Daybreak - Why Indian pharma isn't scared of a 100% tariff (yet)

Episode Date: July 28, 2026

Last Tuesday, Trump announced 100% tariffs on generic medicines imported into the US. By Wednesday, Indian pharma stocks were already falling even though the tariff doesn't take effect for two years.Trump wants import companies to reshore their manufacturing to the US so that the country can secure life-saving medication in the event of global supply chain disruptions. India supplies nearly 50% of all generic medicines consumed in America — birth control, antidepressants, hypertension treatments. The companies most exposed say shifting manufacturing to the US in two years isn't realistic. Building a viable generics ecosystem there takes at least five.But someone has to absorb the cost. And Indian companies have already said that moving is not a realistic plan — for now. Which means the ones picking up the bill are not the ones Trump thinks. Tune in.Take the Daybreak listener survey here.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Last week, on Tuesday, U.S. President Donald Trump made an announcement. He said that tariffs on generic medications imported into the U.S. would eventually hit 100%. And by Wednesday, Indian pharma stocks were already reacting. Bloomberg reported that the NSC Nifty Farma index fell by more than 1%. Sunfarmar, one of the sector giants that sells household names like Wallenie, the paint relief spray or gel, fell by nearly 1%. Even SIPLA, which makes the other popular pain medication, Omni-Gel, and cold meds like Chest and Gold, saw its own shares fall by almost 2%.

But here's the part that might surprise you. This tariff doesn't actually take effect for two more years. So why is the market panicking already? Well, part of the reason is this. CNBC reports that these tariffs are expected to, hit Indian pharma companies especially hard because they supply nearly 50% of all generic medicines consumed in America. Not just that. According to market estimates reported by Outlook business, India exports close to $8 to $9 billion worth of pharmaceutical products to the US every year

and the vast majority of it is generics. Now, the idea behind the tariff, as Trump wrote in his truth social post was to re-shore generic pharmaceutical production into America. So, the domestic supplies for life-saving medications could be secured within the country in the case of any global supply chain disruptions. Now, this new announcement is part of a larger push from the US government to bolster American national security and public health. In April this year, Trump had already announced a 100% tariff on patent and pharma ingredients. In the fact sheet released by the White House at the time, generics had been exempted.

Mainly because generics account for 90% of all prescriptions in the US, which means that these are what the average American patient relies on. Still, like I mentioned earlier, the tariff isn't immediate. In fact, countries like India get a two-year window before a 100% tariff kicks in on August 1st of 2028. And then, if they haven't shifted some of the manufacturing to the US by 28, then a 200% tariff will take effect in 2029. The two-year buffer was given to generic makers exactly so that they could start making that shift. Now, the Trump administration is saying that this protects Americans. But Indian companies are already saying that the two-year timeline for shifting manufacturing seems unlikely.

And even though the Indian stock markets are already. down right now, the ones putting the final bill for Trump's protection may not be who he thinks. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Treychevurgis, and every day of the week, my co-host, Nika Sharma, and I will bring you one news story that is worth understanding and worth your time. Today is Wednesday, the 29th of July. Before we get into the rest of the episode, I have a small request for you. You see, we have been thinking a lot about this show lately, about what it is, what it could be, and about the people who keep listening to it every morning. You. And we realized we don't know that much about you. So we have made a

survey. It takes about three minutes and we're genuinely asking what's working, what isn't and what you want more of. The link is in the show notes and we promise to read every single response. Okay? Let's get into it. To put it simply, consumers are the ones. who are most likely to pick up the tab for the extra costs taken on by pharma companies when and if the tax takes effect. The CEO of Dr. Reddy's labs, Erez Israeli, pretty much said it himself.

He told Ety that if tariffs are imposed, the company would have to raise prices in the US. He explained that making the drugs in the US would still mean higher costs, leading eventually to inflation for both insurers and retailers. Arpit Chaturvedi, the South Asia advisor at Tenio, a global advisory firm, told CNBC that most ordinary generics already operate with razor-thin margins, which means some manufacturers may end up exiting specific products entirely if wholesalers refuse to absorb the cost

or pass it through, making the particular products no longer commercially viable for companies. This would most likely have a two-fold. effect. Even as prices for the cheap generics rise, the supply will decrease and eventually that decrease would feed into the price hike. Now here are a few numbers that will put that into perspective. Namit Joshi, the chairman of Farm Exil or the Pharmaceuticals Export Promotion Council of India, told business standard that the generic set account for 90% of prescriptions in the US contribute only to 13% of drug spending. So even though a generics make the bulk of prescriptions, their eventual costs run much cheaper than the patented

stuff that make up the rest of them. A study published in December last year in the Health Affairs scholar calculated how a worldwide 100% tariff would translate into Finnish drug prices in the US. One of the study's conclusions was that prices of all finished drugs would increase by 30% And on taking the average price per prescription at $70, that would roughly amount to the average price per prescription increasing by an average of roughly $21. And these prices would be hitting medications like birth control, antidepressants and hypertension treatments. A Bloomberg report says that in 2024, it was medicines from India that accounted for more than half of the prescriptions in these categories. These prices would also most likely hit consumers before they were ever reimbursed for the costs that they had already absorbed during Trump's last tariff push in 2025. After the American Supreme Court had ruled that those tariffs had been unlawfully imposed, the Trump administration had started refunding all the importing businesses that had paid those taxes.

As of June 1st this year, Fortune reported that the administration had issued. issued $20 billion in tariff refunds. But this was for companies. For households, there does not seem to be any such refund inside. The Budget Lab at Yale University had estimated that those tariffs had cost the average American household about $2,500. Now, Trump had announced in yet another Truth Social post late last year that he would be issuing $2,000 checks to each household.

except, in his own words, the high-income folks. Though Scott Besant, the Treasury Secretary, later clarified that the rebate checks would require legislation. So, it's likely that these households may be waiting on rebate checks that may never come. But in the meantime, there is a handful of Indian pharma companies that are already positioned to profit from the very tariff that everyone else is placing for. More on this in the next segment. Obviously, some companies are better position than others, and they might even benefit from having their competitors locked out of a geography. Srikantha Kolkir, an analyst at Nuwama Institutional Equities, told business standard that

he believes that companies like Orobindo Pharma and Senores Pharmaceuticals could especially benefit from the tariff. Orobindo has its Indian headquarters in Hyderabad and a sizable U.S. footprint. It has a New Jersey campus of over 500,000 square feet, and it also just acquired Lanet, which is another American pharma company which makes complex non-opioid controlled substances. Lanet also comes with an Indiana-based plant which can scale to produce roughly 4 billion doses in a year. Orobindo told the Hindu that that capacity fits quite well with America's supply chain goals, while giving Orobindo a direct advantage in both its product line and domestic manufacturing.

Senoris, another Indian company which is based in Amdabad, has also been quite aggressive. Its approved U.S. portfolio doubled from 26 products to 51 in just a year. 21 products out of those 51 have already launched and there are 57 more in the works. Cynoris has also picked up a majority stake in a U.S. approved manufacturing plant bought another US pharma brand to build out distribution channels, and it has also formed a joint venture called a Merison, which is aimed at Federal and Veterans Affairs contracts. And that's a big deal, because that's a market, smaller Indian generic players have struggled to crack for years. So clearly, Orubindo and Senores are positioned to make the most of this

tariff if it were come to pass. But apart from just them, there are some other recommendations. recognizable names that had mentioned earlier, like Sunfama, Dr. Redis and SIPLA, who also already have manufacturing facilities in the US. In fact, GTIRI or the Global Trade Research Initiative noted that out of these, SIPLA has been expanding its capacity in facilities like Massachusetts and New York. It makes sense that these companies have a presence there, of course. Take for example Dr. Redis. One third of its revenue comes from North America. And for Sipla, North America provides about 22% of its revenue. Now, it's important to note that most of these moves have been in motion for a while.

The tariff threat is not the driving force behind them. But if moving manufacturing to the U.S. can be lucrative, and if decent chunks of the revenue do come from the geography, why is shifting not an option for Indian pharma companies? Stay tuned. Despite the chunk that North America represents in Dr. Reddy's revenue mix, Israeli said on an earnings call that the company has no plans of shifting manufacturing to the US any time soon. He told business standard that the relocation to avoid tariffs would

not be practical, saying, and I'm quoting here, we are not going to invest because of tariffs. We are going to invest because it's good business. Other analysts and exporters are in agreement with the same sentiment, mainly because the economics just is not there. And there are two reasons why. Firstly, the timeline for constructing a manufacturing pipeline in the US is far longer than the two-year window that has been given. Industry executives who spoke to business standard said that building a viable generics manufacturing ecosystem would take at least five years. This would include all the bureaucracy of actually constructing the facilities, getting regulatory approvers and relocating existing product registrations. Secondly, the cost of producing the same

in the US would be far too expensive and would in fact erase the thin margins that the drugs already sell on. Dushal Manudhane, a research analyst at Motilal Oswald, told business standard that because manufacturing costs in India are about 40 to 60% lower, even with tariffs, the cost advantage might not disappear entirely. Besides, moving the last step of pharma manufacturing to the US is not going to solve one of the major issues that it has, that APIs or active pharmaceutical ingredients, which are basically the chemical compounds in a drug that make up its effects, are sourced heavily from China.

A report from the Council on Foreign Relations wrote, and I'm quoting here, that off the US market, China controls the raw or key starting materials for 94% of amoxicillin, 74% of heparin, and 70% of acetaminophen, ensuring that diversions. specification at a later stage provides no meaningful protection. Let me explain what those three drugs are used for. Amoxicillin is a common antibiotic which is used for stuff like sinus or ear infections. Heparin is a blood thinner that's used to prevent and treat blood clots. And acetaminophen is the generic name for Tylenol, a fever and pain reliever.

So you can see how common these medications are. And you can start to see why America thinks it's a national security issue, except that its proposed solution isn't exactly fixing the core problem and is actively worsening another. Sudarshan Jain, the Secretary General of IPA or the Indian Pharmaceutical Association, said in another report that even for India, the dependence on Chinese API is a problem. Today, nearly 70% of India's chemical-based APIs are imported from China. There's also another reason why Indian pharma companies are not rushing to set up facilities in the US,

which is the fact that a similar announcement happened just last year. You see, the tariff on patented drugs that was formalized in April this year was actually announced last year in September, again on Truth Social by Trump. The post said that the Trump administration would put into effect a 100% tariff on branded and patented pharma imports to the US unless the drug maker was in the process of building a manufacturing plant in the US. The post claimed it would be effective from October 1st, 2025 onwards. The same stock dip followed. The tribune reported that the shares of major Indian pharmaceutical companies fell by up to 2.5%.

Zydas Life Sciences, the company that makes blood pressure meds like Amlodak and consumer products like Lucondi was one of the worst affected. It saw its shares fall by more than 4%. Sunfama saw a dip of 2.5% and the shares of Sipla and Dr. Reddy's also fell. But reports still claimed at the time that exporters weren't especially concerned, because generics were the bulk of their exports and those were not included in the push. Plus, it ended up taking more than seven months for the official order to come. Even then, the fact sheet from the White House says that the tariffs will come into effect in 120 days for certain large companies and 180 days for smaller companies.

So, that's another time baffle. This time, though, with the generics tariff, there is a two-year window. And experts believe that that gives exporters enough time to diversify and adapt to new markets. There's also the fact that the 200% escalation is set to hit in August 29. That's after Trump's current term ends and no one knows if the succeeding government will follow through with it. But the 100% tariff is still on the horizon still within Trump's current term. And if diversification and negotiations don't work out, the fallout isn't entirely going to be Indian Farmer's burden. It's going to be a burden for those the tariff was spent.

meant to protect. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription offers daily long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the Ken website.

Today's episode was hosted and produced by my colleague Rachel Varghies and edited by Rajiv Sien.