Shares of Indian pharmaceutical companies declined on Wednesday following a statement by US President Donald Trump that imported generic drugs would benefit from zero tariffs for two years, starting August 1, 2026, after which they could face potentially very high duties.
In his post on Truth Social, Trump announced that the tariff would rise to one hundred percent after the two-year period, remain at that level for one year, and then increase to two hundred percent. This means that a 100% tariff will be in effect starting August 1, 2028, and a 200% duty starting August 1, 2029.
The Nifty Pharma index fell by approximately 1.6 percent in early trading, becoming the least successful sector index. Among companies with a share in the US market, Cipla and Lupin lost about 2.5 percent each, Sun Pharmaceutical Industries dropped by 2 percent, and Dr Reddy’s Laboratories slipped by more than 1 percent. Aurobindo Pharma, Zydus Lifesciences, Alkem Laboratories, and Torrent Pharmaceuticals also fell by up to 2 percent.
Trump stated that this policy is intended to restore the production of generic drugs in the US. Companies that do not build manufacturing facilities and install equipment in the country will face sharp tariffs after the transition period ends. This statement came amid existing pressure on the export of Indian pharmaceuticals to the US.
India's total pharmaceutical exports grew by 2.13 percent to a record $31.12 billion in the 2025-26 fiscal year (FY26). However, supplies to the US decreased by almost 10 percent year-on-year, amounting to $9.47 billion, according to data from the Directorate General of Commercial Intelligence and Statistics collected by Pharmexcil. The US remains India's largest export market, accounting for over 30 percent of all shipments. Exports to the broader North American region, including the US, Canada, and Mexico, fell by 7.9 percent in FY26.
Pharmexcil Chairman Namit Joshi previously explained the decline in US exports in FY26 as primarily cyclical, not structural, reflecting a high base level, ongoing erosion of generic prices, supply chain inventory adjustments, and product life cycle timing. Nevertheless, Indian exporters and analysts questioned the possibility of the US creating an economically competitive ecosystem for generics production within two years, given the time required for facility construction, regulatory approvals, and product transfer.
One industry source noted: 'Creating a generics ecosystem within two years seems unlikely. Perhaps investment rates have slowed or companies are maintaining the status quo, and he is trying to re-energize the situation.' The source added that the proposed tariff introduction in 2028 coincides with the US election cycle.
Namit Joshi also expressed the view that establishing a generics production ecosystem in the US in two years appears to be a difficult task. Ravi Uday Bhaskar, former CEO of Pharmexcil, considered it positive to maintain the zero tariff for two years, as this could help avoid further drug shortages in the US. He noted that Trump is 'extremely unpredictable and volatile.'
Bhaskar also called the two-year timeframe unrealistic, stating: 'I don't think it will happen due to production costs and other factors.' Bhavin Mukund Mehta, Permanent Director of Kilitch Drugs and Vice Chairman of Pharmexcil, advised the industry to await further details, as the proposed tariffs were still two years away.
Analysts believe that the difference in production costs between India and the US may continue to protect Indian suppliers even after the tariffs are introduced. Tushar Manudhane from Motilal Oswal Financial Services pointed out that production costs in India are approximately 40–60 percent lower than in the US, which is the economic basis for outsourcing generic drug production to countries like India. He suggested that even with tariffs, India's cost advantage might not disappear entirely.
Manudhane also noted that many Indian manufacturers operate through US subsidiaries, and the tariff will likely be calculated based on the transfer price at which the product enters the US, rather than its subsequent retail price in that market. He added that building a manufacturing facility alone will take at least two years, followed by inspection and product approval, which could add another 12–15 months before commercial production begins. These factors call into question the economic viability of setting up generic drug plants in the US and point to limited impact on Indian suppliers in the short term.
Nirali Shah, research analyst at Ashika Investment Managers, emphasized the significance of the announcement but noted that the market reacted before detailed rules were available. She stated: 'Companies can always set up production where it makes economic sense. The real question is whether the production of inexpensive generics can be moved back without losing their price advantage.' She also warned that the consequences extend beyond manufacturers, as 'generic drugs are widely used under Medicare and Medicaid, so any significant increase in the cost of generics will also affect government healthcare spending.'
According to the Accessible Medicines Association, generic drugs account for nine out of ten prescriptions written in the US. The proposed tariff applies to the import of generics from all countries and is not specifically aimed at India. The latest announcement is part of Trump's broader efforts to shift pharmaceutical production to the US. Previously, on April 2, 2026, a presidential decree set a default 100% tariff on certain patented pharmaceutical products and related ingredients but excluded generics and biosimilars from this tariff. However, the proposal for a generic tariff was only made via a social media post, and the official decree establishing its legal basis, product scope, valuation method, exclusions, and procedure for companies investing in US production has not yet been issued.
President Donald Trump stated in a social media post on Tuesday that generic manufacturers will be given two years to relocate production to the United States, otherwise they will face a 100% import tariff set to take effect in August 2028. One year later, in August 2029, this levy will double to 200%.
According to Trump, this measure aims to bring pharmaceutical production back to America, imposing a penalty on companies that fail to build factories and equipment within the specified timeframe. Trump is using the issue of drug costs as a key factor causing concerns about accessibility, especially ahead of the 2026 midterm elections.
He has long criticized price disparities between consumers in the US and international markets and has repeatedly sought to narrow this gap. The administration also launched a drug discount platform for consumers, which it named TrumpRX. The President insisted that pharmaceutical companies produce more medications in the US. In April 2025, the administration began an investigation into this industry based on national security under Section 232 of the Trade Expansion Act.
Trump clarified that his administration's plans regarding patented drugs will remain unchanged. This plan includes tariffs up to 100% on certain imported medicines, although with several major exceptions. Most of the world's largest drug manufacturers, including Merck & Co. and Eli Lilly & Co., avoided these punitive measures by reaching agreements with the administration.
Generic manufacturers find themselves in a more difficult position. Unlike patented drug manufacturers, they operate on minimal margins and rely on global supply chains, which makes absorbing tariffs challenging. Richard Seinor, CEO of Sandoz Group AG, one of the world's largest generic producers, warned last year that America's shift toward high tariffs would likely lead to increased drug prices and restricted patient access.
The Swiss company Sandoz Group AG, along with competitors Teva Pharmaceutical Industries Ltd. and Viatris Inc., copies branded drugs after patent expiration. It manufactures many of its generics outside the US, with plants in Canada and Austria. Among US trade partners, this blow will most significantly affect India, which is the largest exporter of generics to the US. Pharmaceuticals account for three of India's main export goods to America, valued at $10.5 billion in 2024-25, according to the country's Ministry of Commerce.
The drug tariffs could negatively impact over 40% of India's exports to the US, adding to existing duties on steel, aluminum, and automobiles. However, it was not immediately clear what volume of the new tariff Indian pharmaceutical companies would have to pay, as the bilateral trade pact signed in February stipulated that India would 'receive agreed results regarding generic pharmaceuticals and ingredients.' Previously, Trump's threats to impose tariffs on pharmaceutical imports jeopardized cheap supplies from India, particularly for hypertension and depression treatments, as well as oral contraceptives, according to an analysis by Bloomberg News based on data from the firm Symphony Health.
Regarding contraceptives, the analysis showed that about 65% of all prescription pill prescriptions in the US in 2024 were produced by only two Indian companies: Glenmark Pharmaceuticals Ltd. and Lupin Ltd. It is also worth noting that the White House is working on replacing Trump's emergency tariffs after the Supreme Court ruled them illegal earlier this year. The overall 10% tariff expires on Friday, and the administration is expected to impose duties on products from dozens of trading partners by the end of the week, citing allegedly weak labor standards.
