US tariff a bitter pill for Indian pharma

Donald Trump's 100% tariffs on branded and patented medicines, announced last week, will destabilise Indian pharma exports, which make up around 40% of generic drugs sold in the US. Although generics are not covered in the presidential order, some of this class of drugs are sold branded, leaving them open to administrative interpretation of the applicable duty. Indian generics exporters also double up as contract manufacturers for components of patented drugs, and this line of business is affected by the local manufacturing conditions. Offshore contract manufacturing will be neutralised through the tariff, and shifting production bases to the US will be cost-disadvantageous for the Indian pharma industry.

Apart from the ambiguity of the policy, there is the threat contained in its direction. If the Trump administration's agenda is to have cheap drugs made at home, the Indian pharma industry will need to diversify its export destinations. China has signalled its interest in facilitating this transition by slashing its 30% duty to zero on imported generics. China is pivoting from being a generics manufacturer to a leader in drug discovery, and this opens a large space for the Indian pharma industry. This will reshape international alliances in the drug industry and potentially undermine US leadership in pharma research. Altered policy positions by Washington and Beijing will reshape the global drug industry, and Indian exporters must adapt to their new reality.

The pharmaceutical industry is headed for a cliff of patent expirations, making these transitions urgent. Interest in alternative discovery engines is rising, and India could benefit if it manages to move up the value chain from being an efficient producer of off-patent medicines. Treatments in high-value areas, such as immunology, oncology and metabolic diseases, require commercially viable drugs for the global market. The Indian pharma industry must navigate heightened policy uncertainty to emerge with a stronger export model that manages the risk of over-concentration on the US market.