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Pharma stocks on the edge as tariff overhang looms large


US has revealed plans for possible tariffs on pharmaceuticals in the near future with a ‘separate category’ status. This came after the Trump administration had exempted pharmaceutical products from the list of imports hit by reciprocal tariffs.
As we wait for actual tariff announcements, we expect some concessional bilateral negotiations to take place as pharma being a sensitive sector having public health at stake.
As per India’s context, Indian Pharma exports to the US stood at ~US$ 9 billion while US imports to India stood at US$ 800 million in FY24. Of these US$ 800 million pharma imports from the US, India imposes 10% duty only on US$ 400 million worth of imports.
Indian exports account for ~40% of the generic pharma volumes in the US. Imposing a tariff on Indian pharma exports may lead to unsustainable margin squeezing for the Indian pharma players so they are likely to pass on the tariff to the end consumer leading to higer drug prices.
Secondly, there aren’t other alternatives for generic drugs globally other than India and China to fill the vacuum in case most of the Indian players decide to vacate the space.
Lastly, the US is already grappling with drug shortages which has touched almost 300 in Q3FY25 which is likely to aggravate further.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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