Will the US tariff hike open new doors for Indian pharma and medical devices? Here is what experts say

The proposed tariff hike by the US on Chinese goods, potentially rising to 60%, could alter global trade dynamics, particularly in the pharmaceutical sector, experts have said. While Indian pharmaceutical companies could gain a competitive edge in the US market, the move may disrupt the medical device supply chain and drive-up costs for Indian firms exporting such products. 

Though other markets may face a more moderate tariff increase of 10% to 20%, the focus on Chinese goods aims to strengthen US manufacturers. The pharmaceutical generics sector, heavily reliant on Chinese supply chains, is expected to be most affected. 

Chandrachur Datta, Partner at Vector Consulting Group, said the tariff hike could be both a challenge and an opportunity for Indian pharmaceutical companies. “The increase in tariffs on Chinese products could make Indian alternatives more competitive in the US,” he said. However, he stressed that success would depend on Indian manufacturers ensuring product quality, building resilient supply chains, and adhering to US regulatory standards. “Investing in capacity building, transparency, and flexible supply chains will be crucial,” Datta said. 

The impact on the US market is multifaceted. “Higher costs could exacerbate inflation, especially in vital sectors like pharmaceuticals, where affordability is critical,” Datta said. He also highlighted the US’s reliance on China for active pharmaceutical ingredients (APIs), which could lead to supply disruptions and price hikes. 

For Indian generic manufacturers to remain competitive in the cost-sensitive US market, they will need to address internal inefficiencies. "Misaligned raw material (RM) and packaging material (PM) inventories often result in incomplete production kits and manufacturing delays," Datta said. Bottlenecks in production and lengthy turnaround times in quality control (QC) testing also worsen the situation. "Real-time demand forecasting and automation can help optimise RM and PM inventories, while advanced QC techniques can reduce delays," he said. 

The tariff hike presents an opportunity for Indian pharmaceutical companies to expand their presence in the US, provided they meet the stringent demands for quality, efficiency, and agility. Datta also emphasised that quality should be a core value for Indian pharma firms. “While quality principles are widely understood, the prevalence of Official Action Indicated (OAI) notices, warning letters, and recalls from the US FDA indicates gaps in execution,” he said. To gain a sustainable competitive edge, he recommended embedding quality into daily operations through effective corrective and preventive actions (CAPA) that address root causes. 

Technology and digital transformation are also vital. “Switching from traditional monthly planning cycles to real-time, weekly updates enables companies to respond swiftly to market changes,” Datta said. He pointed out that digital tools can automate routine decisions, freeing resources to focus on high-priority exceptions, improving turnaround times, and enhancing decision-making. "Adopting these technologies will improve operational efficiency and responsiveness to market demands," he said. 

Moreover, the proposed US Biosecure Act is an important factor for the Indian pharmaceutical industry. The Act aims to reduce US biopharmaceutical companies' reliance on Chinese manufacturing by January 1, 2032, providing a seven-year timeline for implementation. 

For Indian Contract Development and Manufacturing Organisations (CDMOs), the Biosecure Act offers an opportunity to strengthen their role as alternative suppliers in the global pharmaceutical market. While Indian CDMOs already play a significant role in generic drug production, the Act could allow them to expand into biologics and other advanced formulations required by the US market. However, the seven-year period also poses challenges, demanding proactive investment in capacity building, compliance with US regulatory standards, and strengthening supply chains. 

"The current sentiment from the President-elect on China suggests that his administration will push forward with the Biosecure Act. While this is positive for Indian CDMOs, the bill allows US companies until 2032 to sever ties with Chinese manufacturers, so its impact will likely be felt over the next few years," said Sallil Kallianpur, a pharmaceutical analyst. 

However, the disruption to the medical device supply chain and the tariff-induced price increases could negatively impact Indian companies exporting medical devices to the U.S. To mitigate these risks, Indian pharmaceutical and medical device companies may need to diversify their supply chains and consider investing in US-based manufacturing, said experts. 

“There is an excellent window of opportunity for Indian medical device manufacturers to exploit the market potential in the United States, now that the issue of lower Chinese product prices is no longer a concern. Indian manufacturers should focus on quality and capacity creation for the quick turnaround execution of orders from the United States,” said Rajiv Nath, Forum Coordinator, Association of Indian Medical Device Industry (AiMeD). 

He said that while Indian exports may spike later this year, the domestic Indian market is already seeing an increase in imports from China, as Chinese manufacturers seek new markets with reduced demand in the United States and attempt to liquidate unsold inventory at discounted prices in other developing countries, including India. 

“The Government of India must take immediate steps to revise the customs duties on the Harmonised System (HS) codes listed by the Department of Pharmaceuticals, where excess manufacturing capacity exists in India. Otherwise, we may face the paradox of being pushed out of our own home market while attempting to enter higher-value export markets,” he said.