US imposes 200% tariff, Indian generic drugs in urgent need

The $30 billion pharmaceutical industry in India is facing new challenges, "The Times of India recently reported at the beginning. US President Trump recently issued a strong warning to the global pharmaceutical industry, announcing that manufacturers of generic drugs exported to the US must transfer production to the US within two years, otherwise they will face import tariffs of up to 200%. As one of the largest sources of generic drugs in the United States, Indian pharmaceutical companies are believed to be the most directly affected. Indian pharmaceutical companies are preparing for a potential huge impact, "multiple Indian media reported recently.

0, 100%, then 200%

The New India Express reported on July 26th that under the proposed framework, imported generic drugs will be subject to a 100% tariff starting from August 1, 2028, for a period of one year. From August 1, 2029 onwards, tariffs will increase to 200% for manufacturers who have not established production facilities in the United States. The two-year window period aims to give pharmaceutical companies time to establish production capacity in the United States and gradually relocate their production lines to the mainland.

As an important source of generic drugs for the United States, the Indian pharmaceutical industry is expected to be directly impacted. According to data collected by the Global Trade Research Initiative (GTRI), as of 2025, India's exports of drugs to the world will be worth $25.8 billion, of which $9.7 billion (37.7%) will be exported to the United States, making it India's largest market for drug exports.

Nowadays, generic drugs dominate the majority of the prescription drug market in the United States. Official data shows that over 90% of prescription drugs in the United States are generic drugs. Indian companies supply nearly half of the demand for generic drugs in the United States. Generic drugs are low-priced alternative drugs produced by other companies after the end of the patent protection period. Due to their price advantage, they have become an important component of the US healthcare system. According to Indian media reports, India's exports of related drugs to the United States cover multiple fields such as common painkillers, antibiotics, cholesterol lowering drugs, and anti-cancer drugs.

It is not easy for the United States to take over the market

Although the United States is one of the most important markets for Indian pharmaceutical companies, industry insiders say that generic drug companies simply cannot afford the high tariffs of 100% to 200%. Compared with innovative drugs, generic drugs rely on highly competitive pricing models with limited profit margins, making it difficult to digest the cost pressure brought by high tariffs.

In addition, even if companies intend to avoid tariffs by relocating production capacity, large-scale transfer of generic drug production to the United States still faces many practical obstacles. Although some large Indian pharmaceutical companies have established branches in the United States, transformation is particularly challenging for smaller companies.

Dr. Reddy Laboratory CEO Erez Israeli stated in an interview that it is not economically feasible to produce such low profit products in the United States. Due to fierce competition in generic drug prices, higher production costs in the United States are difficult to pass on through price increases, making it difficult for companies to maintain profitability.

In addition to production costs, insufficient industrial chain support is also an important factor restricting the return of generic drug industry to the United States. According to CNBC website, many generic drugs sold in the US market are produced in India, while the active pharmaceutical ingredients required for finished drugs come from the global supply system. These supply chains are not formed in the short term, but gradually improve around low-cost advantages in long-term development.

In addition, issues such as labor costs and regulatory compliance costs make it difficult for the United States to establish a complete and competitive generic drug production system in the short term. GTRI founder Ajay Srivastava pointed out that the profit margin of generic drugs is already limited and highly dependent on global supply chains. To establish a complete local supply chain in the United States, a large amount of capital needs to be invested, and it will inevitably push up drug prices.

Therefore, the industry generally believes that the full return of the generic drug industry chain to the United States is unlikely to be achieved within two years.

Tariff 'prescription', American consumers may suffer first

This is not the first time the Trump administration has targeted drug imports with tariffs. In April of this year, Trump announced a 100% tariff on imported patented drugs and pharmaceutical ingredients. The Indian Express analyzed that the threat from the US government is actually just a continuation of previous "ultimatums". The real purpose of these ultimatums is to attract investment into the United States. In fact, among the various tariff measures taken by the Trump administration so far, drugs have basically been exempted from tariffs. Trade and investment experts point out that the true purpose of these threats is to force global pharmaceutical giants to increase their investments in Washington, rather than raising tariffs on drugs.

Analysts believe that although some pharmaceutical companies may eventually obtain tariff exemptions, the potential pressure faced by generic drug businesses may prompt Indian pharmaceutical companies to further break away from their dependence on low value added generic drugs and accelerate business diversification.

The Chairman of the Indian Medicines Export Promotion Council, Natit Joshi, stated that India has begun to develop a response plan. He said, "The Latin American market, especially Brazil, is one of our fastest-growing import markets. The European market also maintains very stable growth

The First Post of India commented that the tariffs imposed on generic drugs this time are not so much a blow to the Indian pharmaceutical industry as a costly gamble, which may ultimately result in American patients paying the heaviest price.

Dr. Reddy Laboratory CEO Erez Israeli recently stated in an interview with CNBC that "such high levels of tariffs cannot be absorbed by companies themselves" and will ultimately be passed on to consumers, with drug price increases "roughly equivalent to tariff levels".

Observers say that a significant increase in healthcare costs could impact American consumers and prompt Washington to reconsider tariff policies. Srivastava said that in any case, two years is enough time for many changes to occur. In American politics, two years is a long period of time, and relevant policies may be modified, postponed, or even overturned due to legal or political factors