 "pharmaceutical sector, pharma")
Pharma stocks reacted sharply to concerns that the US might impose tariffs on pharmaceutical imports, causing the Nifty Pharma index to fall by almost 3 per cent during the day. However, analysts and industry insiders believe that even if tariffs are imposed, pharma exports to the US are unlikely to be majorly affected, as India is the largest supplier of generic drugs to the country.
“On trade, I have decided, for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the US, we will charge them. No more, no less,” US President Donald Trump told reporters in the Oval Office on Thursday.
Pharma companies largely dependent on the US market saw a sharp decline in stock prices — Aurobindo Pharma (-4.1 per cent), Sun Pharmaceutical Industries (-2.6 per cent), Natco (-9.4 per cent), Glenmark (-6.2 per cent), Dr Reddy’s Laboratories (-2.2 per cent), and Lupin (-4.2 per cent)— on the NSE on Friday.
A Mumbai-based analyst said: “Pharma stocks saw a bloodbath today, but the market reaction was largely sentiment-driven. We spoke with several pharma companies during the day, and there does not seem to be any immediate threat, as the US remains highly dependent on Indian drugs. If tariffs are imposed, pharma companies will likely pass on the cost through higher prices.”
Moreover, India already imposes around 10 per cent duty on drugs imported from the US. Also, it recently waived the basic Customs duty on some cancer drugs and medicines for rare diseases. Analysts believe that if the US administration does impose tariffs, their magnitude may not be very high.
Pharma ranks among the top product categories that India exports to the US, accounting for nearly 11 per cent of New Delhi’s total exports to the country.
In 2023-24, India’s pharma exports to the US accounted for 31 per cent of its overall drug exports at $8.73 billion. India exported drugs and pharmaceutical products worth $27.9 billion in 2023-24, 9.6 per cent growth over the previous year. Thus, around 70 per cent of India’s pharma exports went to non-US markets.
India accounts for nearly 40-50 per cent of the US' generic drugs supply.
“If prices go up, it will directly impact US insurers and the general public. We thus don’t expect much of a tariff change in the health care segment, as it would not benefit US citizens,” said a senior analyst from a credit rating firm.
Sudarshan Jain, director general of the Indian Pharmaceutical Alliance (IPA), which represents large, research-driven domestic pharmaceutical companies accounting for almost 80 per cent of India’s pharma exports, told Business Standard a week back that the industry was cautiously monitoring Trump’s decisions. “There is a lot of uncertainty in the geopolitical landscape, and given ongoing developments between the US and other economies, one would not want to base any decisions,” he said.
Siddharth Mittal, managing director and chief executive officer of Biocon, told Business Standard a few weeks ago that tariffs would negatively impact insurance companies, patients, and everyone. He had pointed out that while some Indian companies were exploring manufacturing operations in the US, no one wants to duplicate infrastructure unnecessarily.
An industry veteran, who has earlier led the Indian arm of a US-based multinational corporation, said India enjoys a huge cost advantage. “If tariffs are imposed on India on exporting drugs to the US, the exporters will simply add that to the cost and send. This is unlikely to change much dynamics in that market,” he said.
India has also reduced Customs duties on certain drug imports in this year’s Union Budget. The Budget proposed adding 36 life-saving drugs and medicines to the list of those fully exempt from Basic Customs Duty. It also proposed adding six life-saving medicines to the list of drugs attracting a concessional Customs duty of 5 per cent. Full exemptions and concessional duties will also respectively apply to the bulk drugs used for manufacturing these medicines.
Specified drugs and medicines under Patient Assistance Programmes run by pharmaceutical companies are fully exempt from Basic Customs Duty, provided they are supplied free of cost to patients. The Budget proposed adding 37 more medicines and 13 new Patient Assistance Programmes to this list.
