Summary: The U.S. has imposed 100% tariffs on branded and patented drug imports effective October 1, 2025. Although generic drugs remain exempt from these tariffs, the announcement marks a drastic change for pharmaceutical trade which has remained unrestricted for a long time. For Indian pharmaceutical companies supplying nearly half of all generic medicines consumed in the U.S., this development requires them to reassess their market strategies, compliance frameworks, and long-term supply chain planning to navigate an increasingly complex geopolitical environment.
On September 25, 2025, the United States of America (“U.S.”) announced 100% tariffs on branded and patented drug imports, effective October 1, 2025.[1] According to the declaration, tariffs will not apply to corporations that are “building”, “breaking ground” for or have pharmaceutical manufacturing plants “under construction” in the US. This announcement came after an investigation by the US Department of Commerce under Section 232 of the Trade Expansion Act of 1962,[2] evaluating whether pharmaceutical imports endanger national security. Also, as per a report dated October 9, 2025, generic drugs have been exempted from these tariffs to prevent shortages.[3]
The announcement marks a significant change in the global pharmaceutical trade. The tariff announcement has created trade and policy uncertainty concerns within the pharmaceutical industry, which largely enjoyed a safe distance from most trade regulations and export controls. For pharmaceutical companies with extensive US presence, this development necessitates a comprehensive reassessment of market strategies, compliance frameworks, and long-term supply chain planning to navigate an increasingly complex geopolitical environment.
Immediate Impact on Indian Pharmaceutical Companies
India is the largest supplier of generic drugs globally. Indian pharmaceutical companies supply nearly 50% of all generic medicines consumed in the US. Indian drug imports contribute significantly to the US healthcare systems’ savings, totalling USD 1.3 trillion for years 2013-2022.[4]
The immediate impact of the latest US tariff announcements on Indian pharmaceutical companies appears to be relatively limited due to the nature of their exports. While the US represents India’s primary pharmaceutical export destination, comprising approximately 35% of total exports,[5] most of these shipments constitute generic pharmaceutical drugs that fall outside the scope of the newly-implemented tariffs.
The tariffs also indicate enhanced regulatory oversight on foreign pharmaceutical imports, potential future expansion of tariff policies, and increased compliance costs for companies seeking to maintain US market access in the future. Companies that have manufacturing facilities in the US or have at least commissioned them would likely be able to avoid the adverse impact of the tariffs. Indian pharmaceutical companies supplying branded and specialty drugs will feel the impact of the tariffs.
Important Considerations for Indian Pharmaceutical Companies
The immediate impact of the announced tariffs on branded and patented drugs is limited for most Indian companies since they largely export tariff-exempt generic drugs to the US.[6] Indian companies that are mostly supplying generic drugs to the US or have drug manufacturing facilities in the US or have started constructing such drug manufacturing facilities will also not be directly impacted by these tariffs. However, several major Indian drugmakers engaged in the production and export of branded and specialty drugs may expect a significant fall in sales in the US, alongside a further fall in stock market valuations once the tariffs take effect.[7]
As the tariff announcement follows an investigation by the US Department of Commerce, it also raises concerns that further investigation may lead to expanded tariffs for the wider pharmaceutical industry.[8] Future tariffs could potentially include generic drugs as well, thereby impacting nearly all Indian pharmaceutical exporters.
Pharmaceutical companies may also face exporter-specific investigations for legal compliance verification, national security assessments, and federal authority raids at their US manufacturing facilities. For importers, there may be supply chain investigations, enhanced customs procedures, and extensive disclosure requirements. These disclosure requirements are likely to complicate existing supply chains in the global market.[9]
The tariff announcement coincides with the US Food and Drug Administration (“FDA”) PreCheck Initiative, which aims to regulate the construction of manufacturing sites in the US. Together with the tariffs, the PreCheck Initiative complicates the regulatory framework for Indian companies and represents a shift towards increased scrutiny of pharmaceutical supply chains.[10]
The elevated tariffs and complex regulatory structures are expected to raise the compliance requirements for Indian pharmaceutical companies, which will be required to establish appropriate personnel and mechanisms for tariff calculations, strategic customs valuation of goods to minimise duties, supply-chain diversification, and management of any raw material-related disruptions affecting their manufacturing processes.
Recommendations for Indian Pharmaceutical Entities
The implementation of pharmaceutical tariffs has created considerable business and operational uncertainty for Indian pharmaceutical companies, necessitating the adoption of the following strategic measures to proactively identify, monitor, and address business continuity issues and legal risks:
- Monitor Policy Developments and Tariff Evolution: Indian companies should continuously monitor the US tariff framework, ongoing investigations by the US Department of Commerce, as well as any regulatory actions or directives issued by the FDA through its PreCheck Initiative. Understanding these dynamic legal and trade environments can aid in adjusting compliance strategies accordingly.
- Evaluate Trade Practices and Manufacturing Strategies: Indian companies must review their import-export operations to ensure compliance with the evolving US tariff structure and regulatory requirements. Strategic considerations may also include offshoring production capabilities, diversifying raw material procurement sources, and exploring contract manufacturing arrangements in the US or localising manufacturing processes for sales in the US to potentially qualify for available tariff exemptions.
- Comprehensive Compliance Infrastructure: Tariffs and PreCheck Initiative require Indian pharmaceutical companies to build comprehensive compliance systems, controls to ensure proper adherence to the changing regulatory framework, and maximising benefits from available exemptions and alternative regulatory approaches.
- Diversifying Markets and Supplier Strategies: Pharmaceutical companies can proactively participate in the Production-Linked Incentive (PLI) scheme run by the Indian Government, which offers companies opportunities to reduce reliance on imported raw materials for drug production.[11] These programmes could help companies enhance their competitive position. Indian pharmaceutical enterprises should also diversify their target markets beyond the US and focus on high-margin generic products for the time being as they are currently exempted from tariffs to minimise cash flow disruption.
Conclusion
The US tariffs on pharmaceutical imports mark a turning point for Indian drug manufacturers. Beyond immediate duty impacts, these measures create sustained regulatory and operational challenges across customs, FDA oversight, and trade compliance. Sustainable competitiveness in this environment will depend on the ability of Indian pharmaceutical companies to integrate legal compliance with commercial strategy. A disciplined, legally informed approach to trade policy will preserve access to the US market and reinforce India’s long-term position as a leading global pharmaceutical supplier.
Strategic adaptation requires coordinated action between legal, compliance, and operational teams. Companies must diversify production and distribution networks to mitigate origin-related risks and maintain supply stability. Strengthening regulatory systems to meet heightened scrutiny from both domestic and foreign authorities is essential. Ongoing monitoring of US trade developments and proactive legal assessment of policy changes will allow Indian pharmaceutical companies to maintain market access and minimise disruption. Legal departments must prioritise a structured review of trade classifications, tariff valuation, rules of origin, and preferential access mechanisms. Contractual frameworks should incorporate provisions addressing tariff adjustments, changes in law, cost allocation, and dispute resolution. Compliance programmes should document customs procedures, broker supervision, and recordkeeping protocols that align with both Indian and US legal standards.
[1] Truth Details | Truth Social
[2] Section 232 of the Trade Expansion Act of 1962 | Congress.gov | Library of Congress
[3] Exclusive | Trump Excludes Generics From Big Pharma Tariff Plan – WSJ
[4] How reciprocal Trump tariffs may impact Indian pharma, and become a bitter pill for the US
[5] ‘Examining impact’: India’s first response to 100% pharma tariffs by US; concerned ministries ‘monitoring matter’ – The Times of India
[6] Why Donald Trump’s 100% Pharma Tariffs May Not Impact Indian Drugmakers Much
[7] Indian pharma upset on US President Donald Trump’s 100% tariff on branded medicines
[8] Federal Register :: Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of Pharmaceuticals and Pharmaceutical Ingredients
[9] How 100% Pharmaceutical Tariffs Will Impact Domestic Manufacturing and Supply Chains
[10] FDA Announces New FDA PreCheck Program to Boost U.S. Drug Manufacturing | FDA; FDA Public Meeting: Onshoring Manufacturing of Drugs and Biological Products – 09/30/2025 | FDA
[11] US Reciprocal Tariff: Impact On Indian Pharmaceutical Export
