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Pharma stocks on the edge as tariff overhang looms large

ICICIdirect Research 07 Apr 2025 DISCLAIMER

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.

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