New Delhi: US President Donald Trump’s threat to impose reciprocal import tariffs on Indian pharmaceutical products has sparked panic among drugmakers in the country. With annual drug and vaccine exports worth over $9 billion to the US on the line, these companies are bracing for impact, reviewing their business strategies to be able to absorb the duty shock, ThePrint has learnt.
Multiple Indian pharma players that earn a major chunk of their revenue by exporting to the US are now lobbying for a complete duty waiver on drugs coming from the US. According to top government and industry sources, chief executives of top pharma companies and lobby group representatives have held a series of meetings with government functionaries over the past few weeks.
An official in the Department of Pharmaceuticals, which comes under the Union Ministry of Chemicals and Fertilisers, told ThePrint, “They want the government to immediately announce a complete import duty waiver on drugs coming from the US to India, so that the Trump administration does not go ahead with its plan to impose reciprocal tariff, which will be a big blow to many companies.”
Currently, there is no import duty on drugs supplied by India to the US, but India levies up to 10 percent duty on most drugs imported from there—such as teclistamab used in treatment of certain blood cancers—barring some that treat malignancies and rare diseases.
It is estimated that India imports pharmaceutical products worth around $800 million from the US annually, with the government earning less than $50 million in revenue via duty on these drugs. In contrast, India’s drug and pharmaceutical exports to the US stood at $9.7 billion in FY 2023-24.
A large chunk of these medicines exported to the US are generics—cheaper copies of brand-name drugs created after patents expire. The US is heavily reliant on India for generic medicines, which means that while reciprocal tariffs will likely hit Indian pharma players hard, it will also heavily impact the American healthcare system, leading to increased costs, and potential inflation.
Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance (IPA), a network of top 23 Indian drugmakers, told ThePrint, “The Indian government waiving import duty on drugs being imported from the US, which are patented, innovative medicines, will help us immensely, and release the pressure that we are feeling currently.”
ThePrint reached Pharmaceuticals Secretary Amit Agarwal for a comment via calls. This report will be updated, if and when a response is received.
India king of global generics market
India is the world’s largest supplier of generic drugs, with a 20 percent share in the global supply in terms of volume, as of FY 2023-24. According to government data, its pharmaceutical exports stood at $27.85 billion in FY 2023-24, and reached nearly 200 countries, ranging from the richest to the poorest.
For a number of big Indian players in the pharmaceutical space, the lion’s share of their businesses—as high as over 50 percent in some cases—comes from the US, making the country the most important market for these firms, even ahead of India. Other key markets for Indian drugs are Belgium, South Africa, the UK and Brazil.
According to industry estimates, 70-80 percent of the total pharmaceutical supplies from India to the US are low-value high-volume generics. Only about 20-30 percent supplies comprise complex or specialised generics—the “me-too” medicines that are comparatively more difficult to produce and cost more.
According to industry insiders, over 65 percent of the annual sales of Hyderabad-based Granules India—which mainly supplies low-value and commonly used drugs, like paracetamol, ibuprofen and metformin—come from the US. Similar is the case for other big players—Gland Pharma (54 percent), Aurobindo (48), Zydus (47), Dr Reddy’s (47 percent) and Sun Pharma (32 percent).
While IPA members control the majority of the supply pipeline in the US, there are nearly 300 companies in India which supply medicines to the US and rely heavily on distributing partners for taking their drugs to the patients across the country.
Companies like Dr Reddy’s, Zydus and Aurobindo that supply high-volume, low-value and thin-margin products in therapeutic areas such as neurology, cardiovascular and dermatology among others, may be most impacted by the tariffs, Shrikant Akolkar, vice-president and pharma analyst at Nuvama Institutional Equities, an institutional brokerage house, told ThePrint. “For these companies, my understanding is that the profit margin on most products sold in the US is just about 10-15 percent, and therefore, any additional tariff will be very detrimental.”
On the other hand, some others—Sun Pharma, Lupin, Cipla—are likely to absorb the potential impact of the tariffs due to their specialised, high-margin portfolios involving products as injectables, which also brings them nearly 30-35 percent profits.
If tariffs come, who will be India’s competition?
Apart from India, major suppliers of generic drugs to the US include Israel, Germany, Belgium and Switzerland. Vietnam also supplies small amounts of generics, but since India is the largest contributor—nearly half of all generics used in the US—trade experts do not see any other country filling the gap.
“Even if a major push is given to shift the manufacturing base to the US or any other country, it will take at least two-three years to build the uninterrupted supply required to balance the damage the immediate move may cause,” a senior member of the pharmaceutical committee at the Federation of Indian Chambers of Commerce & Industry (FICCI) told ThePrint.
Viranchi Shah, former president of the Indian Drug Manufacturers’ Association (IDMA)—the largest network of generic drugmakers in the country—and director of Ahmedabad-based Saga Lifesciences, agreed. “I do not see any other country immediately filling in the role being played by Indian drugmakers in making pharma products affordable in the US.”
Also Read: Tariff cloud looming, US study links Indian generic drugs with 54% higher severe adverse events
How US healthcare system works
Healthcare in the US is largely insurance-driven. While in countries like India, insurance covers only hospitalisation costs, in the US, it also covers prescription drugs, industry veterans explained. The insurance, which covers over 90 percent of the US population, can be publicly funded, employer sponsored or private.
Generic drugs supplied by countries like India are mainly procured by three American distribution companies—Cardinal Health, McKesson and Cencora. These companies then pass on the drugs to retailer companies, mainly VS Health, Cigna, OptumRx, Humana Pharmacy Solutions.
These companies, acting as intermediaries for insurance firms, pharmacies and drug manufacturers, are part of the Pharmacy Benefit Management (PBM) industry, which ensures that drugs are procured at the lowest possible price from the manufacturers, but are sold at nearly 5-10 times higher prices by the time they reach consumers.
Since most insurances in the US have a co-payment system, the patients also need to pay 10-30 percent of a drug’s price, while the insurer pays the rest.
“This system ensures that a medicine bought at $1, for example, from the manufacturer costs about $10 by the time it reaches a patient. Since a patient may be a co-payee at 1:9 arrangement, they will need to pay $1 for accessing the medicine,” explained a senior executive of a Gujarat-based drugmaker, who did not wish to be named. “This way, while the entire actual cost of the medicine is borne by the patient themselves, the PBM makes it look like the insurer is paying for the drug’s cost.”
There have been widespread concerns about the business practices of the PBMs over the opaque pricing, and its impact on patient access and affordability. This January, a report by the US Federal Trade Commission said the country’s three major PBMs marked up prices at their pharmacies by hundreds or thousands of percent, netting them $7.3 billion in revenue in excess of the acquisition costs of the drugs, including for conditions like cancer.
America’s dependence on Indian drugs
Most companies highlight that the Indian pharmaceutical industry plays a vital role in ensuring access to affordable and standard quality medicines in the US, supplying nearly 47 percent of the generic medicines for American patients, and contributing significantly to the country’s healthcare savings, despite concerns over their quality that crop up time to time.
According to a report titled ‘US-India Medicine Partnership: India’s contribution to the US healthcare system’, released by market research firm IQVIA last year, medicines from Indian companies provided $219 billion in savings to the US healthcare system in 2022, and a total of $1.3 trillion between 2013 and 2022.
Of the top 10 therapy areas by prescription volume, Indian companies supplied more than half of the prescriptions for five—hypertension, mental health, lipid regulation, nervous system disorders and ulcers.
In 2022, 23 Indian companies supplied 60 percent of all hypertension drug prescriptions in the US, resulting in $25.3 billion in savings due to their affordability. Similar trends are observed in case of mental health drugs as well, the IQVIA report said.
Indian companies supply 43 percent of traditional diabetes medicines, like metformin and sulfonylureas, which are almost entirely dispensed as generics.
The US also relies heavily on India for the supply of crucial chemotherapy medicines. The Department of Pharmaceuticals official quoted earlier pointed out that in June last year, when the US FDA ordered the halt of the import of life-saving cancer drugs by Gujarat-based Intas Pharmaceuticals, following good manufacturing practices (GMP) violation issues, there was an acute shortage of the drug in every part of the US for months.
Drugmakers hope that these considerations will be taken into account to arrive at a final decision related to tariffs on pharma products. Any imposition of reciprocal tariffs will put a huge burden on the American healthcare system and patients because the companies will be forced to pass on the additional burden to patients, said a senior executive of a Hyderabad-based company, who attended a meeting at the commerce ministry last week.
Akolkar pointed out that the purported move is likely to interrupt the global pharmaceutical supply chain. A key reason why the US started depending heavily on India and China for supply of critical life-saving medicines and active pharmaceutical products (APIs) was to lower the cost of these medicines for patients, which could be a problem now with the tariff talks, he said.
Also Read: Indian pharmas improved USFDA compliance, but cases of contamination grew 2014-2024—IPA report
Reviewing business strategies
Indian drugmakers are also having discussions internally to draw strategies to deal with the fallout if the import duty is announced.
A big promise that Trump had made in the run-up to the US presidential polls last year was to use tariffs punitively to discourage imports and indirectly encourage companies to invest in manufacturing in the US. Mumbai-based pharma analyst Salil Kallianpur told ThePrint that from 2011 to 2020, generic manufacturing in India increased from 21 to 51 percent, while US manufacturing decreased from 52 to 35 percent.
The move may push some Indian drugmakers to look at three options—shifting businesses outside the US to more lucrative markets, changing product portfolios or shifting manufacturing to the US—said Akolkar.
A deputy general manager with a Mumbai-based pharmaceutical company said India produces generics at a 30-40 percent lower cost than that in the US. “If the companies are forced to shift to the US for manufacturing, it will raise the cost of medicines and will be counterproductive for the American healthcare system. But if that is what the Trump administration is looking at, maybe some companies which see business sense in it can do it, though it will take at least two-three years.”
Serendipitous beneficiaries
There is another section that appears anticipative about chances of the Indian government offering an import duty waiver on drugs from the US—American pharma companies with business interests in India.
ThePrint reached Anil Matai, director general of Organisation of Pharmaceutical Producers of India (OPPI)—a network of global drugmakers—for comment on phone but did not get a response. But sources in the lobby group said a blanket waiver will be in the interest of these companies and patients.
“These are new innovative therapies, and can make a difference of life for many patients, but remain out of reach for most of the Indian patients in need due to affordability issues,” said an OPPI executive. “A price concession on these drugs will help both patients and drugmakers.”
For instance, patients currently need to pay import duty on drugs like Abemaciclib—a critical medicine used in treating particularly aggressive types of breast cancer—by American pharmaceutical major Eli Lilly and Company, which costs about Rs 49,000-95,000 per month (in two different dosage strengths).
Another drug, Amivantamab, by Janssen Pharmaceuticals, used against lung cancer, can cost up to Rs 98,000 per month, said Chetali Rao, a legal researcher with Third World Network, an international non-profit that works on issues related to development, developing countries and North-South affairs. “There are a number of drugs like these, which are manufactured in the US and imported by patients here.”
(Edited by Mannat Chugh)
Also Read: India has a substandard, fake drugs problem. Lack of recall law, scrutiny is making matters worse