Cyprus’ health minister. Cyprus currently holds the rotating EU Presidency.

“With today’s agreement, we are taking practical action to reduce our vulnerabilities, diversify supply chains and strengthen Europe’s capacity to produce critical medicines and their ingredients closer to home,” he noted.

Over the past decades, Europe’s medicines supply chains have increasingly shifted overseas to countries where products and ingredients are cheaper to manufacture.

Implications for Indian Drugmakers

The EU and India concluded their FTA negotiations on January 27, 2026, marking a significant step in their economic partnership.

However, the agreement — dubbed “the mother of all deals” — has yet to be ratified by both sides, amid expectations that the process could be completed by early 2027.

India is one of the world’s largest suppliers of generic medicines and APIs to Europe. If the EU begins favouring “Made in EU” pharmaceutical production through procurement preferences, subsidies or state aid, Indian drug manufacturers could face reduced access to EU public procurement contracts and tougher supply-chain resilience requirements.

Europe is a key market for Indian drugmakers, with merchandise exports reaching nearly 6 billion US dollars in 2025. Indian imports from the EU stood at 1.3 billion US dollars during the same period.

The Indian side may argue that such measures contradict the spirit of free trade and discriminate against competitive foreign suppliers.

In exchange for removing tariffs on European pharmaceutical exports to India — currently at 11 percent for pharmaceuticals and 27.5 percent for medical devices — Indian producers of generics and biosimilars were expected to gain enhanced export opportunities under the FTA.

Strategic Autonomy vs Free Trade

For its part, the EU is likely to argue that the measures are linked to health security and strategic autonomy, and are designed to prevent shortages witnessed during the COVID-19 era. Brussels is also expected to maintain that the rules comply with WTO norms because they are framed around resilience rather than outright exclusion.

India, however, may seek safeguards against discriminatory procurement practices, greater transparency in resilience criteria, or carve-outs protecting existing pharmaceutical exports.

According to reports in the Indian media, the FTA could open up a 572-billion-US-dollar opportunity for India’s pharmaceutical and medical devices sector. However, after the EU’s CMA proposals, there is now a significant question mark over whether such projections remain realistic.

Despite potential tensions arising from the EU’s new medicines legislation, the measures are unlikely to fundamentally disrupt the EU-India FTA, given the strategic importance both sides attach to strengthening economic ties in an increasingly fragmented global trade environment.

The provisional agreement will now need to be endorsed by the Council of the EU and the full European Parliament.

(The author is an Indian journalist and long-time resident of Brussels who has been covering European and EU affairs for the past 40 years. Views expressed are personal. He can be reached at nawab_khan@hotmail.com. X: @NawabKhan10)