US Pharma Tariffs and Implications for Indian Drugmakers

On 25 September 2025, the United States announced the imposition of 100 per cent tariffs on imports of branded and patented pharmaceutical products, with effect from 1 October 2025. The declaration clarified that the tariffs would not apply to companies that are already manufacturing drugs in the US, have commenced construction of manufacturing facilities, or are in the process of building such facilities within the country. The announcement followed an investigation conducted by the US Department of Commerce under Section 232 of the Trade Expansion Act of 1962, which assessed whether pharmaceutical imports posed a threat to national security.

Subsequently, reports dated 9 October 2025 indicated that generic medicines would be excluded from the scope of these tariffs to avoid supply shortages.

This policy shift represents a significant development in global pharmaceutical trade. Historically, the pharmaceutical sector has largely remained insulated from aggressive trade restrictions and export controls. The new tariff regime introduces uncertainty into a sector that depends heavily on predictable cross-border supply chains. For pharmaceutical companies with substantial exposure to the US market, the announcement necessitates a reassessment of commercial strategies, compliance frameworks, and long-term manufacturing and sourcing plans.

Immediate Impact on Indian Pharmaceutical Companies

India remains the world’s largest supplier of generic medicines and accounts for nearly half of all generic drugs consumed in the United States. Indian pharmaceutical exports have contributed substantially to cost savings in the US healthcare system, estimated at USD 1.3 trillion between 2013 and 2022.

In the short term, the impact of the tariffs on Indian pharmaceutical companies appears limited. Although the US is India’s largest pharmaceutical export market, accounting for approximately 35 per cent of total exports, the majority of Indian exports consist of generic drugs, which fall outside the scope of the new tariffs.

That said, the announcement signals increased regulatory scrutiny of foreign pharmaceutical imports and raises the possibility of future policy expansion. Companies with existing or planned manufacturing facilities in the US are better positioned to mitigate tariff exposure. In contrast, Indian firms exporting branded and specialty drugs are likely to experience a more direct financial impact.

Key Issues for Indian Pharmaceutical Exporters

For most Indian pharmaceutical companies, the immediate tariff exposure is limited because their US exports primarily consist of generic medicines. Companies supplying generics, as well as those that have established or commenced construction of manufacturing facilities in the US, are largely shielded from the current measures. However, Indian manufacturers with a strong presence in branded and specialty drug segments may face reduced US sales and potential pressure on stock valuations once the tariffs are fully implemented.

The tariffs also stem from a national security investigation by the US Department of Commerce, raising concerns that additional reviews could result in a broader application of tariff measures. Any future inclusion of generic drugs would significantly affect Indian exporters, given their dominance in that segment.

Beyond tariffs, companies may be subject to exporter-specific investigations, including compliance audits, national security reviews, and inspections or enforcement actions at US-based facilities. Importers may face enhanced customs scrutiny, supply-chain investigations, and expanded disclosure obligations, all of which could complicate existing global supply arrangements.

These developments coincide with the US Food and Drug Administration’s PreCheck Initiative, which regulates the construction and approval of pharmaceutical manufacturing sites in the US. When viewed together, the tariffs and the PreCheck Initiative reflect a broader shift towards heightened oversight of pharmaceutical supply chains and manufacturing practices.

As a result, Indian pharmaceutical companies are likely to face increased compliance burdens. These include establishing internal capabilities for tariff assessment, managing customs valuation, diversifying supply chains, and mitigating disruptions linked to raw material sourcing.

Strategic Responses and Risk Mitigation

The introduction of pharmaceutical tariffs has created operational and legal uncertainty, requiring Indian pharmaceutical companies to take proactive measures to safeguard business continuity:

Monitoring Policy Developments
Companies should closely track changes in US trade policy, ongoing investigations under Section 232, and regulatory guidance issued by the FDA under the PreCheck Initiative, in order to adapt compliance strategies in real time.

Review of Trade and Manufacturing Models
Exporters should reassess their import-export structures to ensure alignment with evolving tariff and regulatory requirements. Strategic options may include diversifying sourcing, offshoring or localising manufacturing, and exploring contract manufacturing arrangements within the US to qualify for available exemptions.

Strengthening Compliance Frameworks
Robust internal compliance systems are essential to manage tariff exposure, meet regulatory expectations, and maximise the benefit of exemptions or alternative regulatory pathways.

Market and Supply Chain Diversification
Participation in initiatives such as India’s Production-Linked Incentive scheme may help reduce dependence on imported raw materials and strengthen domestic manufacturing capacity. Companies should also explore non-US markets and prioritise high-margin generic products that remain tariff-exempt to minimise cash flow disruption.

Looking Ahead

The introduction of US tariffs on pharmaceutical imports marks a turning point for Indian drug manufacturers. Beyond immediate cost implications, the measures introduce sustained regulatory and operational challenges spanning customs compliance, FDA oversight, and trade controls. Long-term competitiveness will depend on how effectively companies integrate legal compliance into commercial decision-making.

Managing these risks requires coordinated efforts across legal, compliance, and operational teams. Diversifying production and distribution networks can help reduce origin-related vulnerabilities, while strong regulatory systems are necessary to withstand increased scrutiny from both US and Indian authorities. Continuous monitoring of trade developments, coupled with proactive legal analysis, will be critical to preserving market access and ensuring supply stability.

Legal teams should prioritise structured reviews of tariff classifications, valuation methodologies, rules of origin, and contractual risk allocation. Agreements should anticipate changes in law, tariff adjustments, cost-sharing mechanisms, and dispute resolution pathways. Well-documented customs procedures, broker oversight, and recordkeeping practices aligned with US and Indian requirements will be central to navigating this evolving trade environment.