The Indian pharmaceutical industry has been exempted from the immediate US tariff hike. The move comes after President Donald Trump raised India-related tariffs to 50 per cent from today, 27 August, citing purchases of Russian oil.
Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, confirmed the exemption. He said the Indian pharmaceutical industry was ‘excluded’ from the enforcement as generic medicines are ‘crucial’ for affordable healthcare in the US.
The sector, however, remains under review as part of the Section 232 investigation.
Indian Generics Dependency
Experts stressed that the US relies heavily on Indian medicines. Nearly half of its generic medications come from India.
Sandeep Pandey, Co-founder at Basav Capital, noted that Indian pharmaceuticals account for 6 per cent of US imports and 40 per cent of India’s overall pharma exports. He warned that exporters had already diverted shipments to Australia after the 50 per cent tariffs took effect.
Analysts said any disruption in the flow of generics could threaten the stability of the American Medicare system.
Considering the high cost of healthcare in the US, they believe substantial immediate tariffs on pharmaceuticals remain unlikely.
Challenges for Indian Companies
Brokerages cautioned that if tariffs eventually extend to pharmaceuticals, the impact could be severe.
Kotak Institutional Equities said firms may be forced to shrink or exit their US portfolios, as many generic products already operate on thin margins.
Passing costs on to patients would be difficult, leaving discontinuation as the only option in some cases.
The brokerage added that building new manufacturing facilities in the US is not viable due to high costs and long timelines. Instead, firms may turn aggressively to India and Europe for growth, sparking price competition.
Jefferies also flagged risks for generic drugmakers and contract manufacturing organisations (CMOs) dependent on US sales.
Among vulnerable companies, Zydus Lifesciences derives 45 per cent of sales from the US.
Dr Reddy’s Laboratories earns 43 per cent of sales there, including over a quarter from injectables. Gland Pharma generates 54 per cent of its revenue from US contracts.
Biocon draws half of its sales from the US, with direct exports of less than 30 per cent, but remains exposed to cost increases.
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