The Indian pharmaceutical industry is facing renewed headwinds following recent statements from U.S. President Donald Trump regarding potential tariffs on pharmaceutical imports. These pronouncements have triggered concerns among Indian drug manufacturers, given their significant reliance on exports to the U.S. market. The Nifty Pharma index has already reflected this apprehension, experiencing a notable dip.

Several Indian pharmaceutical companies with substantial U.S. exposure could be particularly vulnerable if these tariffs are implemented. These include:

1. Granules India: Granules India has a significant presence across the pharmaceutical manufacturing value chain. A substantial portion of the company's revenue comes from North America. According to the FY24 annual report, 66% of Granules India's total revenue came from North America, with the US market contributing 79% of revenue in the March 2025 quarter. Given this significant exposure, any tariff-related cost increases could significantly affect the company's topline and margins.

2. Aurobindo Pharma: Aurobindo Pharma has established a strong foothold in over 150 countries, specializing in generic formulations, APIs, and injectables. Notably, it holds the position of the largest generic drug company in the U.S. Half (48%) of Aurobindo's revenue comes from the US. The company also holds the top spot in the US in terms of oral solids prescription volume, commanding a 10.5% market share. Given this heavy reliance on the U.S. market, proposed tariffs could present near-term headwinds for the company.

3. Dr. Reddy's Laboratories: Dr. Reddy's is another major Indian player with a significant presence in the U.S. market. Analytical service HDFC Securities has adjusted their estimates under different scenarios, with negative FY27 EBITDA impact across their coverage universe saying it can be anywhere from 3-45% in a scenario where Indian companies entirely bear the brunt of a 100% tariff. Even a 50% pass-through could have an outsized impact. It is a new uncertainty for Indian pharma companies with high US exposure like Dr. Reddy's (47%).

4. Sun Pharmaceutical Industries: Sun Pharma, a heavyweight in the Indian pharmaceutical sector, also has substantial U.S. sales. Nomura estimated Sun Pharma US sales at $2.1 in FY26 and $2.3 billion in FY27. Given its considerable presence in the U.S. market, the imposition of tariffs could have a notable impact on its financial performance.

The potential implications of these tariffs extend beyond individual companies, affecting the broader Indian pharmaceutical industry and even the U.S. healthcare system.

Potential Impacts:

• Increased Production Costs: Tariffs could raise production costs for Indian firms, reducing their competitiveness in the U.S. market.
• Price Increases for Generic Medicines: The cost of generic medicines in the U.S. could rise, potentially impacting healthcare affordability.
• Supply Chain Disruptions: The existing pharmaceutical supply chain could face disruptions, potentially leading to drug shortages.
• Reduced Competitiveness: Indian firms may become less competitive, which could affect their long-term growth prospects.

While the threat of U.S. tariffs poses challenges, the Indian pharmaceutical industry possesses inherent strengths. It is a major supplier of medicines to the U.S., with Indian firms accounting for a significant percentage of prescriptions filled in the country. Moreover, Indian generic drugs have contributed substantially to cost savings in the U.S. healthcare system.

Companies may explore strategies such as absorbing a portion of the tariff costs, negotiating with U.S. customers, or focusing on other export markets to mitigate the impact. The long-term fundamentals of the Indian pharmaceutical industry remain strong. However, companies with high revenue exposure to the U.S. could face near-term challenges if tariffs are implemented.