Former US President Donald Trump’s announcement of a 100% tariff on branded and patented pharmaceutical drugs has rattled India’s pharmaceutical sector. Effective 1st October 2025, this policy takes direct aim at biologics and complex generics—two of the fastest-growing segments for Indian manufacturers. India supplies nearly half the world’s generic medicines and leads global vaccine production, yet this tariff threatens to disrupt hard-won market positions.
The stakes are particularly high for companies that have invested billions in developing biosimilars and sophisticated drug formulations for the lucrative American market. As Indian pharmaceutical firms scramble to assess the damage, questions emerge about strategic pivots, manufacturing relocations, and the broader implications for global drug supply chains.
Biologics and Complex Generics in the Crosshairs
The tariff specifically targets branded and patented medicines, pulling biologics and complex generics squarely into its scope. Biologics are intricate molecules derived from living cells, and biosimilars represent the generic equivalents of these expensive treatments. Indian giants like Biocon, Dr. Reddy’s Laboratories, and Sun Pharma have poured substantial resources into this space. Biocon Biologics Limited alone generates roughly 40% of its revenue from the United States, leaving it dangerously exposed.
Complex generics face similar threats. These are sophisticated formulations—injectables, inhalers, specialty cancer drugs, and diabetes medications—that carry higher profit margins than traditional generics. Because many complex generics hold branded or patented status, they fall directly under the new tariff regime. Indian companies had been banking on these premium products to drive future growth and profitability in regulated markets.
The tariff includes a notable exemption clause: companies actively constructing manufacturing plants within the United States can avoid the levy. This definition hinges on breaking ground or having facilities under construction, not merely planning or operating existing sites. For Indian pharmaceutical firms, this means expensive, time-consuming investments in American manufacturing infrastructure to maintain market access.
Economic Fallout and Sectoral Tremors
India’s pharmaceutical exports surpassed $30 billion in FY25, with the American market representing approximately 35–40% of total shipments. Traditional generics—comprising roughly 90% of Indian pharmaceutical exports to the United States—remain exempt from these tariffs. However, the industry’s strategic shift towards higher-margin biologics and complex generics means this exemption offers only partial protection.
The financial implications have already materialised. Stock prices for Sun Pharma, Dr. Reddy’s, and Cipla experienced sharp declines following the tariff announcement. Fitch Ratings issued warnings of profit reductions ranging from 5–15% for major players heavily invested in biologics. Some firms may choose to absorb tariff costs to preserve market share, further squeezing margins.
Companies with significant US exposure face the most immediate pressure. Beyond Biocon’s substantial American revenue base, other firms that have built business models around exporting branded biosimilars and complex formulations now confront difficult choices. The volatility extends beyond individual companies, rippling through the broader pharmaceutical sector and affecting investor confidence.
This tariff forms part of America’s broader push to boost domestic pharmaceutical production under Section 232 of the Trade Expansion Act. US policymakers frame this as a national security imperative, aiming to reduce dependence on imported critical medicines. For Indian manufacturers, it represents a fundamental challenge to export-led growth strategies.
Strategic Pivots and the Road Ahead
Indian pharmaceutical companies are exploring multiple response strategies, though none offer easy solutions. Establishing or expanding US-based manufacturing represents the most direct route to tariff exemption, but such projects require massive capital outlays and years of construction and regulatory approval. Smaller firms may lack the financial resources to pursue this path.
Diversifying export markets offers another avenue. African and European markets present growth opportunities, though neither matches America’s size or profitability. Some analysts suggest the tariff might inadvertently strengthen India’s Atmanirbhar Bharat initiatives, encouraging domestic pharmaceutical self-reliance and reducing export dependence.
Industry stakeholders emphasise the need for diplomatic engagement with US policymakers to negotiate clearer tariff definitions and preserve export opportunities. The uncertainty surrounding which products qualify as “branded” or “patented” adds complexity to business planning and investment decisions.
Looking forward, experts note that India’s dominance in off-patent generic drugs—which remain tariff-exempt—will limit the overall long-term financial damage. However, if the tariff scope expands to explicitly cover more complex generics and biosimilars, Indian firms could face substantially deeper challenges. The policy may also trigger unintended consequences within the American healthcare system, potentially driving up drug prices and creating supply constraints that spark political backlash.
The pharmaceutical industry now faces a critical juncture. Companies must balance short-term profit pressures against long-term strategic investments whilst navigating an increasingly protectionist trade environment. How Indian pharmaceutical firms respond to this challenge will shape the sector’s trajectory for years to come, determining whether they emerge stronger and more diversified or struggle under the weight of diminished market access and compressed margins.