Trump spares generic drugs from pharma tariffs, but are they still at risk? Explained
Indian pharmaceutical exports, especially generic drugs, are not expected to be impacted by US tariffs on branded drugs. However, uncertainty remains due to a US investigation into pharmaceutical imports and potential future tariffs that could affect Indian pharma industry.
Indian pharmaceutical exports, including generic drugs, are unlikely to be affected by US President Donald Trump's recent announcement of 100 per cent tariffs on “any branded or patented" drugs imported into the US from October 1. Even though generic drugs are exempt, companies remain uncertain about tariffs due to a US government investigation under Section 232 to determine if pharmaceutical imports threaten national security, according to a report by Moneycontrol.
"The latest tariff announcement is for branded or patented drugs, and not applicable to generics," the news agency quoted Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance (IPA).
IPA stands for large domestic pharmaceutical firms with substantial exposure to the US market.
Trump also said that exceptions would be granted to pharmaceutical companies establishing or beginning construction of manufacturing plants in the US.
"India, being an exporter of generic drugs, is unlikely to be impacted by this. But perhaps the president’s next target can be generic drugs. This decision may have a sentimental impact on pharmaceutical stocks," the news portal quoted VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
India's leading pharmaceutical company, Sun Pharma, which markets speciality branded drugs in the US, may be affected. US speciality sales increased by 17.1% year-on-year to $1.216 billion, representing 19.7% of Sun Pharma’s total revenues, up from 18% in FY24.
Why are generic medicines important for US?
Generic medications are essential in controlling the costs of the US healthcare system, providing them with some protection against aggressive tariff policies, the report said, citing analysts.
The US has not imposed tariffs on generic medications so far, but has imposed a 50 per cent tariff on most other goods, including a 25 per cent punitive tariff for purchasing Russian oil.
Are pharma companies still at risk?
However, the tariff threat for pharma companies still remains, as the Trump administration initiated an investigation under Section 232, conducted by the US Department of Commerce under the Trade Expansion Act of 1962. This inquiry evaluates whether pharma imports threaten national security. It includes finished drugs, active pharmaceutical ingredients (APIs), key starting materials, and medical countermeasures. A final report is due by December 27, 2025, with a presidential decision anticipated by March 2026.
However, the danger of pharma-specific tariffs has led Indian companies to think about changing their product portfolios and shifting manufacturing locations. Indian pharma leaders worry that tariffs exceeding 10 per cent might render high-volume, low-margin products unprofitable, potentially forcing them to stop supplies.
India exported $8.73 billion worth of pharmaceuticals to the US in 2024, representing 31 per cent of its total pharmaceutical exports. Indian generic drugs constitute nearly half of all medications under the Medicare and commercial insurance plans, saving the US healthcare system $219 billion in 2022.
Despite Trump's efforts to promote local manufacturing, it is challenging to quickly establish drug-producing plants in the US. The process often takes 3–5 years or longer, including planning, building, validation, and obtaining regulatory approval. It also involves purchasing equipment, training staff, and managing supply chains setup, the report said citing analysts.