Trump Imposes 100% Tariff on Pharma Imports

Trump Imposes 100% Tariff on Pharma Imports

Why in News?

Recently, US President Donald Trump announced a 100% tariff on imports of branded and patented pharmaceutical drugs, effective October 1, 2025. The decision has created concerns in the global pharma industry. 

Highlights of the New US Pharmaceutical Tariff Policy

• On September 25, 2025, President Donald Trump announced a significant policy shift to impose a 100% tariff on pharmaceutical drugs.
• The new pharmaceutical tariff will be effective from October 1, 2025.
• The new tariff mandates that all branded and patented pharmaceutical drugs imported into the U.S. will be subject to a 100% duty.
• To qualify for an exemption from the 100% tariff, pharmaceutical companies must demonstrate that they have broken ground or are under construction on a manufacturing plant within the United States. Companies that have not yet started construction will face the full tariff.

Reasons Behind the 100% U.S. Pharmaceutical Tariff

• Reducing Dependence: A primary reason for the tariff is to decrease the United States’ reliance on foreign pharmaceutical manufacturers. By imposing significant tariffs on imported branded and patented drugs, the administration seeks to encourage domestic production. This move is intended to mitigate risks associated with supply chain disruptions.

• Encouraging Investment: The tariff policy is designed to incentivize pharmaceutical companies to establish manufacturing facilities within the United States. Companies that have initiated construction of such facilities are exempt from the tariff, thereby reducing their operational costs. This approach aims to create jobs and stimulate economic growth. 

• Addressing Trade Deficits: The imposition of the 100% tariff aligns with broader efforts to address trade imbalances and promote fair trade practices. By targeting specific imports, the administration aims to rectify perceived unfair trade practices and reduce the U.S. trade deficit. The policy seeks to leverage tariffs as tools to achieve more balanced trade relationships.

• Enhancing National Security: By reducing dependence on foreign suppliers, particularly those in countries with which the U.S. has complex geopolitical relationships, the policy aims to mitigate vulnerabilities in the event of international conflicts or disruptions.

Pharmaceutical Drugs: Branded (Patented) and Generic

Pharmaceutical drugs are substances used to diagnose, treat, or prevent diseases and medical conditions. They play a crucial role in modern healthcare by improving the quality of life and extending life expectancy. Pharmaceutical drugs can be broadly categorized into two main types:

• Branded (Patented) Drugs: Branded drugs are the original medications developed by pharmaceutical companies. They are introduced to the market under a proprietary name and are protected by patents, granting the manufacturer exclusive rights to produce and sell the drug for a certain period. This exclusivity allows companies to recoup the significant investment made in research and development.

• Generic Drugs: Generic drugs are copies of branded drugs that contain the same active ingredients, dosage form, strength, and administration route. They are bioequivalent to their branded counterparts, meaning they perform in the same manner in the body. Generic drugs are typically marketed after the original drug’s patent expires, allowing other manufacturers to produce and sell them.

Impact of the U.S. Pharmaceutical Tariff on India

• Decrease in Pharmaceutical Exports: In fiscal year 2024, India exported $8.7 billion worth of pharmaceutical products to the United States, accounting for approximately 31% of its total pharmaceutical exports. The newly imposed tariffs are expected to reduce the competitiveness of Indian pharmaceutical products in the U.S. market, potentially leading to a decline in exports.

• Financial Strain on Indian Companies: Major Indian pharmaceutical companies, such as Dr. Reddy’s Laboratories, Aurobindo Pharma, Zydus Lifesciences, Sun Pharma, and Gland Pharma, derive a significant portion of their revenue from the U.S. market, with estimates ranging from 30% to 50%. The new tariffs could impose financial strain on these companies, as they may struggle to absorb the increased costs. 

• Impact on the Indian Economy: Pharmaceutical exports to the U.S. represent a significant portion of India’s total exports. In fiscal year 2025, India’s pharmaceutical exports reached a record $30 billion, with the U.S. accounting for a substantial share. A decline in these exports could adversely affect India’s trade balance and overall economic health. The ripple effects may extend to employment in the pharmaceutical sector and related industries.