Pharmaceutical stocks declined sharply on September 26, after US President Donald Trump announced a sweeping 100 per cent tariff on branded and patented drug imports effective October 1, unless manufacturers establish production facilities within the United States.
“Starting October 1st, 2025, we will be imposing a 100 per cent Tariff on any branded or patented Pharmaceutical Product, unless a Company IS BUILDING their Pharmaceutical Manufacturing Plant in America,” Trump wrote on Truth Social. He added that products would be exempt from tariffs if construction of such facilities had already begun, reported Moneycontrol.
Market Reaction
At 10:08 AM, the Nifty Pharma Index was down 1.37 per cent (302.80 points) at 21,674.15, with all constituent stocks trading lower. Natco Pharma, Gland Pharma, and Sun Pharma were among the top laggards, slipping as much as 4 per cent.
The shares of Sun Pharma were trading at Rs 1,587.75 per equity share, down by 2.47 per cent, while the shares of Dr Reddy touched Rs 1,286.50 apiece, slipping marginally by 0.49 per cent on the BSE. The shares of Natco Pharma were also trading 3.65 per cent lower at Rs 812.30 per share on the BSE.
Impact on the Sector
The new tariff applies only to branded or patented medicines, while generic drug formulations remain exempt. Analysts believe this could support Indian drugmakers that derive a significant share of revenue from supplying low-cost generics to the US. Firms such as Dr Reddy’s, Sun Pharma, Lupin, and Aurobindo Pharma are key beneficiaries of this market.
However, the generics business is typically low-margin. If companies cannot raise prices, they risk discontinuing production, potentially triggering drug shortages in the US. A tariff extension to generics could force Indian players to either shift production to the US or halt supply altogether.
Expert View
Industry experts suggest tariffs on generics are unlikely to hold, given their potential to drive up US healthcare costs. According to Kotak Institutional Equities, India accounts for 45 per cent of US generic supplies and 10–15 per cent of biosimilars by volume, delivering substantial savings to the American healthcare system.
Among branded players, Sun Pharma and Biocon face direct exposure. Biocon, however, recently commissioned a new US plant, insulating it from tariff risks, while Sun Pharma could see some impact.
Trump’s Threat To Pharma
Trump has previously warned of even steeper levies, hinting at tariffs of up to 200 per cent for companies which fail to relocate production. “We’re going to give people about a year, a year and a half to come in, and after that, they’re going to be tariffed,” he said earlier this year.
