US tariffs on Indian drugs may raise costs, cause shortages
The United States’ plan to impose a 25% tariff on Indian pharmaceutical imports is poised to have significant repercussions for both the U.S. healthcare system and India’s pharmaceutical industry. India supplies nearly half of all generic drugs consumed in the U.S., leading to substantial savings—estimated at $219 billion in 2022 alone.
The proposed tariffs could disrupt this balance, making Indian generics less viable and potentially causing drug shortages. This scenario may disproportionately affect uninsured and low-income populations. Experts warn that these tariffs could exacerbate existing demand-supply imbalances in the U.S. healthcare system.
Indian pharmaceutical companies express concern over the tariffs’ impact on their U.S. operations. Dilip Shanghvi, chairman of Sun Pharma, stated that the tariffs “do not justify relocating our manufacturing to the U.S.,” citing significant cost differences.
Similarly, Cipla’s CEO, Umang Vohra, argued against allowing tariffs to dictate business decisions, suggesting that building new plants based on these policies could lead to unnecessary infrastructure.
The U.S. has already experienced increased drug costs due to tariffs on Chinese imports, with raw material prices rising by 20% since President Trump took office. Given that the pharmaceutical sector is India’s largest industrial export, any reciprocal tariffs would likely increase costs for both generic and specialty drugs, affecting millions of Americans.
To mitigate these risks, some experts suggest that India could reduce its tariffs on pharmaceutical goods, which currently stand at about 10%. Ajay Bagga, a market expert, noted that U.S. drug exports to India are relatively small, so the impact of such a move would be minimal.
The Indian Pharmaceutical Alliance has also recommended zero duty on U.S. drug exports to avoid reciprocal levies, though this would require significant policy changes. As negotiations continue, the outcome will have far-reaching consequences for the U.S. healthcare system, the Indian pharmaceutical industry, and global access to affordable medications. The U.S. healthcare system, already facing challenges like rising costs and drug prices, could see these issues worsen if tariffs are implemented. Conversely, India’s pharmaceutical industry, a significant contributor to the national economy and employment, may need to adapt to maintain its global standing.
