Despite the dramatic headline of 200% tariffs on generic drug imports, Bernstein analysis suggests the long-term impact on Indian pharmaceutical companies may be more positive than initially feared. Nandan Kulkarni, Director-India Healthcare at Bernstein, believes higher drug prices, supply shortages and a gradual shift in manufacturing to the US could benefit players like Sun Pharma, Lupin and Zydus over the long term. As the proposed tariff deadline approaches, he expects supply disruptions because "there will be shortages because the current economics of moving to US are unsustainable." Those shortages, he believes, will eventually push prices higher and create a new pricing equilibrium, making it more attractive for Indian companies to manufacture in the US. The analysis suggests the proposed tariffs should be viewed less as an immediate threat and more as a catalyst that could reshape the US generic drug market in favour of Indian pharmaceutical companies with the right manufacturing footprint and product mix.
US President Donald Trump has announced a comprehensive tariff plan for generic medicines that will take effect in stages. According to reports from The Times of India, imported generic medicines will continue to enter the country at zero percent tariff until August 1, 2028. From that date, they will face 100 percent tariff for one year, followed by 200 percent tariff thereafter. The two-year window is designed to give drugmakers sufficient time to relocate generic drug manufacturing to facilities within the US. As per Press Trust of India, Trump described the tariffs as a penalty for companies that failed to build plants and equipment in the US during the transition period, stating "This is done in order to RESHORE Generic Pharmaceutical Production into America." Israeli confirmed during the company's post-earnings media interaction on July 23 that the company will "learn and accordingly evolve" as the policy develops.
The announcement could have significant implications for India, which is the largest exporter of generic medicines to the US. According to The Times of India, India supplies nearly 47% of generic prescriptions dispensed in the US and ships 38% of its pharma exports totalling $10 billion to the American market. Ajay Srivastava, founder of GTRI, stated that India has the highest exposure to the new tariff plan among exporters of generic medicines to the US. Indian drugmakers supply around 40-50 percent of generic prescriptions in the US, making them among the most exposed to any policy shift. However, the GTRI analysis suggests that even if a 100% tariff is eventually imposed, many Indian generics could still remain cheaper than branded alternatives, meaning a significant portion of the additional cost may ultimately be borne by US healthcare providers, insurers and patients rather than immediately displacing Indian exports from the market. As per The Times of India, the real challenge begins after two years when 100-200% duties could make certain generic exports commercially unviable and squeeze margins.
The announcement sent Indian pharmaceutical shares sharply lower as investors assessed the potential impact on companies with substantial US revenue exposure. According to Press Trust of India, the Nifty Pharma index fell nearly 2% with 19 of its 20 constituents trading lower during morning sessions on Wednesday, July 22. Cipla was the biggest loser among major exporters, falling 2.5% to ₹1,396, while Lupin dropped 2.5% to ₹2,452 and Sun Pharma declined 2% to ₹1,924. Dr. Reddy's fell more than 1% to ₹1,185, with Zydus Lifesciences, Alkem Laboratories and Torrent Pharmaceuticals dropping by as much as 2%. The selloff was relatively contained because the tariffs would not take effect for two years, with investors allowing for negotiations, exemptions or changes before August 2028. As per Press Trust of India, the absence of an accompanying executive order, tariff schedule or agency guidance means the announcement remains a policy statement rather than a complete set of enforceable rules.
The effect of Trump's tariff plan will vary significantly based on each company's US revenue exposure, product portfolio and existing manufacturing capacity. According to company disclosures compiled by Reuters, Dr. Reddy's is among the most exposed large Indian drugmakers with North America accounting for 47% of its revenue in the fiscal year ended March 2024. Lupin's US business generated $1.32 billion in the fiscal year ended March 2026 and accounted for 42% of consolidated revenue, making it the third-largest pharmaceutical supplier in the US by generic prescriptions during the March quarter. Cipla's US exposure stands at 37%, Sun Pharma at 32%, and Zydus Lifesciences at 46%. Biocon's exposure includes biosimilars, whose treatment under Trump's generic-drug plan remains unclear. Bernstein analysis suggests that companies such as Sun Pharma, Lupin and Zydus, which are investing in complex generics, respiratory therapies and innovation-led portfolios, are better positioned to absorb higher costs and benefit over the medium to long term. The firm is relatively more neutral on Aurobindo Pharma, saying its larger exposure to simple generic medicines makes large-scale US manufacturing less economical, although its recent acquisitions could partly mitigate the impact.
