India's Pharmaceutical Sector at a Crossroads

The ongoing trade dynamics between India and the United States are casting a shadow of uncertainty over the pharmaceutical sector, especially with recent tariff announcements by the US government. Indian pharmaceutical companies, which supply nearly half of the US's generic drug needs, find themselves in a precarious position despite initial exemptions.

By Hitesh Sharma

Temporary Relief and Looming Threats

The exemption from tariffs offers a brief respite to the Indian pharmaceutical industry, particularly for formulations. However, the status of Active Pharmaceutical Ingredients (APIs) and bulk drugs remains under scrutiny. President Donald Trump's indication of potential reciprocal tariffs on pharmaceuticals adds to the sector's anxiety, with a 90-day pause providing only temporary relief.

Strategic Responses to Trade Uncertainties

Indian pharmaceutical companies are advised to remain agile, exploring market diversification strategies in Europe, Africa, and Latin America. The focus should be on high-margin products and optimizing supply chains to mitigate the impact of potential tariffs. The generics market, known for its price sensitivity, faces particular challenges in absorbing increased costs.

Looking Ahead

The long-term outlook for India's pharmaceutical sector in the US market remains uncertain. While the potential for Free Trade Agreements (FTAs) offers a glimmer of hope, companies must stay vigilant and adaptable in the face of shifting global trade policies.

(Hitesh Sharma is Partner and Lifesciences Leader – Tax, EY India)