India is considered the ‘pharmacy of the world’ as the country exports pharmaceutical products to around 200 countries in the world. The US is the largest importer of Indian drugs especially generic medicines.
India exported approximately USD 12.24 billion worth of medicines to the United States in 2024, making it the top foreign supplier. In 2023, India’s drug exports to the United States stood at approximately USD 9.08 billion. Major drug exporters from India are Sun Pharma, Dr. Reddy’s Laboratories, Cipla, Lupin, Aurobindo Pharma which export patented, generics, branded generics, active pharmaceutical ingredients in various categories such as cardiology, neurology, dermatology, immunology, CNS, antibiotics, antivirals, lifestyle disease drugs, injectables, etc.
Out of these Sun Pharma is the largest exporter with many US FDA-approved facilities. US president Donald Trump’s slapping by 100 per cent tariff from October 1, 2025 on pharmaceuticals especially branded and patented drugs from India, could have major repercussions for Indian drug makers. The US is the primary market for India comprising about 35 per cent exports. This move is an indication for Indian pharmaceutical companies to start manufacturing or build plants in the United States to generate more employment in the United States as the United States want to reduce dependency on foreign supply chain. This move by Donald Trump is to make America rich again by boosting domestic production. Nearly half of the pharmaceutical exports by India is off-patent generic drugs which still is out of this ambit but in future it is difficult to predict that scenario will be same.
The total exports to North America by India was Rs. 77,307 crore in FY 2024 by major players Sun Pharma (Rs. 15,349 crore) followed by Aurobindo (Rs. 13, 866 crore) followed by Dr. Reddy’s (Rs. 12,980 crore) followed by Zydus Life science (Rs. 8,685 crore) followed by Cipla (Rs. 7,500 crore). This is estimated to Rs. 85,011 crore in FY 2025. India’s 1/3rd of pharma exports revenue was by the United States in 2024 which stood at USD 30 billion. Country’s largest drug maker Sun Pharma’s total sale revenue can be estimated at USD 1.1 billion in 2025, in this patented drugs have 17 per cent of total revenue. Though Sun pharma, Cipla, Dr. Reddy’s Laboratories, Alkem lab, Aurobindo, Biocon, Piramal Pharma, IPCA lab, Zydus already they have their manufacturing base in United States but that may be insufficient to fulfill current requirements. If companies want to avert risk, they need to re-calibrate their strategies either to diversify export market or shift to contract manufacturing in United States.
This decision can prove a bitter pill which lead impact on share prices of Indian pharma majors. Now the definition of branded or patented drugs are being explored by experts. Speciality drugs, niche or complex generic drugs, peptides, biosimilars, bulk drugs, active pharmaceutical ingredients are finding more ways in next-gen opportunities.
Both countries can be loser
Indian exporters will be left with not much choices either they need to invest hefty in US or have India-US joint ventures in pharma. Companies in India can face reduced competitiveness, less margins or even loss of market share. They need to explore further vertical integration like producing more active pharmaceutical ingredients, semi-finished formulation etc. to reduce import dependence. On the other hand, US lacks domestic capacity which can risks health of people due to shortage of drugs, complex biologics and vaccines, shocks for importers due to huge pressure to on-shore manufacturing can disrupt supply chain which take years to compensate. Manufacturing scale-up for biologics, combination products or medical device can take even more several years and large investments. Patients will be left with very few choices either to opt hefty treatments in their own country or look for alternate country for cheaper treatment options. It is bit unpredictable whether tariffs are only for finished products or intermediate or semi-finished goods/active pharmaceutical ingredients. Technically tariffs on excepients, intermediate or semi-finished formulation/active pharmaceutical ingredients fall under separate tariff lines which come under HS codes so must be treated differently. Indirect tariff costs can still be mystery.
Both countries can gain
Though right now tariffs target branded/patented finished drugs where Investigational New Drug application (IND) and New Drug Application (NDA) filings from India may be meagre but not low-cost generic drugs. Products under 505(b)(1) and 505(b)(2) are considered branded/patented drugs so they would also face 100 per cent import duty. Big innovators under 505(b)(1) still likely to proceed with on-shore production because of high revenue potential. 505(b)(2) will be at more risk as smaller sponsors may cancel or delay projects if tariffs make launches unviable unless they invest in US based manufacturing. Abbreviated New Drug Application (ANDA) filings can fast-track US FDA approvals, push biosimilar drugs and generic drugs import to the United States aggressively. The US companies with substantial manufacturing capacity may gain due to price competitiveness and exemptions. Domestic suppliers of on-patent products can also benefit. Strategic partnership, joint ventures, technology transfers and contract manufacturing can boost supply chain. Partial manufacturing can be done in India and finished goods or packaging in the United States to meet exemption criteria. To avoid tariffs, major firms such as Sun Pharma, Dr. Reddy’s, Lupin may invest in the US plants and can expand their onshore presence further increasing credibility and market access.
US president Donald Trump’s “America First” narrative could not spare even pharmaceutical sector which will put pressure on Indian firms to invest in United States, will encourage the US-based innovation and manufacturing ecosystems, their domestic supply chain security will be prioritised. Hospitals, insurers can shift costs to patients/taxpayers as medicare face higher procurement costs. New launches under (505(b)(1)/ 505(b)(2) can be delayed. This will be an alarming call for restructuring of global supply chains. Now Indian pharma companies need to find opportunities in pain or crisis with dialogues or collaborate with US contract manufacturing organisations for final packaging to share cost burden or focus on difficult-to-make generic drugs or orphan drugs where competition is low or finding new demographies for continuous benefits.
Indian pharmaceutical companies are already exporting generic drugs with very less margin, it will become challenging for smaller exporters to sustain with shrinked profit margin. These tariffs can be wake up call for diversification of markets, more focus on research and development (R&D), explore US production, joint ventures, contract manufacturing, and secure supply chain.
(Author is with Institute of Management Sciences & Research) |