NEW DELHI: The US government’s decision to impose a 100% tariff on patented drugs is unlikely to hurt India’s $30 billion-plus pharma exports immediately, as Indian supplies are largely generic in nature. The US, India’s largest market, accounted for $10.5 billion of drug exports in 2024-25.
According to Aditya Jhaver, director, Crisil Ratings, the replacement risk for Indian generics in the US remains low since local manufacturing capacities are limited, while India continues to supply over 40% of the country’s generic prescriptions. “India delivers significant healthcare savings to the US, with manufacturing costs 35-40% lower than those in the US,” Jhaver said.
Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat, noted: “For Indian pharma, the impact is twofold. Companies manufacturing branded products abroad for the US may face headwinds, while domestic generic producers could see near-term gains as higher prices for branded drugs push demand toward cost-effective alternatives.”
Despite this, share prices of Indian pharma companies fell after the announcement. At 1:15 pm IST, the Nifty Pharma index was down over 2% from the previous close. Sun Pharma and Dr Reddy’s Laboratories — both part of the Nifty 50 Index — were down 2.9% and 1.3%, respectively.
Analysts said the market reaction likely stems from uncertainty around President Trump’s next policy move. He has previously threatened tariffs of up to 200% on pharma imports. While generic drugs have not been targeted yet, the threat of punitive duties continues to hang over the industry.
Indian pharma exports to the US have grown more than 17% in 2024-25, despite a stricter regulatory regime. The US Food and Drug Administration has stepped up unannounced inspections of overseas facilities after compliance lapses were found at several Indian and Chinese plants. The heightened scrutiny has increased compliance costs and the risk of supply disruptions.
Crisil noted that a reduction in GST on life-saving and cancer medicines could shift demand toward organised players, away from smaller unorganised manufacturers.
“To safeguard against tariff shocks, companies are diversifying their geographical footprint and focusing on specialty products with greater pricing flexibility and lower competition. Efficiency gains and productivity improvements will also be critical to protecting profitability in case of fresh levies,” Crisil said.