India’s pharma sees limited risk as US slaps 100% tariff on branded and patented drug imports

US President Donald Trump on Thursday announced a 100 per cent tariff on imported branded and patented pharmaceutical drugs, effective October 1, 2025, in a move aimed at promoting domestic manufacturing. The exemption applies only to companies building or already constructing plants in the US.

India’s pharma exports to the US remain largely generic

The move holds significance for India, the single largest exporter of pharmaceuticals to the US, with shipments worth $7.1 billion in FY24. However, patented and branded drugs account for less than 10 per cent of these exports. The bulk of Indian shipments are generics, which form 90 per cent of prescriptions filled in the US, with India supplying nearly 40–45 per cent of that demand. “The executive order refers to patented or branded products supplied to the US. It is not applicable to generic medicines,” Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, said.

Sun Pharma faces the greatest exposure

Among Indian companies, Sun Pharma is the most exposed due to its US patented product portfolio. In FY25, Sun’s global sales of patented products reached USD 1,217 million, of which nearly USD 1.1 billion—85–90 per cent—came from the US, accounting for roughly 17 per cent of total revenue and 8–10 per cent of consolidated earnings. Ilumya, the company’s largest patented product, contributed 56 per cent of these sales, with the drug substance produced by a CDMO partner in South Korea and the finished dose manufactured in Europe.

“While this tariff development is broadly negative for Sun Pharma, we think the impact on earnings depends on multiple factors—the spread of the supply chain, IP location, and use of third-party manufacturers,” said Damayanti Kerai, Analyst, India Healthcare, and Gaurang Sakare, Associate, India Healthcare, HSBC Global Investment Research.

Analysts note that in a worst-case scenario, Sun may have to shift manufacturing to its US plants or CDMO partners with US facilities, or even acquire a new plant—moves that could take 6–24 months and require significant investment.

“Our FY26–28e EPS includes an 8–10 per cent contribution from patented product sales in the US, so depending on what risk mitigation Sun takes, we think 8–10 per cent of FY26e and FY27e earnings are exposed to downside risks,” Kerai and Sakare added. Sun’s substantial cash reserves of over USD 3 billion as of June 2025 could help fund any required US expansion.

Generics cushion Indian pharma

Despite Sun Pharma’s exposure, analysts and industry groups said the overall impact on Indian pharma is limited. India’s generics sector dominates US imports. According to Crisil Ratings, India accounts for nearly half of America’s generic drug supply, which will remain untouched by the tariff.

“Some domestic formulation makers do have a niche presence in the branded and patented drugs segment, but their contribution to overall revenues is modest,” said Anuj Sethi, Senior Director at Crisil Ratings. “Given the essential nature of most products, much of the tariff cost is likely to be passed on. Several Indian companies already have US-based manufacturing facilities, which would exempt them from the tariffs.”

Other analysts emphasised the potential indirect impact on APIs and intermediates supplied to innovator drug firms outside the US. “This move highlights the need for Indian pharma to diversify markets and innovate in complex generics and biosimilars to stay resilient,” said Deepak Jotwani, Vice President and Sector Head, Corporate Ratings, ICRA.

Indirect effects on APIs and the supply chain

Namit Joshi, Chairman of the Pharmaceuticals Export Promotion Council (Pharmexcil), highlighted that Indian firms provide nearly 47 per cent of the US’s pharmaceutical requirements, primarily in generics. He noted that most large Indian drug makers already operate US-based manufacturing or repackaging facilities, with some exploring acquisitions to deepen their local presence.

“The proposed 100 per cent tariff on branded and patented imports is unlikely to have an immediate impact on Indian exports, as the bulk of our contribution lies in simple generics,” Joshi said.

Globally, the US imports around $151 billion worth of pharmaceuticals annually, with Switzerland, Ireland, and Germany among the largest suppliers of branded drugs. By comparison, India ranks much lower in finished branded exports, reinforcing that the direct tariff shock is limited. However, India imports over 65 per cent of its bulk drugs and APIs from China, worth roughly $3.7 billion in FY24. Analysts caution that any supply disruptions or reshuffles triggered by tariffs could raise production costs for domestic firms.

Pharma analyst Salil Kallianpur described the US policy as a “striking” step aimed at re-shoring and penalising foreign production. He said it reflects a broader trend in the global pharmaceutical industry, where American innovation is no longer a monopoly. While the US remains a leader in drug discovery, a complex global ecosystem has emerged, with China producing innovative drug candidates and Europe acting as a hub for high-value exports to the US.

“The tariff is not solely aimed at China,” Kallianpur noted. “European exporters such as Ireland, Switzerland, and Germany, which act as hubs for finished products and packaging, will feel a significant impact. While China’s strength lies in biotech innovation and API supply rather than finished branded drugs, the tariffs will increase costs for Chinese biotech firms exporting to the US.”

For Indian pharma, the immediate shock is smaller, given that most exports to the US are generics. However, any disruption to China-dependent API supply could raise production costs. Kallianpur also linked the move to political strategy and post-COVID supply chain vulnerabilities, with the US government aiming to secure domestic supply and manage strategic risks posed by Chinese biotechs.

In the long term, the new tariffs could fragment global supply chains, increase manufacturing costs, and slow commercialization for some drugs. Kallianpur concluded: “While many countries have promoted local manufacturing for years, the US doing it through tariffs shakes the global system. With these new tariffs, the pharma supply chain is effectively turned into a hostage negotiation.”

Analysts and industry experts agree that while Indian pharma faces limited immediate impact, companies may need to invest in complex generics, biosimilars, and US-based facilities to tackle potential future shifts, even as generics remain the backbone of exports to the US.