Trump’s Pharma Tariff: A Double-Edged Sword for Indian Drugmakers and US Consumers
US President Donald Trump has once again stirred global markets by announcing a steep 100% tariff on the import of branded and patented pharmaceutical drugs, effective October 1.
The Impact on Indian Drugmakers
The move is likely to have a major impact on Indian drugmakers, with Emkay Global’s Manish Sonthalia pegging an impact of $10 billion. Brokerages have also pointed out the potential impact of US tariffs on Indian companies, especially the likes of Sun Pharma, Biocon, and even Wockhardt.
The US Perspective: Boosting Domestic Manufacturing
From Washington’s vantage point, a full-fledged tariff on patented and branded products is meant to boost domestic manufacturing in the country, which in turn could help the nation have tighter control over the supply chain. However, in the near-term, the move risks higher costs and even access frictions.
The Fallout for US Consumers
After all, it must be noted that brands account for a minority of prescriptions in the United States but a large majority of the drug spending in the country, whereas generics make up roughly 90% of the prescriptions but only 13% of the spending, as per the U.S. Generic & Biosimilar Medicines Savings Report. This essentially means that the average American people could bear the brunt of a direct cost inflation.
Generics and Active Pharmaceutical Ingredients (APIs)
Now let’s talk about generics. On paper, generics appear to have been spared, but until there is a clarification, the ingredients of these generics could be under the blanket of tariffs. In fact, the US relies heavily on Active Pharmaceutical Ingredients (APIs), but a fraction of it gets manufactured in the country.
As per data from QualityMatters.org, only 12% of the branded API volume in the United States gets produced in the country while a whopping 43% come from the European Union. The US already charges 15% tariffs on all goods, including pharmaceuticals.
Feasibility of Onshoring and Supply Chain Disruptions
There is also the practical question of how feasible it is for companies to do onshoring, especially when it comes to pharma, as the industry’s supply chain is very global in nature. Therefore, at the end of the day, it is American people who may get severely impacted, with rising out-of-pocket costs, which in turn, might lead to an increase in insurance premium.
And to make things worse, various tariffs could lead to supply chain disruptions without actually helping the United States, at least in the near-term. For more information on the pharmaceutical industry and its impact on the global markets, visit our pharmaceutical news section.
Conclusion
In conclusion, Trump’s pharma tariff is a double-edged sword that may have far-reaching consequences for both Indian drugmakers and US consumers. While the move aims to boost domestic manufacturing, it may lead to higher costs, access frictions, and supply chain disruptions. As the situation unfolds, it is essential to stay informed about the latest developments and their impact on the global markets.
