India's pharma companies urge New Delhi to negotiate with US on tariffs from a position of strength

India's pharmaceutical industry is urging its government to negotiate with Washington from a “position of power” on tariffs set to take effect next week, rather than yield to the pressure. US President Donald Trump, who has announced retaliatory tariffs on a host of countries – allies and adversaries alike – since taking office in January, said this month that he would impose 25 per cent tariffs on India starting on April 2 in retaliation for its steep tariffs on US exports.

India is known as the "world’s pharmacy" and the US is a crucial market for its manufacturers that send nearly half of all generic medicines, which are cheaper versions of brand-name medicines, to the US.

Indian companies supplied 47 per cent of all generic prescriptions to the US in 2022, according to research firm IQVIA. Washington saves billions in healthcare costs, about $219bn in savings from Indian generics in 2022, according to IQVIA.

India’s exports of pharmaceuticals to the US were $8 billion in 2023-24, while imports stood at just $0.4 billion.

There are zero tariffs on Indian pharmaceutical products entering the US, but exporters from the US face an average of 10.91 per cent import duty on pharmaceuticals to India.

Mr Trump has repeatedly labelled India the 'tariff king' and vowed to impose reciprocal tariffs on imports from New Delhi. Ravi Uday Bhaskar, former Director General of Pharmexcil – an arm that functions under the Ministry of Commerce and Industry to promote pharmaceutical exports from India, said that Mr Trump’s reciprocal tariffs were irrational as the US has gained significantly more than India from using made-in-India medicines and the country continues to rely heavily on Indian drugs.

He added that India must not give in to reciprocal tariff threats and should engage with the US on tariffs from a “position of power".

“President Trump is highly unpredictable and his actions in different countries, he is not keeping to his words … Why is the US putting these tariffs? It is because of their strength and economy. When they are exercising their power of economy, threatening the people … we should negotiate from our position of power. India is exporting to the entire world, and there is no alternative as far as generics are concerned,” Mr Bhaskar told The National.

India is the largest exporter of generic medicines in the world, he added, supplying 200 countries with pharmaceuticals, he said.

"India is in a strong position and the US has saved billions of dollars by purchasing medicines from India. Nobody in the world is in a position to supply such a quantity of generic medicines to the US so the tariffs are irrational,” he added.

Uncertain future

While the full impact remains uncertain, experts warn his retaliatory tariffs could severely disrupt India’s pharmaceutical sector, destabilising trade in the short term – but also inflict significant harm on US consumers by driving up costs and affecting millions."

Dilip Shanghvi, founder and managing director of Sun Pharmaceutical Industries, India’s largest pharmaceutical company that operates in over 100 countries told an industry gathering in February that if tariffs are levied, they will be passed on to customers.

B Parthasaradhi Reddy, a parliamentarian and owner of Hetero Pharma, which is the world's largest producer of antiretroviral drugs, told the upper house of parliament this week that the proposed tariffs could make Indian medicines more expensive in the US, leading to a loss of market share and reducing their competitiveness.

“Any disruption in the exports of pharma products could lead to a decline in foreign exchange revenue and cause potential job losses in manufacturing, research, distribution, and other sectors tied to the pharma industry," Mr Reddy said.

Amid fears of disruption, pharma companies and industry lobby groups have been holding meetings with the Indian government over the issue with Indian Pharmaceutical Alliance, a representative of the country's biggest drugmakers, suggesting drug duty be reduced to zero to avoid reciprocal levies.

Officials from India and the US, including Brendan Lynch, the assistant US trade representative for South and Central Asia, have held a series of talks this week to negotiate a trade deal and lower tariffs but the result of the meetings remains unclear.

Indian drugmakers have the option to shift their manufacturing to the US to avoid high tariffs, but experts say it will not be a viable option because relocation or building just one new manufacturing facility could cost up to $2bn and take five to 10 years before it is operational, according to lobby group PhRMA.

“The manufacturing cost is such that it may not make sense to offshore for Indian drugmakers to make [drugs] because the prices of drugs are very low in the US and given that sort of prices prevail in the generic market, even after the tariffs, it is questionable whether shifting manufacturing would help bring down the cost,” Sujay Shetty PwC Global Health Industries Advisory leader of PWC said.

Viranchi Shah, national president of the Indian Drugs Manufacturers Association, said that even if the tariffs on pharmaceuticals are not given concessions, India will continue to remain the most affordable source of half of the US generics as the only competition is China, the tariffs of which are higher than India, causing no harm to its suppliers.

“Probably the second most competitive producer [for India] is China, but their tariffs are most likely to be higher than India … Indian medicines are trusted because of our track record. There would not be a significant impact in terms of numbers [supply chain].”