The United States has fired two heavy blows at the global pharmaceutical trade in the space of a week. First came an executive order from Washington to strengthen domestic supply of essential medicines and build a national reserve of active ingredients. Then followed a social media post from the US President threatening a 100% tariff on branded and patented drugs imported into America, unless the exporting company is already constructing manufacturing plants in the US. The IPA however clarified that the generics business is unlikely to be impacted.

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“The executive order refers to patented / branded products supplied to US. It is not applicable to generics medicines,” said Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance (IPA).

US key market for Indian generics export

India  is the largest supplier of low-cost generics to the US, but it also depends heavily on sales of high-value specialty medicines. As per Nomura’s report on Pharmaceutical sector, the United States remains the single most important market for Indian players, especially in specialty drugs. Sun Pharma alone generated nearly $ 1.0 billion of specialty sales from the US in FY25, out of $1.2 billion total specialty sales.

Jain added, “The social media post by POTUS refers to patented / branded products supplied to US. It is not applicable to generics medicines.”

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Nomura on how tariffs could be applied

The 100% tariff is not expected to apply across the board. As per Nomura, it will likely be levied on a product-by-product basis rather than hitting entire companies. The deciding factor will be the “country of origin” the place where the most substantial transformation of the medicine takes place.

That creates complications for complex drugs. For instance, a biologic may have its active ingredient manufactured in South Korea, then formulated in Ireland, and packaged elsewhere. Under trade practice, Ireland would count as the origin.

Existing agreements may also soften the blow. According to Nomura, the European Union’s pact with Washington caps pharmaceutical tariffs at 15%, meaning drugs made in Italy, France, or Ireland and exported to the US would face a 15% levy instead of the full 100%.

Tariff impact on Sun Pharma

Among Indian drug makers, Sun Pharmaceutical Industries carries the most risk from these tariff changes. As per the firm’s research, Sun Pharma’s specialty sales reached USD 1.2 billion in FY25, of which nearly USD 1.0 billion came from the US.

Most of those products are manufactured outside the US. The report estimates only USD 100–150 million in sales were generated from drugs produced domestically.

The standout case is Ilumya, a psoriasis treatment that recorded USD 550 million in US sales in FY25. The active ingredient is made at Samsung Biologics in South Korea, while the formulation is done in Europe. Nomura noted that Europe would likely be counted as the country of origin, meaning a 15% tariff would apply. Its rival, AbbVie’s Skyrizi, is manufactured in the US and faces no tariff a clear competitive edge.

Other examples from Nomura’s data:

  • Winlevi (dermatology, USD 110 million US sales, made in Italy) → tariff risk but already under pressure from generics.
  • Cequa (ophthalmology, USD 155 million US sales, made in France) → may face tariff but the company could absorb costs to protect share.
  • Odomzo (oncology, USD 47 million US sales, made in Canada) → likely subject to the full 100% tariff, though its competitor Erivedge is also made in Canada.
  • Leqselvi (new launch, produced in the US) → no tariff exposure.
  • Unloxcyt (launch expected FY26, produced in South Korea) → faces risk of full 100% tariff.

Overall, as per Nomura’s calculations, Sun Pharma could face a tariff cost of about USD 100 million, equal to 5% of its projected earnings before interest, taxes, depreciation, and amortization for FY26.

Generics safe, but not future-proof

Generics remain India’s stronghold. They are low-cost versions of drugs made after patents expire and account for the bulk of prescriptions in the US. As per Nomura, generics are not covered by the announced tariffs, and a 100% duty on them would break the economics of supply.

Even so, the US executive order also called for strategic reserves of essential active pharmaceutical ingredients (APIs). APIs are the raw substances used in medicines, and India is a key global supplier. Nomura warned that if Washington prioritises local production, Indian API exports could shrink in the medium term.

Contract manufacturers under pressure

Contract Research, Development and Manufacturing Organisations (CRDMOs) such as Divis, Syngene, Sai Life Sciences, Laurus and Cohance supply intermediates and APIs to global drug makers. The report added that the most exported compounds are not patented, reducing immediate tariff exposure. Many contracts are also on “Free on Board” terms, where the US buyer pays import duties.

Still, report pointed out that customers may eventually push Indian suppliers to share the tariff burden. In parallel, a proposed US law the Halting International Relocation of Employment (HIRE) Act would add a 25% excise tax on outsourcing payments made to foreign contractors, posing a separate challenge for CRDMO service exportsCRDMO

Nomura on pricing squeeze for Pharma

In July 2025, the US President wrote to 17 major pharmaceutical companies demanding that American prices for Medicaid drugs be aligned with “Most Favoured Nation” levels the lowest prices charged in other advanced economies.

Sun Pharma’s exposure to Medicaid is limited at about 5% of sales, the report added. Even if those prices are halved, the impact would be around USD 30 million. The bigger risk, Nomura stresses, lies in future launches that may be forced to start at globally aligned lower prices.

Nomura on Indiam pharma: What lies ahead

Indian drug makers now face a difficult balance. They cannot abandon the US, the world’s most lucrative pharmaceutical market, but tariffs, outsourcing taxes, and price controls are eroding profitability on the specialty drugs they hoped would drive growth.

For now, generics provide a cushion. But as per Nomura, specialty and patented products are directly in the line of fire. If Washington continues its push for self-reliance in medicines, Indian companies will have to reconfigure supply chains and deepen partnerships in America, while keeping one eye on other markets to steady the risks. The “pharmacy of the world” can no longer assume that its biggest customer will play by old rules.

Nifty Pharma reacts

The Nifty Pharma has witnessed a drop of around 2.3 per cent till now from the time of tariff announcement.

The Nifty Pharma index closed at 21,454.25, down 21.05 points or 0.1%. While the index-level decline looked modest, individual stocks moved more sharply.

On the losing side, Abbott India fell 1.26% to Rs 29,290, Lupin slipped 1.13% to Rs 1,911, and Mankind Pharma dropped 1.07% to Rs 2,435. In contrast, Ipca Laboratories gained 1.67% to Rs 1,339, Cipla rose 1.03% to Rs 1,503, and Sun Pharmaceutical Industries edged up 0.31% to Rs 1,594.