Eliminate import duty on drugs from US: Pharma exporters to Centre

The exporters' worry is understandable as the US is the largest export market for Indian pharma accounting for 31.35 percent of India's overall pharma exports worth $27.8 bn

Amid concerns that the United States (US) may impose reciprocal tariffs on pharmaceutical exports from India, the local industry has urged the government to consider eliminating duties on drug imports from the US.

 

Analysts say this move would effectively prevent Washington from imposing reciprocal tariffs.

 

Senior government officials did not wish to comment on the issue.

 

The exporters’ worry is understandable as the US is the largest export market for Indian pharma, accounting for 31.35 per cent of India’s pharma exports worth $27.8 billion.

 

The UK accounts for only 2.82 per cent of our pharma exports, while South Africa accounts for 2.58 per cent, Belgium 2.06 per cent, and Russia 1.86 per cent. The European Union accounts for 20.05 per cent of pharma exports from India.

 

It is learnt that a leading industry body has made a representation to the government in this regard that India considers making basic customs duty on imports of pharma formulations from the US, which is hardly around $800 million zero.

 

“We export worth $8.7 billion to the US and import hardly worth $800 million. Almost 50 per cent of the imports fall in categories that do not attract duty. The remaining attracts duty in the range of 5-10 per cent. If we make this zero, any reciprocal tariff the US imposes also becomes zero,” said a senior industry veteran, who was part of the team that met the government officials.

 

Uday Bhaskar, former director general of the Pharmaceutical Exports Promotion Council (Pharmexcil), too, felt the move was pragmatic.

 

“While no one can predict what Donald Trump would do, in this case, India can consider making import duty zero on pharma formulation imports from the US. The US does not export any generic medicines to India where we are self-sufficient. Their exports are only orphan drugs, those used to treat rare diseases, cancer, and innovator drugs. These are already high-value products, and the removal of duty would only make these medicines more affordable for the Indian patient,” Bhaskar said.

 

India has been reducing duties on imports of drugs to treat cancer and rare diseases.

 

“To provide relief to patients, particularly those suffering from cancer, rare diseases, and other severe chronic diseases, I propose to add 36 lifesaving drugs and medicines to the list of medicines fully exempted from BCD,” Finance Minister Nirmala Sithraman said in the Union Budget.

 

Another six lifesaving medicines will now attract a 5 per cent concessional Customs duty.

 

India accounted for 47 per cent of the generic medicine supply in the US, the largest supplier of affordable generic medicines followed by companies in the US (30 per cent), and West Asian countries (11 per cent), and Europe (5 per cent).

 

Industry insiders felt that even from the US standpoint levying a duty on Indian drugs did not make much sense, as it would raise the cost of healthcare in the country. The US imports drugs worth $200 billion from Europe.

 

But India has the largest volume share.

 

“Indian drugs are low priced already. We have a large volume share. On the tariff issue, both the governments are in discussions, and we are hopeful that an amicable solution would be worked out,” said Sudarshan Jain, director general of the Indian Pharmaceutical Alliance (IPA), which represents leading pharma firms of India that account for 80 per cent of the country’s pharma exports.

 

Supplies from India are critical for the US which is already facing an issue of drug shortages.  

 

According to the American Society of Health-System Pharmacists (ASHP), the number of drug shortages in the US at the Q32024 calendar is around 271, down from an all-time high of 323 in the first quarter of 2024. 

Haresh Calcuttawala, CEO, Trezix which helps MSME pharma exporters felt that a duty reduction on US drug imports will help Indian patients here. "These drugs are expensive ones and mostly innovator drugs which are not made in India as generics. Therefore patients here benefit," he said, adding that if the US imposes a tariff then it significantly raises their healthcare bill. 

 

 

A Citi Research report highlighted the fact.

 

The analysts said that the US generic drug market seems unprepared for disruption — the fact that import alerts at a couple of facilities in India (Intas/Sun) resulted in drug shortages and change in pricing dynamics in the US, the market seems unprepared for another big disruption, Citi Research said.

 

“Historically, western counterparts (Teva/Viatris/Sandoz) have consistently trimmed the portfolios, and Indian companies are filling in the volume gap. “However, if Indian players start exiting from the generics, drug shortages in the US may escalate beyond control,” analysts added.

 

On the question of relocating the manufacturing base to the US, Indian players have maintained that they not only will take time but also need to be commercially viable.

 

Dilip Shanghvi, chairman and managing director of Sun Pharmaceutical Industries, said at the recent IPA conference that for manufacturing operations to work well, one needs to have some “minimum volume and consistent production.”

 

“If you don’t get that then you cannot achieve the same level of efficiency. So I see multiple challenges in the localisation of manufacturing,” he said, adding that most India-made products are in the range of $1-5, which may not justify relocation.