Indian Pharma Braces for Potential US Tariffs with Strategic Countermeasures

India’s pharmaceutical industry is proactively developing a multi-pronged strategy to protect itself from potential tariff shocks, as US President Donald Trump continues to escalate his trade offensive. Although Indian drug formulations and active pharmaceutical ingredients (APIs) are currently exempt from the latest 25% tariff hike, the industry views this relief as temporary and is preparing for potential future disruption.

Navigating a Temporary Reprieve

The exemption on pharma products stems from the recognition that generic medicines are crucial for affordable healthcare in the US, a market where these products operate on extremely thin margins. However, this safety net is not permanent. The US Department of Commerce is conducting a “Section 232” investigation to determine if pharma imports pose a national security threat. The findings are expected by December 27, 2025, with a presidential decision to follow by March 2026.

Indian Pharma’s Multi-Faceted Defense

In anticipation of a potential tariff imposition, Indian drugmakers are executing a comprehensive strategy that includes:

Acquiring US Assets: Companies are making strategic acquisitions to establish a manufacturing foothold within the US. For instance, Aurobindo Pharma’s acquisition of Lannett Company and Syngene International’s purchase of a US biologics facility are key moves to gain a “shield from tariffs.”
Geographic Diversification: Firms heavily reliant on the US market are expanding their global footprint. Natco Pharma, for example, recently acquired a significant stake in a South African pharmaceutical company to reduce its exposure to the US market.
Supply Chain Resilience: Companies like Alembic Pharmaceuticals are pursuing backward integration, sourcing more raw materials from India, and optimizing operational costs to strengthen their supply chains and reduce reliance on external manufacturing.
Outsourcing to US Manufacturers: Some firms that lack a manufacturing presence in the US are exploring partnerships with US-based contract manufacturers, like Senores Pharmaceuticals, to insulate themselves from tariff risks.

The Stakeholders’ Warning

The industry acknowledges that manufacturing in the US is costly, a significant challenge for generic companies with slim profit margins. Global consulting firms like Oliver Wyman are stepping in to help Indian pharma clients with “scenario-planning” and developing playbooks for potential tariff shocks.

Meanwhile, the Association for Accessible Medicines (AAM), representing US generic manufacturers, has issued a stark warning. The AAM argues that tariffs on generics would inevitably lead to higher prescription drug prices, exacerbate drug shortages, and discourage the “onshoring” of manufacturing. Given that generics account for 90% of US prescriptions and saved the healthcare system $445 billion in 2023, these potential tariffs could have severe consequences for American healthcare.

With India’s pharmaceutical exports to the US totaling $8.73 billion in 2024, the outcome of this trade investigation will have a profound impact on both countries’ economies and healthcare systems.