Explore how the US 100% pharma tariff impacts India’s pharmaceutical giants. Learn which companies are exposed, the opportunities for US-based manufacturing, and strategies to safeguard growth.

US 100% Pharma Tariff: What India’s Pharma Giants Need to Know

The recent announcement of a 100% US tariff on imported branded or patented pharmaceutical products, effective October 1st, 2025, has sent ripples across the global pharmaceutical market. While India’s $10+ billion pharma export engine may feel only a limited immediate impact, the long-term implications for market strategy and growth are significant.

India’s Pharma Exports: Protected Yet Partially Exposed

The Good News: Generics Remain Safe

India is widely recognized as the “Pharmacy of the World,” largely due to its dominance in generic medicines. Generics are explicitly exempt from the new US tariff, which means the core of India’s export revenue to the U.S. remains shielded.

The Exposed Segment: Specialty and Branded Drugs

The risk lies with Indian companies moving up the value chain into specialty, branded, and complex pharmaceutical products—segments seen as the future growth engines for the industry. Companies in this bracket face direct exposure to the 100% tariff.

Companies in the Spotlight

Indian pharma players with significant exposure in branded or specialty medicines include:

• Sun Pharma: Notable for its growing innovative and specialty medicines division.

• Biocon: Vulnerable due to branded biosimilars and complex product lines.

• Aurobindo Pharma: Faces challenges with branded oncology and specialty portfolios.

• Dr. Reddy’s Laboratories & Cipla: While primarily generic-focused, their expanding complex generics and specialty pipelines could be affected next.

Strategic Opportunities Amid Tariff Challenges

Despite the uncertainty, the policy also offers a clear strategic pathway for Indian companies:

US Manufacturing Footprint

The tariff exempts companies building new manufacturing facilities in the U.S. This creates a strong incentive for Indian pharma giants to accelerate plans for local production, fill-finish plants, and CDMO operations in the U.S., protecting high-value specialty revenue.

CDMO Growth Potential

Indian Contract Development and Manufacturing Organizations (CDMOs) may see a surge in demand as global innovators seek Indian partners to establish U.S.-based facilities. This positions India’s pharma sector as a key player in globalized pharmaceutical manufacturing.

Call to Action for India’s Pharma Leaders

In summary, the US 100% pharma tariff is both a challenge and an opportunity:

• Diversify production globally to reduce trade-related risks.

• Localize high-value manufacturing in strategic markets like the U.S.

• Strengthen long-term trade frameworks to safeguard specialty revenue.

While market volatility is high, companies that act decisively to globalize operations and protect their branded and specialty portfolios will likely emerge stronger.

Before the new 100% US tariff, the Indian pharmaceutical industry’s business model with the U.S. (its largest export market) operated under a relatively free-trade framework that favored both generics and specialty products. Here’s a breakdown of how the industry used to do business:

1. Dominance in Generics

• India’s pharma companies exported large volumes of generic drugs to the U.S., including tablets, capsules, and injectables.

• Generics accounted for the majority of India’s pharma exports (~70–80%).

• U.S. FDA approvals were crucial; companies ensured compliance to maintain trust and access.

Example:
Companies like Cipla, Sun Pharma, and Dr. Reddy’s supplied U.S. pharmacies and healthcare providers with low-cost alternatives to branded drugs.

2. Contract Manufacturing and CDMO Services

• Many Indian companies acted as Contract Development & Manufacturing Organizations (CDMOs) for U.S. and global pharma brands.

• They manufactured APIs (active pharmaceutical ingredients) and finished dosage forms under contracts, which minimized trade risks.

Example:
A U.S.-based innovator might outsource production of a specialty drug to India, then import the finished product under favorable trade rules.

3. Specialty and Branded Exports (Smaller Scale)

• Some companies had started moving up the value chain with branded, complex, or specialty products.

• This segment was growing but still a smaller fraction of total exports compared to generics.

Example:
Biocon’s biosimilars or Sun Pharma’s oncology portfolio were exported to niche markets in the U.S., often with higher margins but higher regulatory scrutiny.

4. Trade Framework and Tariff Structure

• No punitive tariffs: Indian pharma products were largely tariff-free under WTO rules and U.S.-India trade agreements.

• Companies benefited from predictable duty structures, enabling long-term investment in production and R&D.

5. Market Access Strategy

Companies leveraged the volume-based model for generics and relationship-based contracts for specialty/CDMO work.

Focused on regulatory approvals, scale, and cost competitiveness rather than navigating high tariffs.

Frequently Asked Questions (FAQ)

Q1: What products are affected by the 100% US pharma tariff?
A1: The tariff applies to imported branded or patented pharmaceutical products. Generic medicines are explicitly exempt.

Q2: How will the tariff impact Indian pharma exports to the US?
A2: The immediate impact is limited for generic-focused companies, but Indian firms with branded, specialty, or complex products may face significant challenges.

Q3: Which Indian pharma companies are most at risk?
A3: Companies like Sun Pharma, Biocon, and Aurobindo Pharma, with large branded or specialty portfolios, are directly exposed. Dr. Reddy’s and Cipla could be affected in the near future as their specialty pipelines grow.

Q4: What opportunities does the tariff create for Indian pharma firms?
A4: Companies that invest in US-based manufacturing or expand their CDMO services can protect revenue and strengthen their global footprint.

Q5: What strategic steps should Indian pharma companies take?
A5: Diversifying production, localizing high-value manufacturing in the US, and securing long-term trade agreements are key steps to mitigate risk and leverage opportunities.