What it means for India
Industry representatives noted that even if generic drug manufacturing were established domestically in the US, active pharmaceutical ingredients (APIs) would still need to be imported, as America lacks sufficient API manufacturing capacity. For these reasons, a full-scale reshoring of the generic pharmaceutical ecosystem to the US is unlikely to be achieved within two years.
They also flagged challenges related to labour costs, compliance burdens and the lack of a supporting ecosystem. “It’s almost impossible to manufacture in the US, as there are no APIs, raw materials or packaging materials being produced there. Labour costs are almost 10-15 times higher, so it may be good to threaten the world, but practically it is almost impossible,” said Vijay Shah, Managing Director of Stallion Laboratories, an exporter to the US.
How did the market react?
Following Trump’s announcement, Indian pharmaceutical stocks fell sharply in early trade, with the Nifty Pharma index declining nearly 2% as investors weighed the potential impact of tariffs that could eventually rise to 200%.Shares of Sun Pharmaceutical Industries, Cipla, Dr Reddy’s Laboratories, Lupin and Aurobindo Pharma were among the biggest losers in early trade. Aurobindo Pharma fell 3.48% to S1,525.50, while Sun Pharma declined 0.95% on the BSE. Cipla and Lupin both dropped about 2.5%, while Dr Reddy’s Laboratories slipped more than 1%. Shares of Zydus Lifesciences, Alkem Laboratories and Torrent Pharmaceuticals also declined by up to 2%.
What could be the bigger challenge for India?
According to GTRI, India’s pharmaceutical industry should prepare for a bigger strategic risk than US tariffs: dependence on China. About 70% of the chemical-based active pharmaceutical ingredients used by Indian drug makers and nearly 90% of biologic inputs are sourced from China. Yet, until the 1990s, India was a leading producer of APIs.
GTRI warned that if Beijing were to restrict API exports while simultaneously expanding sales of higher-value finished medicines, India’s pharmaceutical industry could face serious supply disruptions. India should therefore make rebuilding its API manufacturing base a national priority by expanding domestic production and reducing reliance on a single supplier.
At the same time, Indian pharmaceutical companies should reduce their dependence on the US market by expanding exports to Europe, Latin America, Africa and Asia.
Is this the first time?
This is not the first time the Trump administration has threatened tariffs on pharmaceutical imports. In April this year, Trump announced plans to impose a 100% ad valorem tariff on imports of patented pharmaceuticals and associated pharmaceutical ingredients, citing national security concerns.
