Indian pharma set to weather US tariff threat, says Ind-Ra
The US market accounts for roughly 35% of the total revenue for India's leading drug makers, a share that has seen a gradual decline in recent years due to ongoing price erosion and margin pressures.
- Aug 26, 2025,
- Updated Aug 26, 2025 6:17 PM IST
The Indian pharmaceutical industry appears prepared to withstand potential tariffs on its exports to the United States, according to a recent analysis by India Ratings and Research (Ind-Ra). The agency's report highlights a sector fortified by a diversified business model and a sound financial position, factors that are expected to buffer it against future trade challenges.
The US market accounts for roughly 35% of the total revenue for India's leading drug makers, a share that has seen a gradual decline in recent years due to ongoing price erosion and margin pressures. Despite this, Indian generics remain a foundation of the US healthcare system, providing significant cost advantages.
Ind-Ra suggested that any tariffs imposed would likely be passed on to the consumer, a move that would limit the direct effect on Indian firms. While a short-term disruption could occur over a few months as contracts are adjusted, the long-term outlook remains stable.
"Most Indian pharma players have a generic business in the US market, earning thin operating profitability," said Vivek Jain, Director of Corporates at Ind-Ra. "However, Indian companies have a diversified revenue model and a healthy balance sheet. There is no major risk to liquidity in the sector. Furthermore, most companies have sufficient headroom under debt covenants and diversified funding sources. Hence, any material impact from future tariffs to Indian pharma is highly unlikely,” he said.
The potential for tariffs is emerging alongside significant opportunities from US drug pricing reforms that could open new doors for Indian companies. Recent executive orders, such as the Most Favoured Nation policy, aim to lower prescription drug costs by accelerating generic approvals and allowing for direct imports of cheaper drugs.
Indian firms, with their extensive number of ANDA filings and USFDA-approved facilities, are strategically positioned to capitalise on these new policies. Their position is well-established; from FY14 to FY24, they accounted for 35-40% of all ANDA approvals and operated the second-largest number of USFDA-approved facilities outside the US.
Even before the recent tariff discussions, the Indian pharmaceutical industry has been recalibrating its strategy. The growth in the US market has slowed, with a compound annual growth rate of just 4.2% from FY17 to FY25. This, along with regulatory hurdles and channel consolidation, has prompted companies to diversify into higher-margin segments.
Firms are now focusing on branded generics, complex therapies, and API production. The domestic formulation market, which makes up about 41% of total sales, has become a consistent source of growth, offering strong margins and low capital expenditure needs. This domestic base provides a critical balance against the volatility of export markets, the report said.
The Indian pharmaceutical industry appears prepared to withstand potential tariffs on its exports to the United States, according to a recent analysis by India Ratings and Research (Ind-Ra). The agency's report highlights a sector fortified by a diversified business model and a sound financial position, factors that are expected to buffer it against future trade challenges.
The US market accounts for roughly 35% of the total revenue for India's leading drug makers, a share that has seen a gradual decline in recent years due to ongoing price erosion and margin pressures. Despite this, Indian generics remain a foundation of the US healthcare system, providing significant cost advantages.
Ind-Ra suggested that any tariffs imposed would likely be passed on to the consumer, a move that would limit the direct effect on Indian firms. While a short-term disruption could occur over a few months as contracts are adjusted, the long-term outlook remains stable.
"Most Indian pharma players have a generic business in the US market, earning thin operating profitability," said Vivek Jain, Director of Corporates at Ind-Ra. "However, Indian companies have a diversified revenue model and a healthy balance sheet. There is no major risk to liquidity in the sector. Furthermore, most companies have sufficient headroom under debt covenants and diversified funding sources. Hence, any material impact from future tariffs to Indian pharma is highly unlikely,” he said.
The potential for tariffs is emerging alongside significant opportunities from US drug pricing reforms that could open new doors for Indian companies. Recent executive orders, such as the Most Favoured Nation policy, aim to lower prescription drug costs by accelerating generic approvals and allowing for direct imports of cheaper drugs.
Indian firms, with their extensive number of ANDA filings and USFDA-approved facilities, are strategically positioned to capitalise on these new policies. Their position is well-established; from FY14 to FY24, they accounted for 35-40% of all ANDA approvals and operated the second-largest number of USFDA-approved facilities outside the US.
Even before the recent tariff discussions, the Indian pharmaceutical industry has been recalibrating its strategy. The growth in the US market has slowed, with a compound annual growth rate of just 4.2% from FY17 to FY25. This, along with regulatory hurdles and channel consolidation, has prompted companies to diversify into higher-margin segments.
Firms are now focusing on branded generics, complex therapies, and API production. The domestic formulation market, which makes up about 41% of total sales, has become a consistent source of growth, offering strong margins and low capital expenditure needs. This domestic base provides a critical balance against the volatility of export markets, the report said.