India's generic drugmakers that escaped the first wave of Trump tariffs were in for a rude shock on Wednesday, after the US president pitched tariffs as high as 200% on companies that fail to manufacture in America.
The US will impose 100% tariffs on generics after two years and increase this to 200% after another year, Trump said, in a setback for India's $25 billion pharma exports sector. Both drugmakers and US customers are expected to bear the pain of Trump's decision, given the limited timeframe for the transition, and America's own dependence on imported generics.
Drugmakers tumbled on the bourses, led by Lupin Ltd, which closed 4.35% down. The Nifty Pharma index was down 1,31%, while the benchmark Nifty index fell 0.79%. Analysts termed the pharma fall a “kneejerk reaction”, driven by the suddenness and ambiguity of the announcement. Some called Trump’s plan unviable and difficult to implement. Still, drugmakers are bracing for potential impact and are expected to explore derisking strategies.
Future pain
Indian pharmaceutical companies will continue to face pressure in the US even in a post-Trump future, said Dr. Amit Varma, co-founder and managing partner of Quadria Capital, adding the sector must keep an eye open for it. “But to use 2028 as a pressure tactic, quite frankly, that's not possible,” Varma said. “So, our trend now, even in our portfolio companies, is to find some kind of an onshore base and make sure that there is some amount of manufacturing that's taking place. But for the enormity in the volume that we are talking about, of what the US consumes today, it's a long way off.”
In his social media post, Trump said his aim is to “reshore” generic drug production to the US, with a “penalty” on companies that don’t build capacity in the stated period.
In 2025, Trump had rolled out broad global import tariffs which pushed average US tariff rates to their highest levels in decades. However, generic drugs were spared, with the tariffs targeting branded and patented pharmaceuticals. That relief is over.
“This is a very surprising news for the industry,” Mahesh Doshi, an executive committee member at the Indian Drug Manufacturers Association told Bloomberg. “None of us were expecting this.”
Indian pharma exports to the US fell almost 10% to $9.7 billion in 2025, according to a report by Global Trade Research Initiative (GTRI). While top firms like Dr Reddy’s, Aurobindo Pharma, Zydus, Lupin and Cipla have typically garnered 30-50% of their revenue from the US, the share has been falling over the past few years, driven by pricing pressure in the generics market, and companies looking for other opportunities to derisk.
FY25 was a peak year in US sales for several companies, largely due to windfall sales from blood cancer drug Revlimid, for which many had signed exclusivity pacts with the innovator Celgene.
Tough job
“Practically speaking, bringing generic manufacturing to the US is very difficult,” said Shrikant Akolkar, a pharma analyst at Nuvama. This is because of factors such as constant price erosion, high competition, and the number of dosage types. Generic drugs account for over 90% of prescriptions by volume in the US, of which almost half originate in India. Building production capacity in the US to meet this level of demand would take decades as the US has lost its edge in low-cost generic manufacturing, Akolkar added.
The proposed tariffs would be levied on all countries supplying generics to the US and not just India, and Indian firms could still retain a competitive advantage, Tushar Manudhane, institutional research analyst – healthcare at Motilal Oswal Financial Services Ltd, said in a note.
Setting up a manufacturing facility in the US would take at least two years, after which plant inspections and product approvals could take another 12-15 months. These factors raise doubts about the economic viability of setting up plants in the US for generic drugs, he said.
“Two years is not a window you can create a generic drug ecosystem in,” Namit Joshi, chairman at the Pharmaceutical Exports Council of India told Bloomberg. He cited concerns around manpower availability and backward integrated ecosystems that includes the availability of active pharmaceutical ingredients.
Options beyond US
While there have been some efforts to increase production in the US, most companies don’t have a meaningful manufacturing footprint in the US.
Aurobindo Pharma and Senores Pharma, which have invested significantly in setting up plants in the US, could benefit if the proposal pans out, said Akolkar. However, it is unlikely that other companies would allocate capital to reshore manufacturing in the US.
“If at all it does pan out, companies will only look to onshore the high-margin portfolio products to the US,” said Vishal Manchanda, a pharma analyst at Systematix Group. “For commodity generics, it is not possible to reshore to the US, where very large-volume, high-scale facilities are needed.”
Indian companies may increase focus on other lucrative markets. Companies have already started investing in other promising markets to derisk from the US.
Sun Pharmaceutical Industries’ Organon acquisition is expected to accelerate its emerging market expansion, unlocking access to China and over 10 other countries where it previously had limited or no footprint. Natco Pharma recently acquired a stake in South Africa’s second-largest drugmaker Adcock Ingram to expand in that market.
Experts also pointed out that Trump’s second term ends in January 2029, lowering the risk of tariffs actually being imposed.
Drugmakers, meanwhile, expect to transfer the tariff burden to consumers rather than moving manufacturing. “It is not practical to move operations like that to the US,” Erez Israeli, CEO of Dr Reddy’s Laboratories, told reporters in a post-results press conference. “If the tariff is imposed, we will have to raise the price in the US,” he said, adding that the firm is awaiting official guidelines.
Israeli added that the company is open to other options like technology transfers with local partners, like it does in countries like Russia and in the Middle East, due to local requirements. “Specifically to the US, given the magnitude and the cost difference between the countries, as well as the fact that most of the margins are with the retailers, not manufacturers…That was the reason why it was exempt from the first place. So, I believe that we are very far from the need to take those steps,” he said.
With inputs from Mansi Verma