Select pharma shares fall between 4-7% as Trump's tariffs on branded drugs sour sentiment

Indian generics supply 45 percent of U.S. demand.

Shares of key pharma companies fell sharply, slipping between 4-7 percent September 26, as investors trimmed positions over uncertainty after US President Trump announced a 100 percent tariff on imports of branded or patented drugs from October 1, unless the manufacturer is setting up a production facility.

“Starting October 1st, 2025, we will be imposing a 100 percent Tariff on any branded or patented Pharmaceutical Product, unless a Company IS BUILDING their Pharmaceutical Manufacturing Plant in America,” Trump wrote on Truth Social. He added, “There will, therefore, be no Tariff on these pharmaceutical products if construction has started."

At close, the Nifty Pharma index was lower by 2.14 percent and 5.2 percent for the week, with most constituents in the red. Laurus Labs, Biocon, and Zydus Life were the top losers on Friday, slipping between 4-7 percent. Sun Pharma saw the largest volume among drugmakers with a fall of 2.6 percent.

However, generic drug formulations have been exempted from the tariffs. This is likely to significantly boost domestic pharma players, that depend on exports of generic drug formulations to the U.S. for a large portion of their sales. Companies like Dr Reddy's, Sun Pharma, Lupin, and Aurobindo have long benefitted from the US market’s demand for lower-cost generics.

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. Therefore, if tariffs were imposed on generics and if Indian pharmaceutical players were unable to hike their costs or move production to the U.S., it could result in a shutdown of production.

Experts believe that if any duties on any duties on generics are imposed, they are unlikely to stick, as they would push U.S. healthcare costs sharply higher. India currently supplies around 45 percent of U.S. generics and 10-15 percent of biosimilars by volume, according to Kotak Institutional Equities. The U.S. healthcare system sees major savings benefits as a result of Indian generics.

"While we do not have major share in patented drug exports, things are not looking good for market given the string of negative newsflow around export-oriented sectors," Reuters quoted Pankaj Pandey, head of retail research at ICICI Securities.

Further, Sun Pharma & Biocon are key branded players in U.S. Biocon just commissioned a new U.S. plant this month, safely outside tariff risk while Sun Pharma may have an impact.

Also Read | Trump announces 100% tariff on imported pharmaceuticals

Earlier this year, 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.

Karoline Leavitt, White House Press Secretary also hinted at moving pharmaceutical manufacturing back to the US. “We have outsourced our critical supplies chains in our countries. Do we want out life saving drugs and medicine and chips to be made in China or here in United States of America? This is a common sense policy,” said Leavitt.

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