The reprieve for India’s drug companies from the Trump administration’s reciprocal levies could be short-lived, with the US president Dnald Trump saying, “pharma tariffs are going to come in at levels you haven’t really seen before.”
“We are looking at pharmaceuticals as a separate category. We will be announcing that sometime in the near-future and not too distant future. It’s under review right now,” Trump told reporters.
Currently, the US’s MFN (most favoured nation or non-discriminatory) tariff on medicines is nil, while India charges duties in the range of 0-7.5% on drugs imported into the country, with the recent years witnessing more exemptions or duty cuts for lifesaving drugs.
Although there is no clarity on the quantum of new US tariff, pharma stocks, which were among the top gainers on Thursday following the exemption from the reciprocal tariff, came under heavy selling pressure on Friday.
The Nifty Pharma index fell 4.03%, marking its biggest single-day drop since July 27, 2021. Barring two, all 18 other constituents of the index ended in the red, with losses of up to 7.21%. Among major pharmaceutical companies, shares of Cipla declined 5.38%, Divi’s Laboratories dropped 4.86%, and Sun Pharma fell 3.43%. Laurus Labs, Granules India, and Ipca Labs were the top losers in the sector, each plunging up to 7.21%.
Sources from the domestic pharma industry said that they are monitoring the situation closely. “Given the global uncertainty around tariffs, we cannot speculate about the possible increase in tariffs at the moment. We are in a wait-and-watch mode,” said head of a leading pharma association, asking not to be idemtified.
Another industry association source told FE that the imminent US tariff could affect US healthcare system which is currently facing shortage of generics drugs. “We were expecting some relief from the imposition of reciprocal tariffs as there’s a shortage of generics medicines in the US since 2023. India is a major exporters of affordable generics drugs to the US which nearly 47% share in that market,” he said.
Earlier on Thursday, Trump imposed 26% reciprocal tariff on India stating that US exports to India faces a 52% tariff in India (US trade deficit with India as a fraction of its imports from the the country. “We are anticipating steep tariffs on pharma products over the next few days. Further, the US government is expected to not allow pharma companies to pass the higher cost to consumers. Ultimately, the companies will have to absorb the cost which would affect their profit margins,” said Unnati Bhavekar, equity research analyst, Share India.
InApril-December 2024-25, India exported pharma products worth $6.6 billion to the US, while it imported these items worth $308.4 million from the country. India’s drugs exports to the US stood at 8.1 billion in 2023-24. The US is keen to increase pharma exports to India, but the country’s patenting regulations and price controls are hampering the efforts.
India has been bringing down the tariffs on life-saving drugs to reduce the cost of expensive therapies for patients. In the last union budget, the government proposed basic customs duty exemption on 36 life-saving drugs and medicines and concessional customs duty of 5% for six more medicines.