Indian pharmaceutical exports to US wouldn't be part of the 25% general tariff, effective from August 1, 2025 announced by US President Donald Trump on Wednesday. However the overhang of tariff uncertainty persists on the industry, as Trump has time and again warned of pharma-specific tariffs taken up separately. He has been pushing pharmaceutical companies to manufacture locally.
"The imports of drug formulations and active pharmaceutical ingredients (APIs) are currently excluded from this tariff, consistent with the April 2025 reciprocal tariff framework, where pharmaceuticals were explicitly exempted," said Maitri Sheth, Equity Research Analyst- Pharma Sector, Choice Broking.
"That said, we flag the ongoing Section 232 investigation into pharma imports by the U.S. as a medium-term overhang, with the potential for pharma-specific tariffs to be announced in the coming weeks or months," Sheth said.
Sheth added that in the absence of clarity on the potential rate and scope of such tariffs, it remains difficult to quantify the impact on Indian pharma players at this stage.
"In our view, while the headline risk persists, the structural dependence on Indian pharma and the cost sensitivity of the US healthcare system provide a strong case against aggressive tariff action on the sector," Sheth said.
The US is the biggest market for Indian generics. In 2024, India exported drugs worth around $8.73 billion to the US — about 31 percent of its total pharma exports.
Over 90 percent of all US prescriptions were for generic medicines. Four out of every 10 prescriptions filled in the US were for drugs manufactured by Indian firms. Indian generics saved the US healthcare system $219 billion in 2022 and $1.3 trillion between 2013 and 2022, according to analytics firm IQVIA.
Indian drugmakers provide nearly half of the generic medicines covered by US federal medical insurance Medicare and commercial insurance plans.
Indian drugmakers worried about Trump’s tariffs have been weighing portfolio rejig, and manufacturing realignment to survive US tariffs, as they typically operate on thin EBITDA margins of 5-15 percent on average for their base business. Even a 10 percent reciprocal tariff would have made them unviable if they fail to pass on the increased import duty to the consumers in the US.
Sheth says larger players with manufacturing facilities in the US are likely to remain broadly insulated and others anticipate a limited impact, with plans to pass on incremental costs to customers where feasible.
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