Trump's 100% tariff targets branded drugs, Indian generics remain unscathed for now

In a significant policy move, US President Donald Trump announced a 100% tariff on imported branded and patented pharmaceutical products, effective Oct 1.

This tariff mandates that companies must have commenced construction of manufacturing facilities within the United States to qualify for exemption. The policy is primarily aimed at encouraging domestic production and reducing reliance on foreign-made drugs.

For India, the immediate impact appears minimal. Indian pharmaceutical companies predominantly export generic drugs to the US, which are not subject to the new tariff.

Experts note that India's generic drug exports remain largely safe, though any future extension of US tariffs to generics could disrupt the sector and investor sentiment.

However, industry leaders express concern over potential long-term risks. The US government is currently conducting an investigation under Section 232 of the US Trade Expansion Act to assess whether pharmaceutical imports pose a threat to national security, with a decision expected early next year.

If the scope of tariffs expands to include complex generics, biosimilars, or active pharmaceutical ingredients (APIs), Indian exporters could face significant challenges.

The announcement has already affected market sentiment. On the day following the tariff announcement, the Nifty Pharma index fell by 2.1%, making it one of the top sectoral losers on the National Stock Exchange. Analysts suggest that while the sell-off may be overstated, the situation warrants close monitoring.

In response to the tariff, Indian pharmaceutical companies are evaluating their strategies. Some, like Sun Pharma and Dr. Reddy’s Laboratories, have existing manufacturing facilities in the US, which may exempt them from the tariff. However, the broader industry remains cautious, awaiting further developments.