US President Donald Trump has announced a sweeping 100 per cent tariff on imports of branded and patented pharmaceutical products, effective October 1. This move, part of his broader ‘America First’ trade agenda, aims to bolster United States’ domestic drug manufacturing by penalising foreign imports.
In his announcement on Truth Social, Trump wrote, “Starting October 1, 2025, we will be imposing a 100 per cent tariff on any branded or patented pharmaceutical product, unless a company is building their pharmaceutical manufacturing plant in America.”
“There will, therefore, be no tariff on these pharmaceutical products if construction has started,” he added.
In April, the Trump administration launched a Section 232 investigation into pharmaceutical imports. This law allows the US to examine whether certain imports pose a threat to national security.
Trump wants to use this as a way to push drug companies to manufacture more medicines in the US, as domestic production has declined sharply over the years. Major firms like Eli Lilly and Johnson & Johnson have already announced new investments in US facilities to stay in Trump’s good books.
While the policy targets branded drugs, it casts a long shadow over India’s USD 50 billion pharmaceutical industry, which supplies a significant portion of the US generic drug market. The uncertainty surrounding the tariff's scope has already sent ripples through Indian markets, raising concerns about potential disruptions in one of the country's most vital export sectors.
The announcement and its immediate impact
President Trump's announcement on Truth Social specified that the 100 per cent tariff would apply to branded or patented pharmaceutical products unless the manufacturing company is actively constructing a plant within the United States. This policy is designed to incentivise foreign pharmaceutical companies to establish domestic production facilities, thereby reducing reliance on imported drugs. However, the announcement has introduced significant uncertainty, especially for Indian pharmaceutical companies, as the definition of "branded or patented" drugs remains unclear.
In response to the tariff announcement, Indian pharmaceutical stocks experienced a sharp decline. Shares of major companies such as Sun Pharmaceutical Industries and Natco Pharma fell by up to 3.4 per cent, reflecting investor apprehension about the potential impact on exports to the US.
India's pharmaceutical export landscape
India, often dubbed the “pharmacy of the world,” counts the United States as its biggest market for pharmaceutical exports. The country’s pharmaceutical market for FY 2023-24 is valued at USD 50 billion with domestic consumption valued at USD 23.5 billion and export valued at USD 26.5 billion.
India is a global leader in the production of generic medicines, supplying nearly 40 per cent of the US market's generic drug needs. In fiscal year 2025, India exported about $10.5 billion worth of pharmaceutical products to the United States, accounting for over a third of its total pharmaceutical exports. These exports include essential medications for chronic diseases, antibiotics, and life-saving oncology drugs. Many Indian pharmaceutical companies, such as Dr Reddy's Laboratories, Aurobindo Pharma, and Zydus Lifesciences, derive a significant portion of their revenue from the US market, with estimates ranging from 30 per cent to 50 per cent.
Potential implications on India
If the tariff is applied broadly, Indian pharmaceutical companies may face increased production costs, which could erode profit margins. Analysts have projected that a 100 per cent tariff could lead to a 5 per cent to 10 per cent decline in earnings for these companies in the short to medium term.
While India has been actively seeking to diversify its pharmaceutical export markets to reduce dependence on the US, such efforts are still in the nascent stages. The US market remains a critical destination for Indian pharmaceutical products, and the sudden imposition of tariffs could disrupt existing supply chains and contracts.
The announcement has also affected the Indian rupee, which is under pressure due to the anticipated decline in export revenues. The rupee could weaken further, potentially reaching new lows against the US dollar, depending on the tariff's final implementation and market reactions.
Some companies may consider increasing domestic manufacturing capabilities to qualify for tariff exemptions. However, establishing new facilities involves significant investment and time, which may not provide immediate relief. Companies will also look into alternative markets and supply chain adjustments to offset potential losses in the US market.
While the immediate impact may be limited to specific segments of the market, the uncertainty surrounding the tariff's scope and the potential for broader application pose substantial challenges.
Potential impact on US healthcare sector
The tariff is likely to have immediate consequences for the US healthcare system. India supplies over 45 per cent of generics and 15 per cent of biosimilars used in the US, helping save the system billions of dollars annually. According to industry estimates, Indian drugs helped the US healthcare system save approximately $219 billion in 2022.
A sudden 100 per cent tariff on branded drugs could lead to price spikes, reduced availability, and potential shortages of essential medicines, especially for hospitals, clinics, and pharmacies heavily reliant on Indian imports. Insurers and patients could face higher out-of-pocket costs, while hospitals may need to scramble for alternative suppliers, disrupting treatment schedules for chronic diseases, oncology patients, and emergency care. In the long term, healthcare providers might accelerate domestic sourcing of drugs, but building sufficient capacity would take years.
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