US Tariffs on Pharmaceuticals: Limited Impact on Indian Drug Makers
The imposition of a 100% tariff by the US on imports of branded and patented pharmaceutical products starting October 1 may not significantly hurt Indian drug makers, with Sun Pharma being exposed to some headline risk but with limited earnings impact, according to analysts.
Background
The US last week announced the imposition of a 100% tariff on branded or patented drugs entering the United States from October 1, except for pharmaceutical companies building manufacturing plants in the US. The exemption covers projects where construction has started, including sites that have broken ground or are under construction.
Impact on Indian Companies
Among Indian companies, only Sun Pharma has sizeable sales from patented drugs in the US (about 17% of 2024-25 revenue), HSBC Global Investment Research said in a report. The US market accounted for about $1.1 billion (85-90% of global sales) of Sun Pharma’s global sales of $1.217 billion from patented products in FY25, amounting to 17% of total revenue and 8-10% of consolidated EPS in FY25.
Sun Pharma’s Exposure
Sun Pharma reported global sales of $1.217 billion from patented products in FY25, of which the US market accounted for about $1.1 billion (85-90% of global sales), amounting to 17% of total revenue and 8-10% of consolidated EPS in FY25. However, analysts believe that the impact on Sun Pharma’s earnings will be limited, as the company can pass on the tariff cost to its customers.
Other Indian Companies
‘Generic (off-patent) drugs remain exempt from US tariffs, hence there is no impact for other Indian companies,’ HSBC said. Anuj Sethi, Senior Director, Crisil Ratings, said the new tariff ‘may not significantly hurt Indian drug makers’, as exports to the US – accounting for 20% of the Indian pharmaceuticals market- primarily comprise generic, off-patent medicines, which may not come within the ambit of these tariffs.
Passing on Tariff Costs
‘To be sure, some domestic formulation makers have a niche presence in the branded and patented drugs space, but the contribution of those drugs to their revenue is modest,’ Sethi said. ‘Moreover, given the largely non-discretionary nature of these products, the majority of the tariff cost is likely to be passed through. Some of these domestic companies also have manufacturing facilities in the US, which would make them exempt from the new levies.’
Supply Chain Impact
HSBC said that currently, Sun’s patented products are mostly manufactured by global Contract Development and Manufacturing Organization partners, e.g. for Ilumya, its largest product in the patented portfolio (56% of total patented product sales in FY25), drug substance is done by a CDMO partner based in South Korea, while the finished dose is manufactured by a European CDMO.
Shifting Manufacturing to the US
While this tariff development is broadly negative for Sun Pharma, HSBC thinks the tariff impact on earnings depends on multiple moving parts – spread of supply chain (from active ingredients to Fill-Finish), IP location of the brand, the use of third-party manufacturers, etc. In the worst case, Sun would have to shift manufacturing to CDMO partners with plants in the US. Sun could also transfer the manufacturing of patented products to its three plants in the US.
Conclusion
In conclusion, the imposition of a 100% tariff by the US on imports of branded and patented pharmaceutical products is expected to have a limited impact on Indian drug makers, with Sun Pharma being the most exposed to headline risk. However, analysts believe that the impact on Sun Pharma’s earnings will be limited, as the company can pass on the tariff cost to its customers.
Indian investors and traders can keep an eye on the Indian stocks to watch and pharmaceutical stocks for more updates on the impact of US tariffs on the Indian pharmaceutical sector.
