A 100% tariff on patented pharmaceutical products has been proposed, with implementation timelines of 120 days for large companies and 180 days for smaller firms.
However, products sourced from regions such as the EU, Japan, Korea, Switzerland, and Liechtenstein will attract a lower 15% tariff, while imports from the UK will face an even lower levy.
Companies that enter into Most Favoured Nation (MFN) pricing agreements along with onshoring commitments will be exempt from tariffs until January 20, 2029. Those opting only for onshoring agreements will face a 20% tariff initially, which could rise to 100% over four years.
Generic drugs
Generic pharmaceuticals, biosimilars, and related ingredients are currently exempt from tariffs, although this will be reassessed after one year.
Certain categories, including orphan drugs, animal health products, select specialty medicines, and supplies from trade agreement countries, will remain exempt.
The US government also plans to introduce stricter monitoring and enforcement mechanisms, including external audits and the ability to impose tariffs retrospectively or increase them over time.
Supply chain focus
The policy underscores the US government’s push to strengthen domestic pharmaceutical manufacturing, citing national security concerns.
Officials said that high import dependence, despite strong domestic R&D capabilities, poses risks during global supply chain disruptions. Section 232-related measures have already driven about $400 billion in fresh investment commitments.
The administration has rolled out multiple measures to boost domestic manufacturing. In May 2025, it signed an executive order to remove regulatory hurdles for local production.
In August 2025, another order aimed at strengthening supply chain resilience, including building API reserves. Section 232 investigations have also been extended to adjacent sectors such as PPE, medical devices, and equipment.
Impact on Indian pharma
Patented segment
Sun Pharma remains the only major Indian player with significant exposure to branded drugs. While the company has not been specifically named, an overhang is likely to persist.
Around 20% of its global revenue comes from branded products. Its key drug, Illumya, which may be manufactured in the EU, could benefit from lower tariffs. The company may also explore MFN agreements or onshoring to mitigate risks in the US market.
Generics
Generic drugmakers get near-term relief as they are not subject to tariffs for now. However, with a review due in one year, uncertainty remains. India’s cost competitiveness could limit the feasibility of large-scale US onshoring in this segment.
India supplies nearly 40-50% of generic drugs to the US. The US accounts for about 34-35% of India’s total pharma exports, which stood at roughly $30 billion in FY25.
Exports to the US were about $10.5 billion in FY25, with over 95% comprising generics. Shipments to the US grew 20.4% during the year.
What is Section 232?
Section 232 allows the US President to restrict imports that are deemed a threat to national security, including through tariffs or other trade measures, with flexibility to adjust actions over time.
Most Favoured Nation (MFN) pricing ensures that a buyer receives the lowest price offered by a seller to any of its customers. If prices are reduced elsewhere, the same benefit must be extended to the MFN partner.
