US President Trump’s recent announcement of a 100 percent tariff on import of branded and patented pharma products, starting October 1, has rattled the global supply chains of drugmakers. While generic drugs have been exempted, there are alarm bells across Indian pharma space too, which exported nearly $10 billion worth of drugs to the US during FY25 or 35 percent of its total pharmaceutical shipments abroad.
The immediate impact may be limited, but the broader implications could be far-reaching, and among Indian drugmakers, Sun Pharma may be particularly vulnerable owing to its significant presence in the US specialty branded drug business.
Uncertainty Over Exemptions
Trump administration’s Section 232 investigation - a national security probe into pharmaceutical imports – has cast a long shadow, covering the import of active pharmaceutical ingredients (APIs), key starting materials and potentially generic drugs. A final report is expected by December 27, 2025, with a presidential decision due by March 2026.
The industry is watching closely, aware that exemptions can be temporary, and policy winds may shift very quickly.
Generics: The Political Minefield
Imported generics have so far managed to escape Trump’s glare likely due to their critical role in keeping US healthcare costs in check. The Association for Accessible Medicines (AAM), representing US generic and biosimilar manufacturers, has warned that tariffs on generics would be disastrous.
“Tariffs on generics would raise prices, worsen drug shortages, and threaten the viability of low-margin products,” AAM said in its latest report.
The group, in partnership with IQVIA, revealed that FDA-approved generics and biosimilars saved the US healthcare system $467 billion in 2024, and $3.4 trillion over the last decade. Biosimilars alone contributed $20.2 billion in savings last year.
With healthcare inflation being politically sensitive - especially in an election cycle, analysts believe Trump may tread carefully before extending import tariffs to generics.
Make in America: A Costly Proposition
Even if the administration pushes for domestic manufacturing, the path is likely to be uphill, say many analysts. Building a pharmaceutical plant in the US is a multi-year effort, requiring regulatory approvals, validation of equipment, build pilot or stability batches, workforce training, and supply chain setup.
“Shifting manufacturing to the US is not feasible for the majority of Indian pharma companies,” said Prashant Khadayate, Director, Healthcare, GlobalData.
“However, big players from India would certainly evaluate options to set up or expand their manufacturing base in the US based on their market presence,” Khadayate added.
Margins are another constraint, according to Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance (IPA), who said, “Indian companies typically operate on razor-thin margins.” Most Indian firms earn 10-15% margins on their base business with higher returns only in limited competition generics.
Defence Strategy
Indian pharma is not waiting for the axe to fall, and experts say a multi-pronged defence strategy by key players is already in motion.
Companies like Alembic Pharma are pursuing backward integration and cost optimization to strengthen supply chain resilience, whiel others are diversifying geographically. Natco Pharma, for instance, acquired a 35.75 percent stake in South Africa’s Adcock Ingram for Rs 2,000 crore to reduce US dependence. Lupin is expanding its European footprint, and announced a €190 million acquisition of VISUfarma, a specialty ophthalmology firm with operations across the EU and UK. Indian firms are also investing in US manufacturing assets, with Aurobindo Pharma acquiring Lannett Company for $250 million while Syngene International has bought its first US biologics facility for $36.5 million. Cohance Life Sciences has also made similar moves.
Consulting firms such as Oliver Wyman are helping Indian pharma clients prepare for worst-case scenarios, with their playbook including China+1 sourcing, digital analytics, and M&A opportunities.
“Clearly, we want to diversify,” said Rajeev Nannapaneni, Vice Chairman and CEO of Natco Pharma. “We want to have a good geographical spread and strengthen our core business.”
"Indian pharma companies are capable enough to make necessary changes to their business model to minimize the impact," Khadayate of GlobalData said.
The Road Ahead
Analysts agree that product innovation, diversification of manufacturing and backward integration of pharma supply chains are key to long-term sustainability.
“This move (import tariff) underscores the need for Indian pharma companies to diversify markets and innovate in complex generics and biosimilars to stay resilient in a changing global trade landscape,” said Deepak Jotwani, VP & Sector Head, ICRA.
“To navigate this, Indian firms will need to localize parts of their trial support in the US, consider licensing IP to American partners, and diversify filings toward Europe and ASEAN,” said Suketu Thanawala, Partner, StraCon Business Advisory.
“On the policy front, India must push for tariff carve-outs in trade negotiations, secure IP-safe zones in future free trade agreements (FTAs) and extend tax incentives to accelerate domestic innovation. Unless addressed quickly, this tariff could mark the beginning of a deeper decoupling,” added Thanawala.
There are some industry proposals as well to bring down tariffs on US pharmaceutical imports to zero, in a bid to placate Washington and preserve access to the world’s largest drug market.
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