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Tariffs

India's Pharma Exports to US Unlikely to Take Hit from Proposed Tariff

Strategic Insights

— 2 min read

India's pharmaceutical companies, known for manufacturing generic drugs, are unlikely to be significantly affected by US President Donald Trump's proposed 100 percent tariff on branded or patented pharmaceutical imports. However, experts have cautioned against making any assumptions, citing uncertainty in the definition of "branded" products under the new tariff policy. Indian pharma exports to the US, valued at $9.8 billion, have included a range of products such as antibiotics, vitamins, and anti-diabetic and cardiovascular drugs, mostly in the form of off-patent formulations.

Key Takeaways:

  • Indian pharma companies focus on generic drugs, which are unlikely to be impacted by the proposed tariff.
  • The executive order refers to patented or branded products, excluding generic medicines.
  • Many Indian pharma outfits specialize in manufacturing off-patent products by reverse engineering and selling them at a fraction of their branded counterparts' prices.
  • The definition of "branded" under the new tariff policy is unclear, posing uncertainty for Indian pharma companies.
  • India exports both branded and unbranded generics to the US, including branded generics, which could be subject to the 100 percent tariff.
  • The US accounts for 39.8 percent of India's total pharma exports, with many companies including Zydus, Dr Reddy's, Lupin, Aurobindo, Sun, Cipla, and Hetero, being impacted by the proposed tariff.
  • Shares of several Indian pharma companies, including Wockhardt, Indoco Remedies, Sun Pharma, and Natco Pharma, fell on Friday due to the news.
  • Some domestic formulation makers have a niche presence in the branded and patented drugs space, but their contribution to the overall pie is limited.
  • Indian pharma companies may be able to pass on the tariff cost to consumers due to the necessary nature of the products.
  • Some Indian pharma companies have manufacturing facilities in the US, which would make them exempt from the new levies.
  • The proposed tariff highlights the need for Indian pharma companies to diversify their export basket and innovate in complex generics and biosimilars.

Statistics:

  • US accounts for 39.8 percent of India's total pharma exports (Source: RBI data).
  • India's pharma exports to the US were valued at $9.8 billion (Source: RBI data).
  • India supplied nearly 47 percent of America's pharmaceutical requirements (Source: Namit Joshi, chairman of pharma export council Pharmexcil).
  • Wockhardt shares crashed by 9.4 percent on Friday (Source: Business Standard).
  • Indoco Remedies, Zydus Lifesciences, Sun Pharma, and Natco Pharma shares fell between 4 and 2 percent on Friday (Source: Business Standard).

Sources:

  • Sudarshan Jain, secretary-general of the Indian Pharmaceutical Association (IPA) - "The executive order refers to patented/ branded products supplied to the US. It is not applicable to generic medicines."
  • Ajay Srivastava, founder of the Global Trade Research Initiative - "The biggest uncertainty for India lies in the definition of 'branded' under the new tariff policy."
  • Anuj Sethi, senior director with Crisil Ratings - "Given the largely non-discretionary nature of these products, the majority of the tariff cost is likely to be passed through (to the consumer)."
  • Deepak Jotwani, vice-president and sector head, corporate ratings, ICRA - "This move by the US underscores the need for Indian pharma companies to diversify markets, and innovate in complex generics and biosimilars."
  • Namit Joshi, chairman of pharma export council Pharmexcil - "India supplied nearly 47 percent of America's pharmaceutical requirements."

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