Domestic pharma industry may face setback if US imposes tariffs
India's pharmaceutical industry could be significantly impacted if the proposed 25% US tariff on drug imports is implemented, with the burden expected to fall on exporters.
India is one of the largest suppliers of generic medicines to the US, exporting mostly low-complexity generics worth about $9 billion annually.
These drugs operate on wafer-thin margins, leaving little room to absorb additional tariffs.
The US is heavily reliant on India for its pharmaceutical needs, with around 50% of generic drugs sourced from India. In total, India's drug exports to the US stood over $10.5 billion in the last fiscal.
"If imposed, many Indian manufacturers may find the US market financially unviable and scale back or withdraw. This could disrupt the supply of affordable generic drugs in the US, directly affecting patients who rely on them for essential treatments," Namit Joshi, Chairman of Pharmexcil, told TOI.
Adding to the pressure is the high cost of compliance: the Indian industry collectively spends nearly $1 billion annually to maintain US FDA-approved facilities and undergo regular audits. A further imposition of tariffs would raise operational costs significantly, making it increasingly difficult for companies to sustain business in the US market, he added.
However, analysts say drug formulations and APIs are currently excluded from this tariff, consistent with the April 2025 reciprocal tariff framework, where pharmaceuticals were explicitly exempted.
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Maitri Sheth, Equity Research Analyst - Pharma, Choice Broking, said, "Given the critical nature of healthcare and already elevated healthcare costs in the US, we view the likelihood of material near-term tariffs on pharma as low. That said, we flag the ongoing Section 232 investigation into pharma imports by the US as a medium-term overhang, with the potential for pharma-specific tariffs to be announced in the coming weeks or months.
In the absence of clarity on the potential rate and scope of such tariffs, it remains difficult to quantify the impact on Indian pharma players at this stage."
Broadly, larger players with manufacturing facilities in the US, like Sun Pharma, are likely to remain broadly insulated, while others anticipate a limited impact, with plans to pass on incremental costs to customers where feasible, analysts say.
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