Indian pharma stocks fall as Trump warns of 200% tariff on generic drugs

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

Indian pharmaceutical stocks fell on Wednesday after US President Donald Trump said imported generic medicines would continue to attract a zero tariff for two years from August 1, 2026, before facing potentially prohibitive levies.

 

In a post on Truth Social, Trump said the tariff would rise to 100 per cent after the two-year period, remain at that level for one year and increase to 200 per cent thereafter. This would mean a 100 per cent tariff from August 1, 2028, and a 200 per cent levy from August 1, 2029.

 

The Nifty Pharma index fell around 1.6 per cent in early trade, emerging as the worst-performing sectoral index.

 

Among companies with exposure to the US market, Cipla and Lupin declined around 2.5 per cent each, Sun Pharmaceutical Industries fell 2 per cent and Dr Reddy’s Laboratories slipped over 1 per cent. Aurobindo Pharma, Zydus Lifesciences, Alkem Laboratories and Torrent Pharmaceuticals fell by up to 2 per cent.

 

Trump said the policy was intended to restore generic pharmaceutical production in the US, with companies that did not build manufacturing plants and install equipment there facing steep tariffs after the transition period.

 

The announcement comes as Indian pharmaceutical exports to the US are already under pressure. India’s overall pharmaceutical exports rose 2.13 per cent to a record $31.12 billion in 2025-26 (FY26), but shipments to the US fell nearly 10 per cent year-on-year to $9.47 billion, according to data from the Directorate General of Commercial Intelligence and Statistics compiled by Pharmexcil.

 

The US remained India’s largest pharmaceutical export market, accounting for over 30 per cent of shipments. Exports to the broader North American region, comprising the US, Canada and Mexico, declined 7.9 per cent in FY26.

 

The FY26 decline in US exports was largely cyclical rather than structural and reflected a high base, continued generic price erosion, supply-chain inventory corrections and product-cycle timing, Pharmexcil Chairman Namit Joshi had said earlier.

 

Indian pharmaceutical exporters and analysts, however, questioned whether the US could develop a cost-competitive generic manufacturing ecosystem within two years, given the time required to build facilities, secure regulatory approvals and transfer individual products.

 

“To create an ecosystem for generics within two years seems a distant possibility. Maybe the momentum of investment has slowed or companies are maintaining the status quo, and he is trying to shake things up again,” an industry source said. The source added that the proposed introduction of the tariff in 2028 would coincide with the US presidential election cycle.

 

Joshi said it appeared difficult to create a generic manufacturing ecosystem in the US within two years. He added: “ In the US 90 percent prescriptions are generic and 10 percent are branded and patented. Investment flow of over $480+ billion has come committed by more than 14 major pharma companies like JnJ, AstraZeneca , Roche, Novartis, Eli Lilly etc with a threshold period expanding to 4-10 years. These investments are targeting the branded and patented drugs which has a prescription contribution of 10 percent but value contribution of 87 percent.” Generic spend contributes only 13 percent on value side.  

“Building an ecosystem of generics will take atleast 5 years from now and also not very lucrative investment as value contribution is hardly 13 percent of the spent value. We don’t foresee this to happen soon as gestation period for generic pharma cannot be achieved within 2 years time frame,” Joshi pointed out. 

 

Ravi Uday Bhaskar, former director general of Pharmexcil, said retaining the zero tariff for two years was positive and could help avoid further medicine shortages in the US.

 

“He may be keeping the elections in mind and seeking to reassure Americans and avoid further shortages. He is highly unpredictable and inconsistent; we do not know what he is going to say tomorrow,” Bhaskar told Business Standard.

 

Bhaskar also termed the two-year timeline unrealistic. “I don’t think it will happen because of manufacturing costs and other factors,” he said.

 

Bhavin Mukund Mehta, whole-time director at Kilitch Drugs and vice-chairman of Pharmexcil, said the industry should wait for further details, given that the proposed tariffs were still two years away.

 

Analysts said the differential between manufacturing costs in India and the US could continue to protect Indian suppliers even if the tariffs were eventually imposed.

 

Tushar Manudhane of Motilal Oswal Financial Services said manufacturing costs in India were around 40–60 per cent lower than in the US, forming the economic basis for outsourcing generic production to countries such as India. Even after accounting for tariffs, India’s manufacturing-cost advantage might not be eliminated entirely, he said.

 

Manudhane also pointed out that several Indian drugmakers operated through US subsidiaries and that the tariff would presumably be calculated on the transfer price at which a product entered the US, rather than its subsequent selling price in that market.

 

Building a manufacturing facility would itself take at least two years, following which it would need to undergo inspection and secure product approvals. This could add another 12–15 months before commercial production begins, he said. These factors called into question the economic viability of establishing generic manufacturing plants in the US and indicated a limited near-term impact on Indian suppliers.

 

Nirali Shah, research analyst at Ashika Investment Managers, said the announcement was significant, but the market was reacting before detailed rules were available.

 

“Companies can always add manufacturing where the economics make sense. The real question is whether low-cost generic medicines can be reshored without losing their cost advantage,” Shah said.

 

She added that the consequences would extend beyond manufacturers. “Generic medicines are widely used across Medicare and Medicaid, so any substantial increase in generic drug costs would also have implications for public healthcare spending,” she said.

 

Generic medicines account for nine out of every 10 prescriptions dispensed in the US, according to the Association for Accessible Medicines. The proposed tariff would cover generic imports from all countries and is not directed specifically at India.

 

The latest announcement extends Trump’s broader effort to move pharmaceutical production to the US. An April 2, 2026, presidential proclamation imposed a default 100 per cent tariff on specified patented pharmaceutical products and associated ingredients, but kept generic medicines and biosimilars outside the tariff net.

 

However, the generic-drug proposal has so far been made through a social-media post. A formal proclamation setting out its legal basis, product coverage, valuation method, exemptions and treatment of companies investing in US manufacturing has not yet been issued.

Tariff Timeline:

• April 8, 2025: Trump says the US will shortly announce a “major” tariff on pharmaceutical imports. He does not specify a rate or implementation date. Pharmaceuticals had been excluded from the reciprocal tariffs announced earlier that month.
• August 5, 2025: Trump says pharmaceutical tariffs would begin at a relatively low rate, rise to 150 per cent within 12–18 months and eventually reach 250 per cent. No formal measure follows immediately.
• September 25, 2025: Trump announces through Truth Social a 100 per cent tariff on branded or patented pharmaceutical imports from October 1. Companies constructing US manufacturing plants are to be exempt.
• September 30, 2025: The White House announces a most-favoured-nation drug-pricing agreement with Pfizer, including a three-year tariff grace period. The proposed October tariff is not immediately implemented more broadly as negotiations with other drugmakers continue.
• April 2, 2026: Trump signs a formal Section 232 proclamation imposing a default 100 per cent tariff on specified patented pharmaceutical products and associated ingredients. Generic drugs and biosimilars remain exempt.
• April 2, 2026—preferential rates: Companies with approved US onshoring plans qualify for a 20 per cent tariff, while those also entering into most-favoured-nation pricing agreements receive a zero rate until January 20, 2029. The EU, Japan, South Korea, Switzerland and Liechtenstein receive a 15 per cent rate and the UK a 10 per cent rate.
• July 31, 2026: The patented-drug tariffs are scheduled to take effect for the 17 large pharmaceutical companies listed in the April proclamation.
• July 21, 2026: Trump says imported generic drugs will remain tariff-free for two years beginning August 1, 2026, before attracting a 100 per cent tariff for one year and a 200 per cent levy thereafter.
• September 29, 2026: The tariffs are scheduled to apply to other companies covered by the April proclamation.
• August 1, 2028: The proposed 100 per cent tariff on imported generics would begin, based on Trump’s stated timeline.
• August 1, 2029: The tariff would rise to 200 per cent. Detailed implementation rules are still awaited.