US Tariffs on Drugs and Their Impact on India

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The United States and India share a deeply interlinked pharmaceutical trade relationship. The US is the largest importer of Indian generic medicines, which are valued worldwide for their affordability and quality. However, recent discussions around imposing 100% tariffs on certain drug categories have raised questions about the future of India’s pharma exports. While most Indian generic exports are currently exempt, the development has wider strategic, economic, and policy implications that India must navigate carefully.

Understanding the US Tariff Move

The proposed 100% tariff is largely aimed at reducing dependency on countries like China for critical pharmaceutical imports. The move is part of broader trade protectionism and attempts to strengthen domestic manufacturing in the US. However, there has been concern that such measures could indirectly affect other exporters, including India.

Key Facts:

The tariff targets drug imports under specific HS codes.
Indian generic drugs, which dominate the US market, largely fall outside the impacted categories.
The tariff is seen more as a political and strategic statement than a direct trade blow to India.

Why the US Market Matters to India

The United States is the largest destination for India’s pharmaceutical exports, accounting for over one-third of the $24+ billion India exports annually.

Major Advantages India Holds:

Dominance in generics (especially off-patent medications)
Cost-effective production
Compliance with USFDA standards
Strong presence in complex generics and injectables

Indian companies such as Sun Pharma, Dr. Reddy’s, Lupin, Cipla, and Aurobindo Pharma have established strong footholds in the American market, through exports, subsidiaries, and contract manufacturing.

Immediate Impact: Minimal but Not Ignorable

Currently, the 100% import tariff does not apply to most Indian generic drugs, making the immediate impact negligible. The Indian pharma sector continues exporting off-patent medicines to the US uninterrupted.

However, experts warn that India must remain strategically alert for the following reasons:

Policy changes can tighten in the future
Tariffs could expand to include APIs and finished formulations
Shifts in US domestic manufacturing policies may alter market access
Regulatory pressure may increase under the “Buy American” push

Risks & Challenges for India

Even if the present tariff impact is limited, India’s pharma sector faces structural vulnerabilities that could magnify risks over time.

1. API Dependency on China

India imports 70–80% of its Active Pharmaceutical Ingredients (APIs) from China. If US policy shifts target the entire supply chain, India could face indirect tariff burdens due to dependency.

2. Rising Compliance Costs

Indian firms must meet consistently high standards of USFDA compliance, adding to expenses.

3. Possibility of Non-Tariff Barriers

Instead of tariffs, the US could:

Tighten regulatory norms
Increase inspections
Restrict patent clearances
Encourage domestic substitutes

Strategic Response from India

To stay competitive and immune to future protectionist policies, India is focusing on:

Manufacturing Self-Reliance

Schemes like PLI (Production Linked Incentive) and Bulk Drug Parks aim to reduce dependence on API imports.

Strengthening Supply Chain Resilience

Post-COVID, India is actively diversifying sourcing and production to ensure uninterrupted global drug supply.

Expanding Next-Gen Capabilities

Indian pharma companies are investing in:

Complex generics
Biosimilars
Peptides
CAR-T cell therapies
Biologics

These areas reduce vulnerability and enhance bargaining power in international markets.

Policy Advocacy and Documentation

Industry leaders stress the need for:

Clear documentation of tariff exemptions
Active engagement with US trade authorities
Lobbying through diplomatic and industry channels

Long-Term Opportunities for India

Despite tariff talks, the US still needs India:

Over 40% of generic drugs sold in the US are supplied by India
India ensures affordable access to critical medication
The US healthcare system relies on cost-efficient imports to control insurance and patient burden

If the US increases tariffs on drugs from other countries, India may even gain further market space by having exemptions for off-patent generics.

Conclusion

The 100% US tariff proposal is unlikely to hurt India’s pharmaceutical exports in the short term because most Indian exports fall under off-patent generic categories that are exempt. However, this development highlights the importance of preparedness, diversification, and policy-driven resilience. India’s focus must remain on:

Cost efficiency
Quality compliance
API self-reliance
Innovation in next-gen therapies

By prioritizing these areas, India can not only safeguard its current dominance in the US pharma market but also expand its global leadership in affordable healthcare.