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

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

 

Industry executives said creating a viable generic manufacturing ecosystem in the US could take at least five years. Building facilities, securing regulatory clearances and transferring hundreds of individual drug approvals would extend well beyond the duty-free window announced by Trump, they said.

 

 

In a post on Truth Social, Trump said imported generic medicines would continue to attract zero tariff for two years from August 1, 2026. The tariff would then rise to 100 per cent 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 policy is intended to restore generic pharmaceutical production in the US, with companies that do not build manufacturing plants and equipment there facing steep tariffs after the transition period.

 

Shrikant Akolkar, analyst at Nuvama Institutional Equities, said producing generics in the US was difficult because of persistent price erosion, intense competition, the large number of dosage forms and strict manufacturing-quality requirements.

 

“Building such large-volume capacities locally would take decades, as the US has lost its edge in low-cost generic manufacturing,” Akolkar said.

 

Aurobindo Pharma and Senores Pharmaceuticals could benefit because of their US manufacturing presence if the tariffs were implemented, he said. Dr Reddy’s Laboratories, Lupin, Cipla and Zydus Lifesciences have some manufacturing footprint in the US, but it is not large enough to meaningfully offset their dependence on imports, making the proposal sentimentally negative for them.

 

Biocon could also face a negative impact because its generics and biosimilars are produced largely in India and Malaysia. Alkem Laboratories and Torrent Pharmaceuticals are dependent on Indian manufacturing but are expected to see a relatively neutral impact because their US generics operations contribute less to cash flows, Akolkar said.

 

Pharmaceutical stocks fell as investors assessed the potential company-wise impact. The Nifty Pharma index ended 1.3 percent lower on Wednesday. Lupin fell 4.2 percent, Aurobindo Pharma around 2 percent and Dr Reddy’s nearly 2 percent. Zydus declined around 1.2 percent, Cipla and Sun Pharmaceutical Industries about 1 percent on the BSE.

 

Mayank Jain, market analyst at Share.market by PhonePe, said the sector was witnessing a sharp divergence between robust domestic fundamentals and emerging global trade risks. The proposed tariffs introduced a significant long-term risk to export margins, although the two-year transition period provided companies time to realign supply chains, renegotiate contracts or evaluate US manufacturing, he said.

 

Pharmexcil chairman Namit Joshi said recreating a generic manufacturing ecosystem in the US within two years appeared difficult.

 

“In the US, 90 per cent of prescriptions are generic and 10 per cent are branded and patented. Investment commitments of over $480 billion have come from more than 14 major pharmaceutical companies, such as Johnson & Johnson, AstraZeneca, Roche, Novartis and Eli Lilly, with timelines extending from four to 10 years,” Joshi said.

 

These investments were focused on branded and patented medicines, which accounted for only 10 per cent of prescriptions but 87 per cent of drug spending, he said. Generics, despite accounting for nine out of every 10 prescriptions, contributed only 13 per cent by value.

 

“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. We do not foresee this happening soon, as the gestation period for generic pharma cannot be achieved within a two-year timeframe,” Joshi said.

 

Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance, said leading Indian drugmakers already operated more than 40 facilities in the US, supporting local jobs and investing in manufacturing, research and resilient supply chains. The industry would continue engaging with the US administration to strengthen medicine security in both countries, he added.

 

Manufacturing costs in India are estimated to be 30–60 per cent lower than in the US, analysts said, raising questions about whether reshoring would remain commercially viable for generic medicines that already operate on thin margins.

 

Tushar Manudhane of Motilal Oswal Financial Services said this cost differential formed 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.

 

Several Indian drugmakers also operate through US subsidiaries, and the tariff would presumably be calculated on the transfer price at which a product entered the US rather than its subsequent selling price, Manudhane said.

 

Building a facility would itself take at least two years, after which it would need to undergo inspection and secure product approvals. This could add another 12–15 months before commercial production begins, indicating limited near-term impact on Indian suppliers, he added.

 

Bharat Celly, equity research analyst at Equirus Securities, said transferring an approved product to a US facility was not simply a matter of relocating production.

 

It would require site-transfer filings, process validation, stability data and approval from the US Food and Drug Administration for each abbreviated new drug application. For Indian manufacturers with large approved portfolios, the cost and time involved in re-registering individual products would significantly exceed the proposed transition period, while the economics of many medicines would not support such investments, he said.

 

Celly said imposing tariffs of 100–200 per cent could raise the cost of low-priced medicines and increase the risk of supply disruptions in shortage-prone categories. The proposal appeared primarily to be a negotiating tool, given that implementation had been deferred until August 2028, he added.

 

Param Desai, research analyst at PL Capital, also said the announcement was largely unexpected and considerable ambiguity remained over its implementation.

 

Several generic companies already operated manufacturing facilities in the US, which could partially mitigate the impact. However, two years was too short to relocate the entire generic pharmaceutical value chain, he said. With Trump’s current term ending in January 2029 and the first major tariff taking effect in August 2028, eventual implementation could also depend on the next administration, Desai added.

 

Nirali Shah, research analyst at Ashika Investment Managers, said companies could add US manufacturing where the economics supported it, but the key question was whether low-cost generics could be reshored without losing their cost advantage.

 

“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,” Shah said.

 

Sunny Agrawal, head of fundamental research at SBI Securities, said companies such as Gland Pharma, Aurobindo, Lupin, Zydus, Dr Reddy’s, Sun Pharma and Cipla would remain sensitive to tariff-related developments because of their meaningful US revenue contribution.

 

However, assessing the impact solely through US exposure would not provide the full picture. Aurobindo appeared relatively better placed because of its US manufacturing base, while Sun Pharma had been strengthening its presence through acquisitions and strategic investments, he said.

 

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, inventory corrections and product-cycle timing, Joshi had said earlier.

 

The latest proposal 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.

 

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.