Impact of U.S. Tariffs on Indian Pharmaceuticals
Introduction
The U.S. President, Donald Trump, announced a 100% tariff on patented pharmaceuticals entering the U.S. from October 1, 2025, unless companies are building manufacturing facilities in the U.S. This move targets Indian drugmakers, with significant implications for global pharmaceutical trade.
Key Details of Tariff Announcement
- The tariff applies to branded or patented pharmaceuticals unless under construction in the U.S.
- Uncertainties remain on definitions and scope, including the impact on generics and APIs.
India's Pharmaceutical Impact
- Pharmacy of the World: India is a leading supplier of affordable medicines to the U.S.
- 2022 Data:
- Indian companies filled 40% of U.S. prescriptions, including 47% of generics and 15% of biosimilars.
- Savings of $219 billion for U.S. healthcare in 2022; $1.3 trillion between 2013-2022.
- Export Growth: India's pharma exports reached $30 billion in FY25, with a significant portion to the U.S.
Potential Impact of Tariffs
- Indian companies like Dr. Reddy's, Sun Pharma, Lupin, Zydus Lifesciences, and Aurobindo Pharma face potential revenue risks.
- Cipla has some insulation due to domestic production.
U.S. Healthcare Dependency
- The U.S. healthcare system relies largely on Indian generics, which constitute 90% of prescriptions yet only 20% of spending.
Challenges in Domestic Manufacturing
- Cost and time constraints make U.S. manufacturing less appealing for Indian companies.
- Setting up in the U.S. is 50-60% costlier and requires 3-4 years for regulatory approvals.
Uncertainties and Future Outlook
- While the tariff announcement raises concerns, clarity remains elusive without a formal executive order.
- Potential for policy shifts similar to past announcements, impacting Indian generic drugs and APIs.
Conclusion
The imposition of tariffs by the U.S. on Indian pharmaceuticals raises significant challenges and uncertainties, both for the Indian economy and the U.S. healthcare system. The long-term implications depend on how these policies unfold and the strategic responses by Indian manufacturers.
