Biocon, Cipla: Nifty Pharma down 6% as US eyes possible tariffs on sector

Adding to the worries of investors, US is looking for possible tariffs on the pharmaceutical goods

Nifty Pharma index slipped 6.2 per cent, logging an intra-day low at 20,089.45. The fall came amid reports that US President Donald Trump is looking for possible tariffs on pharmaceutical goods. 

Around 10:01 AM, all 20 Nifty Pharma constituents traded in the red. Among others, Aurobindo Pharma was down 6.25 per cent, Ipca Laboratories slipped 5.59 per cent, Lupin 5.35 per cent, Laurus Labs and Biocon were down 5.05 per cent each. 

 

Similarly, Cipla was down 4.68 per cent, Divi's Laboratories 4.18 per cent, Dr. Reddy's Laboratories 4.16 per cent, and Sun Pharma 3.72 per cent. 

 

As per Geojit Investments report, Zydus Lifesciences' 47 percentage of revenue comes from the US. Similarly, Aurobindo Pharma has a revenue exposure of 46 per cent to the US, Dr. Reddy’s Laboratories has 41 per cent, Lupin has 38 per cent and Sun Pharma has 32 per cent and Cipla has 30 per cent.   Global brokerage CLSA believes mitigate the impact of tariffs on pharma the Indian givernemnt is likely to remove the customs duty on US pharma imports, to which the US may reciprocate.  "The customs duty on US pharma imports in India is from 5-10 per cent, so the reciprocal tariff should be up to 10 per cent for Indian pharma companies India imports $800 million worth of drugs from the US, but it exports $8.7 billion. India receives $50 million from customs duty on US imports, which will be significantly lower than the reciprocal tariff to the US," the report read.  Further, CLSA noted, even if the tariff is imposed, the Indian pharma companies will pass it on, due to their dominant share. Generic products have very low margins (high single-digit to low double-digit), thus if they are unable to increase prices, they may stop manufacturing some these, leading to drug shortages in the US. 

 

On Thursday, Indian Standard Time (IST), the White House announced 'reciprocal tariffs' on all imports from India and other nations, calling the move “kind reciprocal." Calling India’s tariffs “very, very tough," Trump said he was imposing 27 per cent tariffs on all imports from India. The US also imposed 10 per cent base tariffs on all its trading partners.

 

"President Trump will impose an individualised reciprocal higher tariff on the countries with which the United States has the largest trade deficits. All other countries will continue to be subject to the original 10 per cent tariff baseline," according to the White House official website. This will take effect April 9, 2025, it added.  

However, the White House exempted pharmaceuticals and some other categories from 'discounted reciprocal tariff'. Rejoicing the news, pharma stocks rallied and Nifty Pharma rose 4.9 per cent in trade on April 3, 2025. Though it was not clear whether it was a temporary exemption. 

"We wait for more details and note that higher tariffs are not completely ruled out for the future on pharmaceuticals," said brokerage firm BNP Paribas.

 

As per the White House official website, some goods will not be subject to the reciprocal tariff including articles subject to 50 USC 1702, steel/aluminum articles and autos/auto parts already subject to Section 232 tariffs; copper, pharmaceuticals, semiconductors, and lumber articles; all articles that may become subject to future Section 232 tariffs; bullion; and energy and other certain minerals that are not available in the United States.