On Truth Social, the President revealed a three-phased tariff structure for generic medicines imported into the United States. Beginning August 1, 2026, generic medicines would be imported in the country with zero tariff for the next two years. After that, the tariff would be hiked to 100 per cent for a year before moving to 200 per cent from the third year onwards.
The policy was unveiled as a means of reshoring the industries by imposing a penalty on those who do not manufacture and set up their manufacturing units during the period provided to them.
The President made it clear that while the previous tariff structure for patented medicines, branded medicines and innovative medicines remained unchanged with the tariff rate being 100 per cent effective from October 1.
The decision has come straight to India’s pharmaceutical exports business, which is by far the largest exporter of generics to the US. Indian pharma companies exported almost $10.5 billion of pharmaceutical products in fiscal year 2025 to the US.
The generics were responsible for most of the exports. The Indian pharma exporters constitute about 40% to 50% of the total generic prescriptions prescribed in the US.
As the first duty rate of 100% on the generics will remain nil for two years, it can be expected that the impact of the decision on India’s pharmaceuticals exporters will be relatively smaller in the short run. But in the long term, if the tariffs are imposed as planned, firms without a solid presence in US manufacturing will lose competitiveness in the US market.
Even with the buffer created by the transition period, however, shares of Indian pharmaceutical companies fell upon the announcement as investors were concerned regarding the exposure of the industry to changing policies of the US concerning imports.
According to market watchers, companies which generate a majority of their revenues from the US market were expected to react sensitively to changes in the tariff policies of the country as they relied heavily on easy access to consumers in the United States.
Generally, analysts have regarded the stock sale-off as being "sentimental" and not because of an impact on their earnings, given that they would continue to enjoy the benefit of zero tariffs until the end of the period.
Market analysts are currently classifying Indian pharmaceutical firms according to their manufacturing exposure in the US:
- Better off: Companies like Aurobindo Pharma and Senores Pharmaceuticals may experience some benefits in the event that the tariffs kick-in since they are currently engaged in some form of manufacturing activity within the US.
- Exposure: The following firms – Dr. Reddy's Laboratories, Lupin, Cipla and Zydus Lifesciences – manufacture products in the US; however, analysts state that the scale is too small to significantly affect their dependence on imports from India, making the tariffs proposal negatively sentimental.
- At more risk: Biocon may face comparatively greater consequences since their generics and biosimilars are manufactured predominantly in India and Malaysia as opposed to the US.
- Neutral position: Firms that manufacture drugs in India with minimal US exposure through this route, namely Alkem Laboratories and Torrent Pharmaceuticals, are likely to be affected neutrally.
Quite a number of the big Indian pharmaceutical brands, including Syngene, Gland Pharma, Biocon, Dr. Reddy's, Zydus, and Aurobindo, generate over 40 percent of their revenues from the US.
One of the common concerns raised by Indian pharma exporters and analysts is the question of whether there would be enough time for building up a sustainable generic manufacturing industry in the US within the two-year duty-free period offered by Trump. There are several structural factors that make executives believe it would be hard to develop a viable generic manufacturing business within the country.
According to the executives, creating an environment in which generic drugs could be manufactured within the US will take no less than five years due to such factors as manufacturing costs, regulatory requirements, and low margins of profit that come with generics.
While this news pertains specifically to generics, earlier in April, there was an executive order by Trump imposing tariffs of up to 100 per cent on pharmaceutical drugs that are imported into the United States, except where drug manufacturers agreed to certain government-sponsored pricing deals or made manufacturing commitments in the US. This tariff went into effect on October 1, and despite Indian companies being largely immune from this tariff due to the fact that they produce mostly generics, it still managed to lead to the sale of stocks of Indian pharma companies.
According to analysts, India is trying to enter into a trade agreement with the United States that could lower its overall tariff levels on Indian goods exported to the US. It is yet to be seen if the trade agreement would include any special provision for Indian pharmaceuticals.
