Shares of pharmaceutical companies traded flat on Wednesday, July 16, after U.S. President Donald Trump indicated that pharma tariffs were likely to be imposed towards the end of the month.
“Probably at the end of the month, and we’re going to start off with a low tariff and give the pharmaceutical companies a year or so to build, and then we’re going to make it a very high tariff,” Trump said.
At 9.20 a.m., the Nifty Pharma index was flat. Biocon, Natco Pharma and IPCA Labs led the gains, rising up to 3.5 percent, while Divi's Labs and Cipla dragged the pack.
Earlier this month, Trump also indicated that the levies on pharma players could be as high as 200 percent. The President's aim is to give companies time to onshore manufacturing, following which, those that failed to do so would face strong tariffs.
"We're going to give people about a year, a year and a half to come in, and after that, they're going to be tariffed," Trump said.
This is likely to significantly impact domestic pharma players, that depend on exports of generic drug formulations to the U.S. for a large portion of their sales.
According to experts, if these Indian pharmaceutical players are unable to hike their costs or move production to the U.S., 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 in drug shortages across the U.S.
In April, when President Trump first threated to impose tariffs on pharma imports, he said they would be at "never seen before levels." So far in July, the Nifty Pharma index has gained around 2.5 percent. So far this year, the index has sunk around 3.4 percent in trade amid concerns on high tariffs.
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