Trump’s pharma tariff shock: Why Indian generics may escape the hit—for now

While the industry decodes the implications, New Delhi is examining the potential impact of Trump’s decision on India’s generic drugs exported to the US, according to two government officials.

“We [India’s pharmaceutical industry] are largely into generic drug exports. Given their price competitiveness, we will continue to export to the US regularly, as [the generic drugs] are still expected to remain outside the scope of the new reciprocal tariff regime," one of them said.

“We are examining the proposal and plan to discuss its impact with the export promotion councils. At this initial stage, we do not foresee any major impact on Indian drug exports," added the second official. Both of them requested anonymity.

India’s pharma industry leaders agreed that the overall impact of Trump’s latest tariff, which will come into effect on 1 October, would be limited.

“We don’t see any direct impact of Trump’s 100% tariff proposal… because India is not into the patented products market," said Viranchi Shah, national spokesperson of the Indian Drugs Manufacturers Association. “However, we are awaiting more details in the form of some order."

Despite the optimism, the Nifty Pharma index fell 2.1% on Friday, while the benchmark Nifty 50 dropped nearly 1%.

Within the pharma index, barring Torrent Pharmaceuticals Ltd, IPCA Laboratories Ltd, and J.B. Chemicals and Pharmaceuticals Ltd, which closed 0.1-1.6% higher, all other constituents were in the red.

Sun Pharmaceutical Industries Ltd ended the day 2.6% lower on NSE, while Dr Reddy’s Laboratories Ltd fell 1.6% and Lupin Ltd lost about 2%. Zydus Lifesciences Ltd, Natco Pharma Ltd, Biocon Ltd, and Larsus Labs Ltd lost 4.35%, 2.65%, 4.78%, and 7.15%, respectively.

According to Trump’s proposal, the new tariff rate would apply unless a pharma company has a manufacturing plant or started to build one in America by 1 October. According to a Bloomberg report, this exemption would soften the blow for global drugmakers as several already have US plants or are building them.

“The proposed 100% tariff on branded and patented pharmaceutical imports is unlikely to have an immediate impact on Indian exports as the bulk of our contribution lies in simple generics and most large Indian companies already operate US manufacturing or repackaging units and are exploring further acquisitions," said Namit Joshi, chairman of Pharmexcil (Pharmaceuticals Export Promotion Council of India).

“Nonetheless, it is prudent to remain prepared for future policy shifts and to build risk-mitigation strategies," he added.

The commerce ministry didn’t immediately reply to Mint’s queries.

‘A troubling sign’

India’s total export of drugs and pharmaceuticals increased to $30.38 billion in 2024-25 from $27.82 billion in FY24. Exports to the US rose to $10.52 billion from $8.73 billion in FY24, accounting for about 34.6% of India’s total drug exports in FY25.

As per a recent report by the Global Trade Research Initiative (GTRI), although the US hadn’t imposed reciprocal tariffs on pharmaceuticals earlier, India’s pharma exports recently had dropped to $646.6 million in August from $745 million in May.

The global market for generic drugs is projected to reach about $468.08 billion this year, according to a report by Precedence Research, a Canada-based market research firm.

Patented drugs are new, unique medicines developed by a company and are often very expensive. Generic drugs, on the other hand, are low-cost versions of these medicines that can be produced once the original patent has expired.

Generic medicines contain the same active ingredients and are just as effective as the branded versions, explained Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance.

Indian drugmakers have minimal presence in the US branded pharmaceuticals market. The portion of Indian-origin exports that are branded or patented is 1-3%, according to Nikkhil K. Masurkar, chief executive of Entod Pharmaceuticals.

“India’s strength lies in supplying affordable generics to the US market, not patented or branded drugs. Since generics, which make up the bulk of India’s pharmaceutical exports, are so far excluded from these tariffs, Indian exports to the US should remain unaffected," Masurkar said.

“The UK and the EU, however, with their stronger focus on patented and branded medicines, are likely to feel a much greater impact. Such tariffs could also push up the prices of patented and branded medicines in the US, increasing the burden on patients and healthcare systems."

Rahul Ahluwalia, founder and director of the Foundation for Economic Development, added that while the immediate impact of the tariff was unlikely to be significant for India’s pharmaceutical industry, it was a troubling sign. “We should redouble efforts to get a trade deal with the US and EU to enable our industries to have access to large markets."

Among Indian pharma companies, Param Desai, research analyst at PL Capital, said only Sun Pharma was likely to see a direct impact of Trump's 100% pharma tariff as its branded or specialty sales in the US are estimated to be about 12% of its total US sales.

“…Some domestic formulation makers have niche presence in the branded and patented drugs space, but the contribution of those drugs to their revenue is modest," said Anuj Sethi, senior director, Crisil Ratings.

“Moreover, given the largely non-discretionary nature of these products, majority of the tariff cost is likely to be passed through. Some of these domestic companies also have manufacturing facilities in the US, which would make them exempt from the new levies," said Sethi. “Strong balance sheets further support the credit quality of these companies. That said any imposition of further tariffs, pending outcome of the ongoing US Section 232 investigation, remains monitorable."

Branded generics—a grey zone

Ajay Srivastava, founder of GTRI, however, flagged a grey zone—branded generics.

Many Indian pharma companies export off-patent drug molecules under brand names to the US, he said, adding that under US law branded generics are treated as patented drugs.

“If that interpretation holds, Indian pharmaceutical exports would remain largely unaffected. However, certainty will only come once the US legal documents are officially released," Srivastava said.

India’s shipments to the US include tablets, capsules, injectables, antibiotics, vitamins, and anti-diabetic and cardiovascular drugs—mostly off-patent formulations.

Top exporters such as Zydus, Dr. Reddy’s, Lupin, Aurobindo Pharma Ltd, Sun Pharma, and Cipla Ltd account for 70% of India’s pharmaceutical exports to the US.

The impact could be more pronounced on companies that either sell or are expect to sell patented or branded products in US, added Aditya Khemka, fund manager, Incred Asset Management. “A few companies which we believe could be potentially impacted from this development are Sun Pharma, Biocon, Wockhardt, etc."

ICICI Direct Research added that while direct near-term impact of the tariffs would be limited, “uncertainty still remains whether complex generics and biosimilars will come under tariff embargo in the future".

The US imported $212.82 billion in pharmaceutical goods in 2024, with Ireland, Switzerland, and Germany dominating branded drugs and expected to bear the brunt of the new tariffs, according to the World Trade Organization’s World Integrated Trade Solution platform.

An Indian team of negotiators is in Washington this week to try and break the logjam in discussions for a bilateral trade agreement.

Earlier this month, Assistant US Trade Representative Brendan Lynch visited New Delhi to bring the talks back on track. The negotiations had stalled after Trump imposed 50% tariffs on Indian exports, including a punitive 25% on New Delhi’s purchases of discounted Russian oil.

Dipti Sharma contributed reporting.