Impact of Potential US Tariffs on Indian Pharma

Around 40% of generic drugs consumed in the US are imported from India, currently with no tariffs. Should the US impose tariffs, particularly punitive ones, there could be significant implications.

Implications for Indian Pharma Firms

• Revenue Impact:
  • Several Indian firms rely on the US for a significant portion of their revenue, with some getting more than 40% from there.
• Profit Margins:
  • Indian companies operate on thin margins, especially with price-sensitive medicines. Tariffs could make these drugs less viable to produce.
  • Companies might scale back or exit low-margin drug production, reducing medication variety in the US.
• Supply Chain Concerns:
  • 70% of APIs and intermediates for US firms come from China. Disruptions here will also affect high-value biologics.
  • Transitioning supply chains could lead to shortages or delays in essential medicines in the US.

Consequences for the US Pharma Market

• Price Increase:
  • The US market, reliant on affordable generics from India, may see sharp price hikes if tariffs are imposed.
  • Insurance companies may pass increased costs onto consumers, impacting affordability and adherence to therapies.
• Supply Chain Disruption:
  • Tariffs would disrupt established supply chains, necessitating the search for alternative suppliers or domestic manufacturing investment.
  • This could have a cascading effect globally, affecting drug availability in reliant countries.

Opportunities for Indian Pharma Firms

• API Production:
  • The GoI's PLI scheme offers financial incentives to boost domestic API manufacturing, reducing dependence on Chinese imports.
• Expanding High-Value Segments:
  • Firms can expand into biosimilars, complex generics, and injectables, which offer higher margins and are less tariff-susceptible.
  • Increased R&D investments can strengthen capabilities in these segments.
• Strategic Partnerships:
  • Indian firms can form joint ventures with US biotech and pharma companies for co-development, leveraging US infrastructure.
  • Partnerships can aid in knowledge exchange, regulatory compliance, and faster market entry.

The imposition of tariffs may act as a catalyst for innovation and diversification in Indian pharma, enabling companies to emerge stronger and more competitive on a global scale by leveraging government incentives and exploring new market segments.