Pharma shares declined in early trade on Wednesday after US President Donald Trump declared a phased tariff plan for imported generic medicines. The Nifty
Pharma Index declined nearly 2% with all its constituents also plunging in trade. Shares of Lupin, Gland Pharma, Aurobindo Pharma, Ajanta Pharma, Sai Life Sciences and Zydus Lifesciences fell over 2% each in early trade. US President Donald Trump declared a phased tariff plan on imported generic drugs to boost US' domestic pharmaceutical manufacturing. Shares of Sun Pharma, Cipla and Dr Reddy's were also among the top losers on the Nifty 50 as Donald Trump's announcement raised worries over the long-term impact on Indian drugmakers with significant exposure to the US market. Under the proposed framework, generic drugs imported into the US will have a 0% tariff for two years from August 1. However, from August 2028, a 100% tariff will be imposed for one year, followed by a 200% tariff thereafter. Donald Trump's tariff plan aims to encourage pharmaceutical manufacturing to shift to the United States. Trump stated that tariffs on patented and branded medicines will remain unchanged. However, the announcement triggered a selloff in Indian pharmaceutical companies, which are among the largest suppliers of affordable generic medicines to the US. Some analysts noted that manufacturing generic medicines in the US would incur 25-30 percent higher costs than in India and shifting production is hard to be accomplished in the two-year transition period allowed by Trump. Experts believe the proposed tariff structure at the moment seems like a wait and watch and mixed approach for Indian pharma companies, as many of them get a large share of their revenue from the US generics market. They also feel intense competition, quality requirements and the clear focus of the upcoming framework in the US could present fresh challenges for Indian drugmakers that have a significant exposure to the US market. In fact some analysts feel 2 years is a long time away and a lot can happen, it could also be more or less the end of Trump’s Presidency and this tariff plan may not be implemented at all. G. Chokkalingam Head of Research at Equinomics Research told Times Now Digital, "investors of pharmaceutical stocks need not worry too much about Trump’s proposed new tariff plan. Two year period is quite reasonable period for some of Indian companies to set up units in the US. They may not fully replace Indian operations with units in the US. However increasing efforts to invest in the US will pacify US leadership and minimise the scope for adverse moves against Indian companies. By the time the 2-year grace period is getting over ( i.e. by August 2028), his term is also coming closer to end. New leadership may not be so aggressive as over 100% tariff on pharmaceutical imports into the US will increase the cost for US households quite substantially. It is also highly possible for reversal of his own proposals as the US President Trump is well known for frequently reversing his own proposal."
