Trump's generic drug tariff plan: Who gains, who faces pressure and what's next?

Days after US President Donald Trump proposed steep tariffs on imported generic medicines, Indian drugmakers and analysts say companies are unlikely to rush manufacturing to the US. Instead, they are expected to review product portfolios, expand capacity selectively and step up efforts to diversify exports.

Under Trump's proposal, imported generic medicines will continue to face zero tariffs for two years beginning August 1, 2026. From August 1, 2028, imports would face a 100% tariff for one year, with the rate rising to 200% from August 1, 2029. Trump said the move is aimed at encouraging pharmaceutical companies to manufacture generic medicines in the US, although details of how the policy will be implemented are yet to be announced.

The proposal has also turned industry attention to which companies are better placed to absorb higher costs if the duties are eventually implemented. Companies with manufacturing facilities in the US, a diversified export base and a larger share of specialty products are expected to be less affected than firms with greater dependence on low-margin generic medicines.

Pharmexcil Chairman Namit Joshi said the transition period gives the industry time to strengthen its presence in other markets instead of depending on a single geography.

"The zero-tariff window through 2028 gives the industry a meaningful runway, and we see this as time we can use productively — to keep strengthening our position across multiple markets rather than relying on any single one," Joshi said.

He said exports to Europe during April-May FY27 rose 21% over the same period last year and now account for over 20% of India's pharmaceutical exports. Exports to Latin America grew 23.96% during the same period and now contribute nearly 8% of exports.

"We've been diversifying for a while now. Generics remain a segment where India brings deep expertise and scale, supplying a large share of the world's affordable medicines, and we expect that strength to continue," he said.

Joshi said the announcement also provides greater clarity for the ongoing India-US trade negotiations, where pharmaceuticals remain an important area of discussion.

"We see the announcement as an opportunity to build even more clarity into the FTA conversations ahead. Pharma has always been an important chapter in those discussions, and a defined tariff timeline gives both sides a clear framework to work within as they shape a strong, durable agreement, including any specific provisions for generics," he added.

Analysts, however, do not expect companies to shift production to the US on a large scale.

"Existing on-shore capacities of most large Indian manufacturers are not sufficient to absorb the load completely, so companies will need a clear framework to decide which products should be manufactured in such capacities," said Chandrachur Datta, Partner at Vector Consulting Group.

According to Datta, companies are likely to review their manufacturing footprint and product portfolio, with greater focus on higher-value products where the economics remain favourable. Some low-margin, high-volume products could gradually be dropped as lower-cost suppliers are established.

He said building factories alone would not solve the problem. "Replicating the supply chain ecosystem involves much more than setting up manufacturing capacity. While establishing overseas facilities is relatively easier, creating local supply chains for APIs, excipients and packaging materials currently sourced domestically will be challenging and will add to costs," Datta said.

He added that if reliable lower-cost alternatives are not established, a large part of the additional tariff cost is likely to be passed on to consumers.

For now, industry executives say companies are likely to expand manufacturing selectively, continue building exports outside the US and wait for greater clarity on the tariff framework and the outcome of India-US trade talks before taking any major investment decisions.