India’s Generics Shield Pharma from Tariff Heat, But Clouds Linger

India's Generics Shield Pharma from Tariff Heat

India is the backbone of the global pharmaceutical supply chain, providing:

• 50% of the world’s vaccines
  
  
• 40% of US generic drug consumption
  
  
• 25% of UK medicines
  
  

In FY25, pharma exports from India touched a record USD 30 billion, driven by a 31% YoY jump in March, a clear signal of India’s growing scale and strategic significance in global healthcare.

 Tariff Concerns from the US

The recent 100% tariff announcement by the US is currently limited to branded and patented drugs, which multinational pharma giants mostly supply. However, the uncertainty around whether these tariffs could extend to complex generics and specialty medicines areas, where Indian pharma leads globally, has spooked investors.

 Company-Wise US Exposure

Not all Indian pharma companies face equal risk. Their exposure to US revenues varies significantly:

• High Risk: Natco Pharma (66%), Gland Pharma (49%), Dr. Reddy’s (46%), Biocon (46%)
  
  
• Moderate Risk: Sun Pharma (32%), Zydus Lifesciences (24%), Aurobindo Pharma (23%), Lupin (21%), Cipla (21%)
  
  
• Low Risk: Divi’s Labs (14%), Alkem Labs (13%), Ajanta Pharma (12%), Mankind Pharma (12%)
  
  

 Clearly, companies with higher US dependence are more vulnerable to tariff shocks.

 Implications of Extended Tariffs

If tariffs were imposed on Indian generics, the impact would be twofold:

1. For the US:
   
   
   • Healthcare costs would skyrocket as generic drugs become more expensive.
     
     
   • Patients, insurers, and hospitals would face rising bills.
     
     
   • Drug shortages could disrupt access to critical therapies.
     
     
2. For Indian Pharma Companies:
   
   
   • Margins, already thin in the generics business, would shrink further.
     
     
   • Companies may be forced to pass on costs, hurting demand.
     
     
   • Profitability would come under severe pressure.
     
     

Strategic Buffers

Some large players, including Sun Pharma, Dr. Reddy’s, and Lupin, already have manufacturing facilities in the US, which helps them mitigate risks from regulatory hurdles and trade disputes. This may cushion them if tariffs escalate, but the sector as a whole remains exposed.

 Market Outlook

For now, India’s generic drug exports remain unaffected, but the medium-term risks are real. The US heavily depends on India for affordable healthcare, making broad-based tariffs a double-edged sword that hurts both Indian pharmaceutical companies and US consumers.