How India will be impacted by 100% tariff on branded drugs?
US President Donald Trump announced new tariffs on Thursday. He said that starting October 1, 2025, there will be a 100% tax on branded drugs made outside the US.
While generic medicines, which are mainly exported from India, are not included in this tax, the decision could still disrupt the $20 billion industry that provides nearly half of the generics used in the US.
India sells mainly generic drugs to America
This announcement has created concerns in the global pharmaceutical industry. India sells mainly generic drugs to America, so it probably won't feel the effects right away. However, there is also a chance that future taxes could apply to generic drugs, which could lead to bigger problems later on.
India is the largest supplier of generics to the US. Indian companies export about $20 billion worth of generics to the US each year, with major exporters including Sun Pharma, Dr. Reddy’s Laboratories, Cipla, Lupin, and Aurobindo Pharma.
When Trump previously imposed a 50% tax on Indian imports, the Global Trade Research Initiative (GTRI) stated that these tariffs would raise the prices of both generic and branded drugs.
North America is a major source of revenue for Indian pharma companies
According to GTRI, Indian companies selling large quantities of pharmaceuticals to the US operate on very low margins. North America is a major source of revenue for Indian pharmaceutical companies.
This region accounts for the majority of these companies' revenues and contributes to a third of their profits.
Half of the generic drugs sold in the US come from India alone
Nearly half of the generic drugs sold in the US come from India alone. Generic drugs are imported into the US from countries like India, and nine out of ten prescriptions are for these drugs.
This saves the US billions of dollars in healthcare costs. According to a study by the consulting firm IQVIA, in 2022, Indian generic drugs could result in savings of $219 billion.
Some Indian generic drug companies could exit US market
Experts say that without a trade agreement, Donald Trump's tariffs could force some Indian generic drug companies to exit the market.
This could further worsen the existing drug shortage in America.