Former US President Donald Trump announced a 100% import tariff on branded and patented medicines starting October 1, 2025. Following this announcement, Indian pharma stocks saw a decline of 2-4%. While generic drugs are exempt from this tariff, it could pose a challenge for companies supplying branded medicines.
Pharma Stocks Fall: Donald Trump announced on September 26 that a 100% tariff would be imposed on branded and patented medicines in the US starting October 1, 2025. The objective is to encourage American companies to increase manufacturing within the US. Following this decision, Indian pharma stocks, including Natco Pharma, Gland Pharma, and Sun Pharma, experienced a decline. This tariff will not apply to generic drugs, offering some relief to Indian pharmaceutical companies.
Decline in Indian Pharma Stocks
Trump's announcement dealt a significant blow to the pharma sector in the Indian stock market from the morning. The Nifty Pharma Index dropped by 2.3 percent by 9:22 AM. Major stocks like Natco Pharma, Gland Pharma, and Sun Pharma fell by up to 4 percent. During this period, all major pharma stocks were trading in the red.
Experts believe that the 100 percent tariff on branded medicines will directly impact companies' earnings in the US market and the share prices of Indian pharmaceutical companies. However, generic drugs have received relief from this tariff. Indian pharma companies have long relied on supplying generic medicines to the US market. A significant portion of the earnings for companies like Dr. Reddy's, Lupin, Sun Pharma, and Aurobindo Pharma comes from the US.
Relief for Generic Medicines
The decision not to impose tariffs on generic medicines is considered crucial for the US healthcare system. Experts state that if import duties were also levied on generic drugs, it could lead to drug shortages and significant price increases in the US. This is why the US government has granted an exemption for generic medicines.
India's Significant Role
According to Kotak Institutional Equities, India supplies approximately 45 percent of US generic medicines. Additionally, 10-15 percent of biosimilar demand is also met by India. Indian generic drugs lead to significant savings for the US healthcare system.
Companies like Sun Pharma and Biocon also supply branded medicines to the US. Biocon recently started a new plant in the US, thus placing it outside the tariff's immediate impact. However, companies like Sun Pharma might see an effect.
Trump's Strict Policy
Trump had previously indicated that he might impose tariffs of up to 200 percent on pharmaceutical companies. He believes that companies operating in the US should manufacture their products within the US. Trump stated that companies would have approximately one and a half years to invest and produce in America before the tariffs are implemented.
White House Press Secretary Karoline Leavitt stated that the American supply chain has become overly reliant on foreign countries. She emphasized that life-saving drugs and critical medicines should be manufactured in the US, not in China or other countries. This decision aligns with US economic and national security interests.
Impact on Investors and Market
Experts say that Trump's decision could affect the US earnings of Indian pharmaceutical companies. Its impact was evident in the stock market, with heavy selling in the pharma sector. Investors are now closely monitoring how companies will determine their production and investment strategies under the new US tariff regulations.
Following Trump's tariff announcement, the trajectory of Indian pharma company shares and the investment situation in the US market over the next few months will determine how quickly the market stabilizes. While the exemption for generic drugs will prevent a shortage in the US healthcare supply, the price and supply of branded medicines could be affected.
