macOS Catalina - External Hard Drive not sleeping when lid closed and laptop sleeping
The LED on your USB external drive probably just indicates that it is connected to power.

The MacBook Pro provides connected USB devices with at least 0.50 watts of power (according to the USB power specification and Apple technote HT204377) even when the laptop has been put to sleep. This low level of power is particularly helpful for input devices like keyboards and mice, because it ensures they have enough power to register activity that can be used to wake the system.

If you want the drive LED to turn off, you can either unplug it from the laptop or you can shut down the laptop completely.