Generic medicines exempted from Trump’s 100% pharma tariffs, but uncertainty continues

Trump, however, said that exceptions would be made for pharmaceutical companies that are building manufacturing plants in the US or have broken ground to set up manufacturing plants.

"India, being an exporter of generic drugs, is unlikely to be impacted by this. But perhaps the president’s next target can be generic drugs. This decision may have a sentimental impact on pharmaceutical stocks," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Sun Pharma, India's largest drugmaker, which sells specialty branded drugs in the US, may have some impact.  Specialty sales in the US rose 17.1 percent year-on-year, reaching $1.216 billion, and accounted for 19.7 percent of Sun Pharma’s consolidated revenues, up from 18 percent in FY24.

Shares of Sun Pharma were down 1.79 percent and were trading at Rs 1,598.85 at 10 am on the BSE on September 26, while the BSE healthcare index declined 1.42 percent.

Analysts say that generic medications play a critical role in keeping the costs of US healthcare system under check, giving them some shield against aggressive tariff actions.

The US has, so far, withheld tariffs on generic medications, while levying it 50 percent on most of the other goods, which includes a 25 percent penal tariff for buying Russian oil.

That said, the tariff threat isn't over for pharma companies as the Trump administration ordered investigation under the Section 232, launched by the US Department of Commerce, under the Trade Expansion Act of 1962, to assess whether pharma imports pose a threat to national security. The investigation covers finished drugs, active pharmaceutical ingredients (APIs), key starting materials, and medical countermeasures. A final report is due by December 27, 2025, with a presidential decision expected by March 2026.

Still, the threat of pharma-specific tariffs has prompted Indian firms to consider portfolio realignment and manufacturing shifts. Indian pharmaceutical executives are concerned that tariffs above 10 percent could make high-volume, low-margin products unviable, forcing them to cease supplies.

India exported pharmaceuticals worth $8.73 billion to the US in 2024, accounting for 31 percent of its total pharma exports. Indian generics make up nearly half of all drugs covered by Medicare and commercial insurance plans, saving the US healthcare system $219 billion in 2022 alone.

Lacks clarity

It remains unclear whether Trump’s trade deals with the UK, Europe and Japan offer any protection to brand-name drugs imported to the US or would alter any terms of those deals.

The US signed trade deals with the UK, Europe and Japan that imposes 10-15 percent tariffs on their exports. Nearly all of the biggest multinational drugmakers have a significant manufacturing presence in Europe, from where they exports drugs to the US.

If branded and patented pharmaceuticals are not covered under the deal, it would have an impact not just on those companies, but may potentially squeeze margins for contract development and manufacturing organisations (CDMOs) which rely on them, offering R&D and manufacturing services for these companies.

Analysts say despite Trump's push to boost local manufacturing, it's not easy to shift manufacturing to the US and get the plants rolling out drugs immediately. It can take 3–5 years or more to plan, construct, validate, and get regulatory approval for a new plant. It requires equipment procurement, workforce training, and supply chain setup.