US President Donald Trump announced the imposition of tariffs starting October 1, which include a 100% tariff on branded and patented pharmaceutical products.
The announcement of US tariffs imposing a 100% duty on patented and branded drugs can directly impact the pharmaceutical companies of India. This trade policy, implemented under Section 232 of the Trade Expansion Act, targets branded pharmaceuticals while exempting companies building manufacturing facilities in America.
For India, the world's largest generic drug supplier, these US tariffs present challenges and implications that could reshape the pharmaceutical landscape and accelerate Atmanirbhar Bharat initiatives.
India's Pharmaceutical Exports: Generic Shield Effect
India's pharmaceutical relationship with the US is substantial, with exports worth $9.8 billion, representing 40% of India's total pharma exports. The US remains India's largest pharmaceutical market.
However, India's export profile provides protection against these US tariffs. 90% of Indian pharmaceutical exports to the US consist of off-patent generic medicines, which are exempt from the 100% duty on patented drugs.
India supplies 40-50% of all generic drugs consumed in the United States, earning it the title "Pharmacy of the World." This dominance in the generic segment means the revenue impact may be limited to $1 billion of Indian exports.
Indian pharmaceutical companies like Zydus Lifesciences, Dr. Reddy's Laboratories, Lupin, Aurobindo Pharma, and Sun Pharma together account for 70% of shipments to the US market.
Branded Generics Vulnerability
Despite the generic shield, uncertainties remain regarding "branded generics" – off-patent compounds marketed under proprietary brand names. Products like Crocin, a branded version of paracetamol, could face tariffs if US Customs classifies them as "branded imports."
Sun Pharmaceutical emerges as the most exposed Indian company, with sales from patented drugs in the US market. The company reported global sales of $1.217 billion from patented products in FY25, with 85-90% originating from the US market.
Strategic Implications Under Section 232 and IEEPA
The tariff wave operates under Section 232, providing legal protection than previous measures under the International Emergency Economic Powers Act (IEEPA). By invoking national security concerns under Section 232, the US effectively blocks legal battles and proceedings at the World Trade Organization
The timing is worth noting, as Trump's tariff powers under IEEPA face curtailment following a possible Supreme Court ruling. This uncertainty has accelerated the administration's reliance on Section 232 for implementing protective measures.
Global Trade Dynamics and US Domestic Impact
The 100% tariff on patented drugs poses inflationary threats for American consumers, with price doubling for some patented medicines. This pressure will increase strain on US government health expenditure, Medicare and Medicaid programs.
European nations specializing in high-value branded pharmaceuticals face the impact. Countries like Ireland ($50.35 billion), Switzerland ($19.03 billion), and Germany ($17.24 billion) dominate the US market for premium branded imports and will bear the financial burden.
The uncertainty surrounding tariff regimes diverts capital toward US manufacturing localization instead of R&D activities, undermining global pharmaceutical innovation.
Accelerating Atmanirbhar Bharat in Pharmaceuticals
These US tariffs provide challenge and opportunity for India's Atmanirbhar Bharat strategy in pharmaceuticals. The ₹15,000 crore Production-Linked Incentive (PLI) Scheme for Pharmaceuticals, approved in 2021, gains urgency as a tool for reducing import dependence.
The PLI scheme focuses on three categories: biopharmaceuticals, complex generic drugs, and patented drugs nearing patent expiry. This initiative aims to address India's dependence on imports for over 60% of Active Pharmaceutical Ingredients (APIs) and Key Starting Materials (KSMs), from China.
However, the tariff pressure creates a paradox. Margin compression from trade friction might compel Indian firms to increase procurement of cheaper Chinese APIs to remain competitive, contradicting the PLI scheme's dependency reduction goals.
To counter this challenge, India needs a dual API strategy: supporting PLI applicants with streamlined processes while exploring "friend-shoring" partnerships with allies beyond China for supply chain security.
Market Diversification: Reducing US Dependency
The US market necessitates diversification to reduce India's pharmaceutical export dependence from 35% to below 25% over the next two-three years.
- Europe and UK: Leveraging existing regulatory compliance for growth in generics and biosimilars, in markets like the Netherlands and France.
- Latin America: Markets like Brazil offer growth potential (10-15% CAGR) focusing on therapeutic areas including cancer and infection drugs.
- Africa: Building on established public health agreements for HIV and malaria drugs, Africa presents a $2 billion market potential with 20% growth rates.
- China: Converting the existing raw material trade deficit into relationships by increasing finished goods and vaccine sales.
This diversification strategy requires efforts to improve regulatory alignment in jurisdictions while capitalizing on India's strengths in low-cost, high-volume production.
Strategic Response Framework for India
India's response requires coordinated diplomatic, industrial, and commercial strategies:
- Diplomatic Engagement: The Ministry of External Affairs continues monitoring and examining impacts while pursuing bilateral trade discussions. India possesses negotiating leverage through its intellectual property policy and role as a global generics supplier.
- Industrial Impetus: Accelerating API self-reliance through PLI implementation while maintaining cost advantages that make generalized tariffs likely to be passed on to US consumers.
- Regulatory Compliance: Leveraging India's USFDA-approved plants and enhancing technological integration for entry into global markets.
Conclusion
The imposition of US tariffs on patented drugs represents more than a trade dispute – it signals a shift toward supply chain nationalism and manufacturing security. While India's generic-focused export profile provides protection, the implications demand restructuring.
The challenge accelerates India's Atmanirbhar Bharat imperative while highlighting the need for geographic diversification beyond Western markets. Success requires balancing cost competitiveness with regulatory compliance and technological integration.
As global pharmaceutical trade dynamics realign, India must leverage its "Pharmacy of the World" status while building resilience against protectionist measures. The crisis presents an opportunity to strengthen domestic capabilities while expanding into emerging markets less susceptible to geopolitical trade tensions.
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US Tariffs on Patented Drugs FAQs
1. What is the US tariff rate on patented and branded drugs in 2025?
Ans. 100% tariff rate.
2. Which US law authorizes the new pharmaceutical tariffs?
Ans. Section 232 Trade Expansion Act.
3. When do the US pharmaceutical tariffs take effect?
Ans. October 1, 2025.
4. What percentage of Indian pharma exports to the US are generic drugs?
Ans. 90% are generic medicines.
5. Which countries face the biggest impact from US pharma tariffs?
Ireland, Switzerland, and Germany.