The exemption granted by the U.S. administration on pharmaceutical imports has temporarily eased concerns for Indian drug manufacturers, but analysts warn that potential future trade measures could introduce new challenges.

A report from HDFC Securities suggests that pharmaceutical products might be included under future tariff actions based on the Trade Expansion Act of 1962. This legislation provides the U.S. President with the authority to modify international trade tariffs, including the imposition of new duties.

While the first round of tariffs has left Indian pharmaceutical exports unaffected, industry experts caution that this relief may not be permanent. The report states that concerns regarding price hikes in generic medicines, supply chain disruptions, and the rationalization of low-margin products have been temporarily mitigated. However, it highlights that pharmaceuticals may still face duties under potential future trade measures.

Indian pharmaceutical exports to the United States, which accounted for nearly 40% of U.S. generic drug imports, were valued at approximately $8 billion in FY24, reflecting an 8 per cent compound annual growth rate (CAGR) over the past decade. Despite the current tariff exemption, Indian pharmaceutical stocks have shown signs of caution, with the sector index declining nearly 10% in the last three months amid concerns about future restrictions.

Industry analysts suggest that continued exemption from tariffs would be beneficial for sustaining stable export volumes. However, if the U.S. enforces new levies on Indian pharmaceutical imports, both nations could face significant repercussions. The United States relies heavily on cost-effective Indian generics to maintain affordable healthcare, and additional tariffs could lead to rising drug prices and inflationary pressure in the sector.

Indian generic drugmakers, operating with already narrow profit margins, may struggle to absorb additional costs if tariffs are imposed. These financial pressures could force companies to pass the costs onto consumers or insurers, potentially leading to drug shortages and further squeezing profit margins.

The long-standing role of the Indian pharmaceutical industry in supplying affordable generics to the U.S. healthcare market remains crucial. Any future tariff imposition could disrupt this balance, impacting medicine affordability in the U.S. and profitability for Indian manufacturers. Industry stakeholders remain watchful as trade policies continue to evolve, determining the long-term outlook for Indian pharmaceutical exports.