How might (a) US pharmaceutical companies and (b) US consumers benefit from the rise of the Indian pharmaceutical industry?
American pharmaceutical companies can benefit by outsourcing some of their operations to the Indian market, where there exists a confluence of conditions that make manufacturing cheaper while not compromising too much on quality. These companies end up saving on labor costs, as they can pay less for employees who are of a similar quality. Likewise, there is the added benefit of a diversification of talent. Indian talent is schooled under a different set of circumstances and perspectives, which could aid big-time pharmaceutical companies in their efforts to develop new and useful products for a wide range of diseases.
US consumers will tend to benefit from lower pricing overall in the industry, which benefits both uninsured individuals and the increasing portion of the population that does have insurance. When costs are lowered and when more firms are competing in a given market, prices will tend to go down. Companies will be forced to become more efficient in their operations. Likewise, there would seem to be more widely available generic drugs, which are obviously cheaper for all classes of patients. There is one downside, of course. With the rise of the Indian industry, more jobs at home are lost, which can have a subsidiary negative impact on American consumers, but the more direct cost savings will tend to benefit American consumers in the form of lower insurance premiums, lower co-pays, and the like.

Who might have lost out as a result of the recent rise of the Indian pharmaceutical industry?
There are many potential losers who must be accounted for when considering the rise of this industry in India. Perhaps the most prominent of the group of losers is the group that has lost jobs in the American manufacturing sector. With jobs being shipped to India because of the lower costs, highly skilled American workers are having to deal with a shrinking domestic sector. Research jobs are difficult to replace, of course, because they come with a very specific skill set that is not necessarily applicable to other industries. These individuals lose their jobs with no real chance of replacing them in the interim.
Likewise, competing foreign markets are a big loser. If one assumes that there is a finite amount of space in the American market, and in the international market at large for non-American companies, then the rise of the Indian market will almost certainly have a negative impact on competitors from China. Indian companies now have a specific advantage because momentum in this industry has produced a more robust infrastructure for creating skilled professionals in this industry. Likewise, the FDA’s willingness to set up offices in India in order to approve the manufacturing processes that lead to new drugs is a major advantage that allows companies based in India to quickly get into the American market if they choose to do so.

Do the benefits from trade with the Indian pharmaceutical sector outweigh the losses?
The benefits of trade with the upcoming Indian sector does outweigh the losses incurred by the American manufacturing sector. While that would be a difficult thing to sell to the person who lost his or her job as a result of outsourcing, the overall effect is clear. What this means, then, is that the Indian sector provides those direct cost-savings benefits that ultimately benefit all parties. That might be true in any industry, with consumers ultimately benefitting from the lower prices brought by more competition. It is certainly true in this industry, where new entrants and more competition not only means lower prices, but also means the chance of more and better life saving drugs.
Pharmaceuticals can be rightly seen as a tangible public good. They help to heal diseases and help people live longer and better lives. This concern tends to outweigh the concerns of job losses, which can be replaced with other sectors that America tends to have more of. Without competition in this industry, prices remain so high that some people cannot get the drugs that might save their lives. Likewise, stagnation occurs, and companies have no real reason to innovate in a way that leads to a better long-term result.

What international trade theory (or theories) best explain the rise of the Indian as a major exporter of pharmaceuticals?
Fragmentation theory could be used to provide an ample description of why the Indian market has risen steadily over the last decade or so. One of the chief bases of this theory is that, ultimately, trade will flow in such a way that slices of a given market will be allocated to the places in the world where the lowest end-price for a product can be achieved. For instance, because certain conditions exist in India – including low wages, high amounts of talent, and the infrastructure to quickly produce the goods that the market currently needs – it makes sense that India would be a place where a part of the market would be sent in order to capitalize on those favorable conditions. In essence, the market has been fragmented because it is efficient to do so. While the Indian market might not have the overall capability of being a complete player in every export market, it has created the kinds of arrangements, both macro and micro, to facilitate an easy process of cooperation between itself and both American companies and the American authorities that license the sale of pharmaceutical goods. This explains why the market has moved some of its manufacturing to India.