Shares of leading Indian pharmaceutical exporters, including Aurobindo Pharma Ltd, Dr. Reddy's Laboratories Ltd, Lupin, Sun Pharmaceuticals Industries Ltd, and Zydus Lifesciences, are in focus following a significant policy announcement by US President Donald Trump.
Zero Tariff for Two Years, Then Escalation
In a recent social media post, President Trump declared that all generic drugs imported into the United States will face a zero percent tariff for a two-year period, beginning August 1, 2026. However, this initial relief is temporary. Following this period, a 100 percent tariff will be imposed for one year, escalating to 200 percent thereafter.
Trump stated that the objective of this policy is to reshoring generic pharmaceutical production into America. He warned of a penalty for companies that choose not to establish manufacturing plants and equipment within the specified timeframe, emphasizing that the policy aims to protect the people of the United States. He also noted that the existing successful policy on patented, branded, or innovative drugs would remain unchanged, citing an unprecedented level of pharmaceutical facility construction across the US.
Impact on Indian Pharma Exporters
The US market constitutes a significant portion of revenue for several major Indian pharmaceutical companies. According to Bloomberg data compiled by Business Today for FY26:
- Aurobindo Pharma: US market accounted for 46.16 percent of its total sales.
- Sun Pharma: 30.26 percent of its revenues were derived from the US.
- Lupin: North America contributed 41.04 percent to its revenues.
- Zydus Lifesciences: US business made up 43.85 percent of its total revenues.
More than 90 percent of medicines sold in the US are generics, as per the US Food and Drug Administration, underscoring the potential impact of this tariff policy.
Broader Trade Context
This generic drug policy follows a previous executive order signed by Trump in April, which imposed 100 percent tariffs on branded pharmaceuticals imported into the US. That measure was intended to pressure manufacturers into agreeing to government drug pricing deals or committing to domestic production.
The announcement also comes amidst ongoing trade discussions between India and the US, which have yet to yield a consensus on a comprehensive trade agreement. Despite earlier expectations of a limited deal, recent talks, including a visit by US Trade Representative Jamieson Greer to New Delhi, failed to finalize an interim agreement.
Among Indian pharmaceutical firms, Aurobindo Pharma stands out as a major generic player in the US, operating three manufacturing sites within the country. One of these facilities specializes in niche formulations like dermatology, transdermal, and respiratory products, with potential for expansion.