The Indian pharmaceutical industry has been exempted from immediate tariff increases in the US due to the significance of generic medications for providing affordable healthcare in the country. This decision comes after President Trump implemented a 25% tariff on India related to the purchase of Russian oil, bringing the overall tariff to 50%, which takes effect today, August 27.
According to Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, the Indian pharmaceutical industry has been “excluded” from the US’s immediate tariff enforcement, as generic medications are “crucial” for maintaining affordable healthcare in the US, as reported by ANI.
The sector is currently under review as part of the Section 232 investigation. Generic medications are vital for affordable healthcare in the US and generally operate on very narrow profit margins. Ensuring their steady availability is essential for patient treatment.
Further, Sandeep Pandey, Co-founder at Basav Capital, explained that India’s portion of pharmaceutical imports to the US is roughly 6%, indicating a significant reliance of the American Medicare system on India. Following the implementation of 50% tariffs on August 27, 2025, Indian pharmaceutical exporters began relocating their shipments to Australia, which was anticipated to threaten the stability of the American Medicare system.
Consequently, US President Donald Trump excluded Indian pharmaceuticals from the 50% tariff despite the fact that India accounted for about 40% of its overall pharmaceutical exports in FY25, noted Pandey.
Experts assert that significantly, the US is highly dependent on India for its pharmaceutical supply, with approximately half of its generic medications coming from India. Considering the essential role of healthcare and the already high healthcare expenses in the US, they anticipate that the chances of substantial immediate tariffs on pharmaceuticals are slim.
What if pharma tariffs are not rolled back and remain elevated?
Kotak Institutional Equities stated that if it comes down to it and the pharma tariffs are not reversed, companies might have to reduce their US portfolio significantly (in some cases, completely exiting) after considering other options like passing the increased costs on to patients. With many molecules in the US generics portfolios of Indian firms already bringing in very low margins, companies may have to discontinue selling them in the US, especially given the ongoing pricing declines.
Considering the long time needed to establish a manufacturing facility in the US (policies may change by the time these facilities are operational) and, more crucially, the high cost structure, they do not foresee significant efforts by Indian companies to add manufacturing facilities in the US. In a worst-case scenario where companies substantially cut back on their US generics portfolio, the brokerage believe it could trigger a domino effect as Indian firms may need to adopt a more aggressive approach to pursue growth in India and EU/ROW, potentially leading to price competition.
High-Risk Stocks: Generic Drug Manufacturers and CMOs
According to Jefferies, generic pharmaceutical manufacturers and contract manufacturing organizations (CMOs) might face significant challenges from new tariffs due to fierce pricing competition and their substantial dependence on US sales.
Zydus Lifesciences | 45% of sales from the US | With a significant share of its revenue generated from oral solid dosage (OSD) formulations in the US, Zydus is particularly vulnerable to the potential effects of tariffs.
Dr. Reddy’s Laboratories | 43% of sales from the US | Dr. Reddy’s Laboratories obtains more than 25% of its revenue from injectable medications in the US, which could be subject to pricing pressures.
Gland Pharma | 54% of sales from the US | As a CMO, part of Gland Pharma’s revenue is derived from manufacturing for clients based in the US. An increase in tariffs could directly affect its business operations.
Biocon | 50% of sales from the US | Although its direct exports of generics from India to the US account for less than 30%, any rise in costs could negatively influence its competitive stance.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
