Last week, US President Donald Trump announced a phased tariff plan for low-cost generic drugs, with the aim of bringing manufacturing back to the US. While many believe the plan is unviable and difficult to implement, Indian drugmakers will have much to lose if Trump goes through with it. Mint unpacks the potential impact, why the US remains a key market, and what companies can do.
1. What did Trump say?
On 22 July, Trump wrote in a social media post that the US will impose 100% tariffs on generic drugs after two years and increase this to 200% after another year. The aim is to “reshore” generic drug production to the US, with penalties for companies that don’t build capacity in the stated period, he said.
2. Why is the US so important?
The US is the largest overseas market for India's pharmaceutical industry, a global generics powerhouse, accounting for over a third of the country's pharma exports and a significant share of profits for leading drugmakers. In 2025, India’s drug exports to the US were worth $9.7 billion, roughly 37% of its overall drug exports, according to a report by Global Trade Research Initiative (GTRI).
Though generics are generally cheap and have thin margins, the US remains a crucial market for India due to its sheer size, and because prices there are higher than in other markets. Generics account for 90% of the drugs consumed in the US, and India supplies nearly half of the generic prescriptions dispensed in the US by volume. Many of India’s top listed pharma companies such as Dr Reddy’s, Aurobindo Pharma, Zydus, Lupin and Cipla have typically garnered 30-50% of their revenue from the US.
3. How have previous tariff talks panned out?
While Trump threatened innovator pharma companies with tariffs in 2025, this was ultimately used as a bargaining tool to push drugmakers to expand manufacturing in the US and reduce medicine prices. Companies were given time to relocate production before the tariffs took effect, while the administration held talks with major pharmaceutical firms on investment commitments.
It also introduced a ‘most favoured nation’ pricing policy, urging companies to align US drug prices with those in other developed markets. Several global drugmakers subsequently announced billions of dollars in US manufacturing investments, with no broad-based pharmaceutical tariffs implemented during the year.
4. What do experts say?
Most industry experts and company executives believe the tariff threat is a way to bring manufacturing back to the US. However, analysts are in agreement that the two-year timeline is unviable. It takes a minimum of two years to set up a plant, followed by 12-15 months of plant inspections and product approvals. Also, the US has lost its edge in low-cost manufacturing over the past few decades. Given the low-cost, low-margin nature of generics, setting up facilities capable of producing large volumes would be economically unviable for drugmakers.
They may look to reshore certain high-margin products to the US, but it’s unlikely they will be able to build enough capacity to cater to all the demand in the US. Ultimately, the move could hurt US consumers more than Indian drugmakers.
Companies that have the required capacity in the US, such as Aurobindo Pharma, Senores Pharma and Cipla, and companies that have already planned capacity, such as Lupin, are better positioned than their peers.
5. What are companies’ mitigation plans?
While some companies have already built US capacity—with Cipla already producing 35-40% of its goods in the US—others intend to expand their footprint. Even so, shifting all manufacturing to the US remains unviable for every company. Awaiting more clarity, players like Dr Reddy’s have indicated a willingness to consider options such as technology transfers to outsource production to domestic US partners. But while these solutions have worked in other markets requiring localisation, they may not be as viable in the US, given the market's size and cost dynamics.
Most leading drugmakers have also been broadening their revenue sources to hedge against US risks, driven by macroeconomic instability and ongoing price erosion in the US generics market. Sun Pharmaceutical Industries’ acquisition of Organon is set to speed up its penetration into emerging markets, opening doors to China and more than 10 other regions where its presence was minimal or nonexistent. Conversely, small and medium-sized Indian exporters exposed to the US market face greater vulnerability due to the absence of immediate revenue alternatives.
Ultimately, pharmaceutical firms will have to pass these additional expenses along to US buyers, executives said. The sector continues to await clearer guidance alongside bilateral talks with the US, anticipating a negotiated fix instead of actual tariff enforcement.