US pharma tariffs pose limited immediate threat, but risks loom for India

United States President Donald Trump announced on Truth Social that starting October 1, 2025, the US will impose a 100 percent tariff on all branded and patented pharmaceutical imports, unless the manufacturer is actively building a production facility in the country. Companies that have already broken ground or have plants under construction will be exempt from the new tariff regime.

The move carries significant implications for India, which is the largest supplier of medicines to the US and counts the American market as its single biggest export destination. While the immediate impact on India's core generic drug export business may be limited, as most generics are not directly targeted by these tariffs, significant risks remain.

The US has emerged as the leading destination for Indian pharmaceutical exports, accounting for 34.5 percent of the total in the fiscal year 2024-25. Notably, India's pharmaceutical exports to the US surged by 20.4 percent, reaching $10.5 billion, while overall exports rose by 9.4 percent to $30.5 billion during the same period, as reported by the Pharmaceutical Exports Promotion Council of India.

Immediate impact
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said any tariff move by the US is bound to weigh negatively on sentiment for Indian pharmaceutical companies. India exported about $10.5 billion worth of pharmaceuticals to the US in FY25, of which nearly $1 billion was branded drugs and the rest generics.

“The initial commentary suggests the 100 percent tariff is applicable only to branded drugs, not generics. But we need more clarity, particularly on whether this would cover critical, life-saving medicines as well as non-critical ones,” he said.

Bathini added that since US healthcare is already grappling with high costs, tariffs on branded drugs could create “additional cost pressures” for patients. He cautioned that while the immediate impact on India’s generics exports may be limited, “any tariff tinkering is a negative for the sector, and we will have to wait and see how the industry mitigates this.”

Other industry executives also echoed that the core of India’s export business—generics—remains insulated for now. “Generics are exempted for now, which is a sigh of relief. How long that relief lasts remains to be seen,” said Sugeet Chopra, Senior Vice President of Supply Chain Management at Strides Pharma Science.

A logistics head at a major Indian life sciences company also cautioned that the exemption may not last forever: “If generics are exempted, India is fine for now, but sooner or later there will be an impact. Indian pharma companies must be prepared for cost optimisation and diversifying their market outreach.”

Opportunities
Some industry voices see openings rather than obstacles. A procurement specialist at a leading Indian pharma major said, “Contract manufacturing organisations will have more opportunities to work with US companies.”

Arloph John Vieira, Vice President of Supply Chain at Bajaj Healthcare, commented at a personal level that the announcement is more to satisfy the local crowd and so is about political messaging than a real threat to India’s pharma exports.

“The announcement of the tariff on pharmaceuticals was shocking, but with a caveat, only branded off-patent goods are affected, so that the impact will be limited.”

“At the same breadth, the announcement mentioned that the companies with plants in the US, or even those that have started construction of a plant in the US, will get a waiver. So, it’s more of a tactic which indicates it can go even for pharma, though with only a small impact. Most of the large companies will not be impacted, as it has plants in the US. It’s also a ‘Make in America’ message for his local support. The Tariff was a clever strategy, hitting two birds with one stone,” he said.

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Future risks
Vieira warned, however, that the impact could intensify in the coming years as blockbuster molecules go off patent: “These new molecules will be more focused on the Indian market and will have to be very competitive to absorb a 100 percent tariff for US export.”

Ramnivas Mundada, Director of Economic Research and Companies at GlobalData, a leading data and analytics company, said, “If the US expands tariffs to encompass generic medicines in the future, it will directly affect India's primary export category. Furthermore, Indian generic manufacturers, operating on thin profit margins, could find the US market financially unviable if tariffs expand, potentially leading to reduced supply of affordable medicines.”

“However,” Mundada said, “the impending tariffs have already triggered a negative reaction in the Indian stock markets, with the Nifty Pharma index experiencing a notable decline. Major players in the sector, including Sun Pharma, Dr Reddy's Laboratories, and Lupin, have also seen their share prices drop.”

To navigate this challenging landscape, Mundada notes that India has several options.

“Market diversification into regions such as Europe, Latin America, and emerging economies is crucial to reduce reliance on the US market. Additionally, a shift towards high-value products, including complex generics and biosimilars, could enhance profit margins and provide a buffer against competitive pressures,” he said.

“The Indian government can also bolster domestic manufacturing through Production-Linked Incentive (PLI) schemes, reducing dependence on imports for active pharmaceutical ingredients (APIs) and reinforcing India's position as a self-reliant pharmaceutical hub. Diplomatic engagement with the US to advocate against protectionist measures will be essential in highlighting India's role in providing affordable medicines.

“As the fiscal year 2026 unfolds, the economic impact of these tariffs is expected to be mixed but manageable. While companies reliant on the US for branded drug exports may face immediate revenue challenges, the resilience of the generic segment is expected to mitigate a catastrophic decline.

He added, “India's diversified economy and robust domestic demand are anticipated to absorb much of the shock, although a potential depreciation of the Indian rupee could occur if pharmaceutical exports decline significantly.”

As tariffs loom and markets recalibrate, Indian pharma finds itself navigating a delicate balance between opportunity, risk, and resilience.