After Trump’s tariff announcement, there has been a big decline in pharma shares.
On Wednesday, pharmaceutical stocks came under pressure after US President Donald Trump announced a phasewise tariff plan for imported generic medicines. This raised concerns about the long-term outlook for one of the industry’s largest export markets. This selloff happened when the proposal gives two years of tariff-free period to generic drug manufacturing companies before the imposition of heavy duty. The Nifty Pharma index fell by nearly 2 per cent in early trade. On the other hand, investors assessed the possible impact of tariffs which could ultimately increase by up to 200 per cent.
After this news, shares of Sun Pharmaceutical Industries, Cipla, Dr. Reddy’s Laboratories, Lupine and Aurobindo Pharma saw the biggest decline in early trade. Aurobindo Pharma fell 3.48 percent or 54.95 points to 1525.50. Sun Pharma traded at Rs 1943.45, down 18.70 points or 0.95 per cent on the BSE, while Cipla fell 2.5 per cent to Rs 1,396 per share. Lupine also fell 2.5 per cent to Rs 2,452, while Dr Reddy’s Laboratories fell more than 1 per cent to Rs 1,185. Zydus, Alkem Laboratories and Torrent Pharmaceuticals also declined up to 2 percent.
Trump’s announcement
In a post on Truth Social, Trump wrote that there will be no tariffs on all generic drugs brought into the US for two years. After this, the tariff will be increased to 100 percent from August 1, 2028 and then to 200 percent by August 1, 2029. The purpose of this phased tariff plan is to encourage pharmaceutical companies to set up manufacturing plants and related infrastructure in the US during the transition period. Companies that don’t produce locally could eventually face higher import duties as part of the administration’s broader “America First” manufacturing agenda. This announcement also indicates a change in the attitude of the administration. Branded and patented medicines have already come under the ambit of tariff. Whereas generic medicines were outside the scope of duty. That policy remains the same.
Why is America important for pharmaceutical companies?
America remains an important market for Indian pharmaceutical companies, where generic drugs account for about 90 percent of the total prescriptions. The two-year tariff-free period gives Indian exporters additional time to rethink their supply chains and investment plans. Although the immediate impact on exports is expected to be limited, 100 percent and later 200 percent tariffs could significantly change the economics of supplying generic drugs to the US for companies that do not strengthen their manufacturing presence there.
India’s pharmaceutical industry is closely monitoring changes in US trade policy amid concerns over possible tariffs on drugs. Industry executives say India’s low-cost manufacturing ecosystem remains globally competitive, although prolonged tariff barriers could prompt companies to expand manufacturing capacity in the US or rely more on contract manufacturing partnerships to maintain market access.
Among Indian pharmaceutical companies, Aurobindo Pharma has a significant manufacturing presence in the US. Dr. Reddy’s Laboratories, Lupine, Cipla and Zydus Lifesciences also have manufacturing operations there. Alkem Laboratories and Torrent Pharmaceuticals are largely dependent on manufacturing facilities in India and have limited presence in the US generics market in terms of cash flow generation. Biocon manufactures its biosimilar and generic products from facilities in India and Malaysia, while Senores Pharmaceuticals has a local manufacturing presence that caters to the US generics market.
