Pharma stocks such as Sun Pharma, Ipca Labs and Ajanta Pharma came under pressure on April 6, over fresh concerns around the US government’s latest tariff announcement on patented drugs.
Shares of Sun Pharma fell as much as 2.30 per cent to Rs 1,654.90 apiece on the NSE. Likewise, Ipca Labs fell over 4 per cent to Rs 1,426 apiece. Ajanta Pharma, Abbot India, and Piramal Pharma also fell in the 1-2 per cent range. However, on the other hand, Laurus Labs, Mankind Pharma, Cipla, Glenmark, Gland Pharma, Biocon, Torrent Pharma, and Aurobindo Pharma were in the green.
Understanding The 100% Tariff On Patented Drugs
The US President Donald Trump, on April 2, signed an executive order announcing a 100 per cent tariff on imports of patented pharmaceuticals and related ingredients, which will come into effect on July 31.
The White House said the aim of the tariffs is to reduce the country’s dependence on overseas supplies, which Washington believes could jeopardise access to critical medicines during periods of global supply chain disruptions.
Companies that have entered into a “most favoured nation” pricing arrangement and are in the process of setting up manufacturing facilities in the US to localise production of patented drugs and their ingredients will attract zero tariffs.
For firms that are investing in such onshoring efforts but have not signed a pricing agreement, a 20 per cent tariff will be charged initially, which will be progressively raised to 100 per cent over a four-year period.
Trump clarified that generic drugs will remain outside the scope of the tariff “at this time”. However, he also indicated that this exemption may not be permanent. He added that the administration could review imports of generic drugs and their ingredients, with a decision on possible curbs likely within a year.
“I have determined that it is necessary and appropriate to impose a 100 per cent ad valorem duty rate on the import of patented pharmaceuticals and associated pharmaceutical ingredients.. The Secretary [of Commerce] found that the present quantities and circumstances of imports of pharmaceuticals and pharmaceutical ingredients threaten to impair the national security and economy,” Trump said while announcing the tariff order.
Which Pharma Companies Will Be Impacted The Most
The US is India’s their largest export destination, accounting for nearly 35 per cent of outbound shipments, according to Ministry of Commerce’s India Brand Equity Foundation (IBEF).
Analysts believe the impact of the latest tariffs will be contained, as risks are largely confined to companies with exposure to patented or specialty drugs.
Maitri Sheth, Pharmaceuticals at Choice Institutional Equities, said the tariffs are targeted at patented drugs produced outside the US, which creates some exposure for select Indian players. “The new US pharma tariffs are primarily aimed at patented drugs manufactured offshore, which creates some exposure for Indian companies with specialty portfolios. Firms like Sun Pharma and Glenmark Pharmaceuticals, and others such as Dr Reddy’s Laboratories, Lupin and Zydus Lifesciences, do have a presence in patented/specialty products, some of which are manufactured outside the US, making them technically exposed.”
However, she added that the overall impact is likely to be “limited” as patented products still form a relatively “small share of revenues” for most Indian players
She further added that contract development and manufacturing (CDMO) players such as Divi’s Laboratories are unlikely to see meaningful disruption. “For CDMO players, such as, Divi’s Laboratories, the impact should be minimal, given US-based capacities and contract structures, with the tariff burden largely borne by innovator companies. Overall, while there may be minor near-term pressure on select specialty portfolios, the structural growth story for Indian pharma remains intact.”
Antu Eapen Thomas, Research Analyst at Geojit Investments, highlighted that the policy provides a 120–180-day “negotiation window,” offering temporary relief for companies that have not yet entered into agreements with the US government.”
He added that the exemption for generics and biosimilars significantly reduces the broader impact. “Generic drugs and biosimilars are exempt, which significantly limits the direct impact on the broader Indian pharma sector, given that exports to the US are predominantly skewed toward generics. As a result, the overall industry impact is expected to remain limited.”
