Trump's 200% tariffs on imported generic medicines to test India's edge

Imported generics to remain tariff-free for two years; industry doubts US can build a cost-competitive manufacturing ecosystem within the transition period

American President Donald Trump’s proposal to impose tariffs of up to 200 per cent on imported generic medicines is unlikely to trigger a large-scale shift in manufacturing to the US within the proposed two-year transition period, Indian pharmaceutical exporters and analysts said, citing high costs, lengthy regulatory timelines and weak economics for producing low-cost medicines locally. 

Industry executives said building a viable generics manufacturing ecosystem in the US would take at least five years. Constructing facilities, securing regulatory approvals and transferring product registrations would extend well beyond the duty-free window proposed by Trump, they said. 

In a post on Truth Social, Trump said imported generics would face zero tariffs for two years from August 1, 2026. Duties would rise to 100 per cent from August 1, 2028, and to 200 per cent a year later. The proposal aims to encourage companies to establish manufacturing capacity in the US. 

Shrikant Akolkar, analyst at Nuvama Institutional Equities, said producing generics in the US remains challenging due to sustained price erosion, intense competition, multiple dosage forms and stringent quality standards. “Building such large-volume capacities locally would take decades, as the US has lost its edge in low-cost generic manufacturing,” he added. 

He said Aurobindo Pharma and Senores Pharmaceuticals could benefit from their US manufacturing footprint if the tariffs were implemented.

 

Dr Reddy’s Laboratories, Lupin, Cipla and Zydus Lifesciences have some manufacturing capacity in the US but remain substantially dependent on imports, making the proposal sentimentally negative for them. 

Biocon could also be affected because most of its manufacturing is based in India and Malaysia. Alkem Laboratories and Torrent Pharmaceuticals rely on Indian facilities but could see a relatively neutral impact because their US generics businesses contribute a smaller share of cash flows, Akolkar said. 

Pharmaceutical stocks fell as investors assessed the potential impact. On the BSE, Lupin declined 4.2 per cent, Aurobindo Pharma about 2 per cent and Dr Reddy’s nearly 2 per cent. Zydus fell about 1.2 per cent, while Cipla and Sun Pharmaceutical Industries declined around 1 per cent each. The Nifty Pharma index ended 1.3 per cent lower. 

Pharmexcil Chairman Namit Joshi said building a US generic manufacturing ecosystem within two years appears unrealistic. While generics account for 90 per cent of prescriptions in the US, they contribute only 13 per cent of drug spending. Branded and patented medicines account for the remaining 10 per cent of prescriptions but 87 per cent of spending, making them far more attractive for investment. 

Investment commitments exceeding $480 billion by more than 14 global pharmaceutical companies have been directed largely towards patented medicines and involve timelines of four to 10 years, he said. “Building an ecosystem for generics will take at least five years and is also not a very lucrative investment, as their value contribution is hardly 13 per cent of total spending,” Joshi said. 

Sudarshan Jain, secretary-general of the Indian Pharmaceutical Alliance, said India had been a trusted supplier of affordable, quality-assured medicines to American patients. “Leading Indian pharmaceutical companies have US presence -- over 40 facilities -- supporting American jobs, investing in manufacturing, research and resilient supply chains,” Jain said, adding that the industry would continue engaging with the US administration. 

Tushar Manudhane of Motilal Oswal Financial Services said manufacturing costs in India were about 40-60 per cent lower than in the US. Even after tariffs, that cost advantage might not disappear entirely. 

Building a manufacturing facility would take at least two years, followed by inspections and product approvals that could add another 12-15 months. Transferring approved products would also require separate regulatory filings, validation and stability data, making the relocation of large product portfolios difficult. 

Manudhane said the tariff would likely apply to the transfer price at which products entered the US, rather than the eventual selling price, as several Indian pharmaceutical companies operate through US subsidiaries. 

Param Desai, research analyst at PL Capital, said considerable uncertainty remains over implementation. The first major tariff increase would take effect in August 2028, while Trump’s term ends in January 2029, meaning execution could also depend on the next US administration. 

Nirali Shah, research analyst at Ashika Investment Managers, said companies could add manufacturing capacity in the US where the economics justified it, but the key question is whether low-cost generic production can be reshored without eroding its cost advantage. “Generics are widely used across medicare and medicaid, so any substantial increase in generic drug costs would also have implications for public healthcare spending,” Shah said. 

India’s pharmaceutical exports to the US fell nearly 10 per cent year-on-year to $9.47 billion in FY26, even as overall exports rose 2.13 per cent to a record $31.12 billion, according to Directorate General of Commercial Intelligence and Statistics data, compiled by Pharmexcil. The US remained India’s largest export market, accounting for more than 30 per cent of shipments.

The proposal has so far been announced only through a social media post. A formal proclamation detailing its legal basis, product coverage, valuation methodology and exemptions has yet to be issued. 

DRL not shifting manufacturing to US for now 

Dr Reddy’s Laboratories has no plans to alter its manufacturing footprint in response to proposed US tariffs on pharmaceutical imports, with Chief Executive Erez Israeli saying the company would wait for a formal policy before taking any action. 

“What we have is a tweet (a Truth Social post by US President Donald Trump). It is not that we saw an official guideline,” Israeli said, adding that the company was awaiting greater clarity through industry associations. He noted that generic medicines had previously faced similar tariff threats before ultimately being exempted. Israeli said relocating manufacturing to the US solely to avoid tariffs was “not practical”. If tariffs were imposed, the company’s first response would be to raise prices in the US rather than shift production.   

 

“We are not going to invest because of tariffs. We are going to invest because it’s a good business,” he said.