Nifty Pharma crashes 3% as tariff fears spook investors; Biocon, IPCA Labs settle 6% lower

India’s pharma exports to U.S. were largely generic formulations, and tariffs would make drug access to American citizens more expensive.

The pharmaceutical index Nifty Pharma closed with sharp cuts on April 7, as investors cut their holdings to domestic pharma players following the threats of reciprocal tariffs from the U.S.

At 3.30 pm, Nifty Pharma closed lower by 2.75 percent at 19,995.50 On the index, export-orient players such as Biocon and IPCA Labs fell by 6 percent, dragging the pack. All constituents closed in the red.

The losses echoed the negative sentiment across global markets, that have crashed sharply, diving over 10 percent as U.S. President Donald Trump reiterated his stance on the broad-based tariffs. On a post on his social media platform, Truth Social, Trump termed the tariffs as a ‘very beautiful thing.’

He also spoke about the ‘massive financial deficits’ with countries such as China and as well as the European Union. Trump said that tariffs are the ‘only way’ to fix this problem.

India’s pharma exports to the U.S. are largely generic formulations, and the imposition of tariffs would make drug access to American citizens more expensive. "India-based generic companies benefit from low cost of manufacturing, availability of required talent in India and thus do not intend to make material investments in the US, even in the eventuality of higher tariffs," noted Nomura.

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On April 3, pharma stocks escaped the brunt of the selling, as the sector was exempt from U.S. President Donald Trump's reciprocal tariffs. However, the following day, US President Donald Trump said his administration is looking at possible tariffs on pharmaceuticals.

“The pharma is going to be starting to come in at, I think, a level that you haven’t really seen before,” President Trump said speaking to reporters aboard Air Force One.

The caused a sharp rout in the pharma index, as the pharma index settled lower by 4 percent, while constituents such as Aurobindo Pharma, Lupin, and IPCA Labs sank over six percent on April 4, 2025.

However, international brokerage CLSA allayed concerns, stating that the risk of high tariffs on pharma products is low. Despite this, CLSA believes that the risk is lower than the markets are currently pricing in, as U.S. healthcare system sees major savings benefits as a result of Indian generics. Indian companies contributed 46 percent of generic savings to the U.S. healthcare system.

Further, the Hong Kong-based brokerage believes that even if tariffs are imposed, Indian drug makers are likely to pass on the costs, given their dominant market share.

However, if these Indian pharmaceutical players are unable to hike their costs, it may result in a shutdown of production. Generic products can command only very lower margins, therefore, if they are unable to increase prices, they could stop manufacturing which would result indrug shortages in the U.S.

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