Domestic pharma sector on edge as US tariffs loom

Ahead of the potential reciprocal tariffs by the US, the domestic pharmaceutical industry faced jitters as companies braced for measures that could raise drug prices, disrupt supply chains, and hurt Indian exporters, especially those reliant on the lucrative American market.

Domestic pharma companies could face headwinds once the White House confirms the scope and extent of tariffs on drug imports, possibly tonight or over the next few days.

Analysts suggest that if tariffs are imposed, they might peak at 10% on Indian medicines imported to the US, softening the material impact. Meanwhile, US drug imports to India hover around $800 million, with roughly half facing nil duty, and the rest 7-10%.

Further, the US relies heavily on India for affordable generics, with domestic companies supplying three out of 10 prescriptions. With India’s $9 billion plus US export market at stake, margin compression and export slowdowns loom as key risks, driving stock volatility until full clarity on the policy emerges. Still, the industry’s critical role in supplying nearly half of US generics may buffer the fallout, industry experts told TOI.

For Indian companies, the immediate concern is reduced competitiveness. Companies like Sun Pharma, Dr Reddy’, Cipla, and Aurobindo Pharma, which derive significant revenue from the US, may face margin pressure if tariffs increase export costs.

Deepak Jotwani, VP & sector head, corporate ratings, ICRA Limited says, "Any material imposition of tariffs by the US government on the Indian pharma companies will elevate their cost of sales for the US market, and also impact their competitive positioning to some extent. While the companies will try and pass on this incremental cost through increase in prices, these will have to be partially and jointly borne by these companies and the supply chain in the US market. This in turn could impact the profitability of the Indian pharma companies from the US market, which has remained constrained in the recent past as well due to considerable pricing pressures."

Industry experts warn that since tariffs could increase drug prices for US consumers and trigger shortages, there’s a strong possibility of them being delayed or being struck off the agenda entirely.

D Naveen Kumar associate director, CareEdge Ratings, says, "Although the US remains a buyers’ market for generics, India’s competitive advantage—stemming from cost-efficient production and a high number of regulatory-approved manufacturing facilities—positions it well to withstand potential tariff impositions, causing minimal impact on its pharma sector."

The US pharma import market splits into high-value patented drugs, mostly from Europe (Ireland, Germany, Switzerland), and lower-value generics, led by India, China, and Mexico, where India dominates.