Trump: Tariffs on Indian drugs will be a bitter pill for Americans

If the Trump administration imposes tariffs on Indian pharmaceuticals, millions of Americans could face soaring drug prices. With trade friction escalating between the Trump administration and India, tariffs may be levied on Indian goods next month, causing many Americans to worry about a further increase in their medical burden.

To avoid this situation, Indian Commerce Minister Piyush Goyal urgently visited the United States last week to consult with U.S. officials, hoping to reach a trade agreement. Previously, the Trump administration announced that it would impose tariffs on Indian goods from April 2nd in retaliation for India's tariffs on U.S. goods.

The main purpose of Goyal's trip was to prevent key Indian export industries, especially pharmaceutical products, from being affected by tariffs. Nearly half of the non-patented drugs (i.e., generic drugs) used in the United States come from India. These generic drugs from countries like India, due to their low prices, account for 90% of the U.S. prescription drug market.

Indian generic drugs have saved the United States a significant amount of medical expenses. A study by consulting firm IQVIA showed that Indian generic drugs saved the United States as much as $219 billion in healthcare costs in 2022 alone. Experts warn that if a trade agreement is not reached, the Trump administration's tariff policy may cause some Indian generic drugs to lose their market competitiveness, forcing related companies to exit the market and exacerbating existing drug shortages.

Dr. Melissa Barber, a drug cost expert at Yale University, said that tariffs could "exacerbate the supply and demand imbalance," and the ultimate victims will be the poor who do not have health insurance. An IQVIA study funded by the Indian Pharmaceutical Alliance (IPA) shows that more than 60% of prescriptions for hypertension and mental health diseases in the United States come from India. For example, the supply of sertraline, the most used antidepressant in the United States, is highly dependent on India.

Peter Maybarduk, a lawyer for the consumer advocacy group Public Citizen, said, "We are concerned about this." He added that a quarter of American patients cannot take their medications on time due to price reasons. The Trump administration previously imposed tariffs on imported goods from China, and has already faced pressure from American hospitals and generic drug manufacturers. 87% of the raw materials for drugs sold in the United States come from abroad, mainly concentrated in China, which accounts for about 40% of the global supply.

Since Trump took office, tariffs on imported goods from China have risen by 20%, leading to increased costs of pharmaceutical raw materials. The Trump administration hopes to force companies to move production to the United States by imposing tariffs. Some large pharmaceutical companies, such as Pfizer and Eli Lilly, have already stated that they will be committed to moving some production to the United States.

However, for low-value drugs, this transfer is not economically viable. Dilip Shanghvi, chairman of Sun Pharma, India's largest pharmaceutical company, said that the drugs his company sells in the United States are priced between $1 and $5 per bottle, and the tariffs are "not enough to justify moving production to the United States." Sudarshan Jain of the Indian Pharmaceutical Alliance said: "The cost of production in India is at least three to four times lower than in the United States."

Even if companies are willing to move production, it is difficult to achieve in the short term. The lobbying group PhRMA said that building a new production facility may require an investment of up to $2 billion and take 5 to 10 years to become operational. For Indian domestic pharmaceutical companies, the impact of tariffs may also be huge.

Data from the trade research institution GTRI shows that the pharmaceutical industry is India's largest industrial export sector. India exports approximately $12.7 billion worth of pharmaceuticals to the United States each year, almost duty-free. However, U.S. pharmaceuticals entering the Indian market are subject to a tariff of 10.91%. GTRI pointed out that this "trade imbalance" of 10.9% will increase the cost of generic and specialty drugs if the United States takes reciprocal tariff measures, and believes that the pharmaceutical industry is one of the industries in the U.S. market most vulnerable to price increases.

Indian pharmaceutical companies mainly sell generic drugs, and the profit margins are already very thin, making it difficult to bear high tariff expenditures. Compared with competitors, their drug prices are much lower, and they dominate the cardiovascular, mental health, dermatology, and gynecology drug fields in the world's largest pharmaceutical market. A finance head of a large Indian pharmaceutical company, who asked not to be named, said: "We can offset single-digit tariff increases by cutting costs, but any higher increase must be passed on to consumers."

North America is the largest source of revenue for Indian pharmaceutical companies, contributing the majority of the company's one-third of revenue and profits. The finance head said: "This is the fastest-growing and most important market. Even if we increase investment in other markets, we cannot make up for the losses in the U.S. market." Umang Vohra, CEO of Cipla, India's third-largest pharmaceutical company, recently stated publicly that tariffs should not ultimately determine corporate behavior, "because there is a risk that these tariffs may disappear after four years."

But four years is a long time and could determine the fate of several companies. To avoid the above situation, veteran market expert Ajay Bagga said: "India should eliminate tariffs on U.S. pharmaceuticals. The U.S. exports only $500 million worth of pharmaceuticals to India, so the impact is negligible." The Indian Pharmaceutical Alliance also suggested a zero tariff on U.S. pharmaceutical exports to avoid the negative impact of reciprocal taxation on India.

Indian Prime Minister Narendra Modi's government recently included 36 life-saving drugs in a list that is completely exempt from basic customs duties in the budget. President Trump hinted last week that India may be succumbing to his pressure. He said that India has agreed to "substantially reduce" tariffs because "finally someone has exposed what they have been doing."

Although the Indian government has not yet responded to this, pharmaceutical companies in both countries are anxiously awaiting the specific details of the trade agreement, as it may affect the lives and livelihoods of the people. Mark Linscott, a senior advisor at the U.S.-India Strategic Partnership Forum, said: "In the short term, there may be some pain due to new tariffs, but I think they will make significant progress on the first phase [trade] agreement before this fall." He added that neither country can afford disruptions to the pharmaceutical supply chain.