Trump Tariffs: India’s Pharma Exports at Risk

Former US President Donald Trump has proposed significant tariffs of 100% to 200% on generic medicines imported into the United States, effective from August 2028. This policy aims to compel pharmaceutical companies to relocate their manufacturing operations to the US or face commercially unviable export costs.

The move poses a substantial threat to India’s $30-billion pharmaceutical industry, which is a major global supplier of generic drugs. Industry experts describe the initial two-year grace period as a “negotiating lever” designed to promote onshoring initiatives.

Key Financial Implications

• India accounts for approximately 47% of generic prescriptions dispensed in the US.
• Indian pharma exports to the American market are valued at $10 billion, representing 38% of India’s total pharma exports.
• Analysts predict EBITDA margins for US-focused generic companies could decline by 300-600 basis points if tariff burdens are shared with US importers.

The Mechanism of Proposed Tariffs

The proposed tariff structure begins with a 100% levy in August 2028, escalating to 200% a year later. This steep increase is intended to make it economically unfeasible for Indian manufacturers to export certain low-cost generics to the US market.

Relocating manufacturing, however, involves complex challenges. It requires extensive technology transfer, navigating numerous regulatory approvals, and establishing a robust supporting supply ecosystem within the US.

The US currently lacks this comprehensive ecosystem, particularly for crucial key starting materials (KSMs) and active pharmaceutical ingredients (APIs), which are predominantly sourced from China and India.

Companies and Industry Response

Several Indian pharmaceutical companies generate a significant portion of their revenue from the US market and are expected to be most affected. These include firms like Sun Pharma, Dr Reddy’s Labs, Cipla, Lupin, Aurobindo Pharma, and Zydus Lifesciences.

These companies typically derive between 35% and 50% of their total revenue from US operations. While some already have US manufacturing facilities, the thin margins on many generic products make absorbing such high tariff costs extremely difficult.

In anticipation, Indian pharmaceutical companies are likely to reassess their product portfolios. The focus may shift away from low-margin commodity generics towards higher-value therapies such as complex generics, biosimilars, and oncology drugs.

The Indian Pharmaceutical Alliance plans to engage with the US administration to advocate for a stronger partnership. Concurrently, Pharmexcil is exploring new international markets, identifying Latin America (especially Brazil) and Europe as rapidly growing import destinations for Indian pharmaceuticals.