The pharma sector in India will be in focus after US President Donald Trump has announced up to 100% tariffs on some patented drugs & APIs on companies that do not agree to US pricing deals or not shifting production to the US. Though companies in India are heaving a sigh of temporary relief as generics remain exempted from any tariffs in the US, what does it mean for India?
The fact that the US Secretary of Commerce indicated that it will be scrutinising key generic import levels across the pharma sector over the next 1 year is also a key factor to watch out for.
India has not signed reshoring agreement with US
India is in focus as it has neither signed a reshoring agreement with the US Commerce Department nor a Most Favoured Nation (MFN) pricing deal with the Department of Health and Human Services (HHS). The US has announced relief for the Most Favoured Nation MFN countries (zero tariff) and companies that commit to manufacturing in the US, will face a reduced 20% tariff, which will rise to 100% later by April 2030.
No tariffs on generics: Relief for Indian pharma exporters?
The US accounts for 34% of India’s pharma exports. In FY25, India’s pharmaceutical exports reached $30.47 billion, registering a 9.4% YoY growth. Exports to the US rose 20% to about $10.5 billion in FY25, comprising mainly cheaper generic versions of popular drugs.
The good news is that generic medicines are currently exempt from the tariff. “I have further determined not to adjust imports of generic pharmaceuticals and their associated ingredients, including biosimilar products, at this time,” the White House release on April 2 noted.
“This determination includes purchases of generic pharmaceuticals and ingredients for the Strategic API Reserve. I find that such products should not be subject to section 232 tariffs at this time,” it noted.
The tariff will come into effect on July 31 for larger companies and September 29 for smaller ones.
The fresh tariff announcement came after the US Supreme court struck down a reciprocal tariff imposed by Trump earlier.
The big concern ahead
One of the key concerns going forward is the final status of the tariff announcement and how much is ‘subject to change.’ According to the commentaries coming out of US, it is looking at ways to limit the country’s heavy reliance on pharma imports. As per information available, the US Secretary of Commerce will be scrutinising key generic import levels across the pharma sector over the next 1 year to calibrate the next course of action.
As of now, the risk of increased regulatory monitoring is what most Indian pharma companies, with significant business in the US, need to focus on.