US President Donald Trump announced a tariff plan in July aimed at forcing generic drugmakers to relocate production to the United States. Under the proposal, imported generic medicines will remain duty-free until August 2028, before tariffs rise to 100% and eventually 200%. According to reports from Mint, the Nifty Pharma index fell 1.31% following the announcement, with 18 of its 20 stocks closing lower. Among the top 10 pharma companies by revenue, Aurobindo and Cipla are up by 3% to 4%, while Lupin and Mankind are down by over 4%. Companies heavily reliant on high-volume US generic formulations, such as Lupin which gets 42% of its revenue from the US, face greater valuation pressure. The administration has not yet detailed specific product lists or potential exemption frameworks, leaving uncertainty around whether companies have sufficient predictability to commit to long-term facility investments.
India supplies 47% of all generic drugs imported into the US by volume, according to IQVIA, though by value it accounts for about 30%, indicating lower prices and margins. As reported by Mint, the US imports of pharmaceutical products have more than doubled in the past decade to $214 billion in 2025, with generic drugs accounting for roughly 90% of all US prescriptions. Manufacturing generic drugs in India costs about 30-50% less than in the US, making relocation economically challenging. For commodity generic exporters operating on tight margins of 10% to 15%, the impending 100% or 200% import duties pose significant operational vulnerabilities. Unlike brand-name producers, generic drugmakers compete primarily on price and generate profits through high production volume, leaving limited operational room to absorb steep import taxes.
Major Indian pharmaceutical companies are actively acquiring US assets to secure their market position. According to Mint, Sun Pharmaceutical Industries committed $11.75 billion in an all-cash acquisition of New Jersey-based Organon & Co., which operates six manufacturing plants globally. In June, Aurobindo Pharma closed a $250 million deal to buy Lannett Company after FTC clearance, securing a Seymour, Indiana plant to add 4 billion doses in annual capacity. These deals involve specialized segments with higher margins, justifying higher operating costs unlike commodity generic drugs. Under the Section 232 policy framework, companies establishing domestic facilities can apply to the US Commerce Department to secure a reduced 20% tariff rate over four years for branded segments. The proposal represents the latest trade directive aimed at pressuring drug companies to expand their domestic footprint, with Trump stating that policy efforts surrounding branded medications will continue.
According to a Deloitte survey of pharmaceutical CXOs, 55% of industry leaders prioritize expansion into specialty drugs and biologics, while 45% identify biologics and biosimilars as their primary R&D focus over the next two to three years. As reported by Mint, companies are reallocating capital away from commodity generics toward biologics, biosimilars, and specialty medicines. Lupin invested $250 million in its Coral Springs, Florida facility for complex products, while Cipla commissioned plants in Massachusetts and New York. Simultaneously, companies are monetizing proprietary research, with Glenmark Pharmaceuticals out-licensing a first-in-class trispecific antibody to AbbVie for $700 million upfront plus ongoing royalties, transferring US trade and regulatory exposure to an international partner. However, industry analysts highlight that immediate cost pressures could trigger market shortages or elevate drug prices if firms cannot absorb the tariffs.
According to a Niti Aayog report cited by Mint, China supplies 66% to 86% of India's imports across major Active Pharmaceutical Ingredient (API) categories and accounts for 70% to 75% of key starting materials (KSMs). Chinese APIs are estimated to be 35% to 40% cheaper than domestic alternatives, making it economically difficult for Indian formulators to establish fully independent US or onshore supply chains. The two-year transition period poses acute operational vulnerabilities for Indian pharma manufacturers relying exclusively on domestic production, as moving operations to the US would take four to seven years according to Dr Reddy's CEO Erez Israeli, well beyond the proposed timeline. Generic medications represent the vast majority of prescriptions filled by American patients, currently predominantly manufactured overseas while relying heavily on raw active ingredients sourced from China, raising bipartisan concerns regarding potential disruptions to the critical medical supply chain during geopolitical conflicts.
