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The Indian pharmaceutical export has been exempted in the current reciprocal tariffs by the U.S., while the medical device industry falls within. All the markets have started resetting their business-like U.S. pharma giants are working to increase their manufacturing capacities, the government of India has started strengthening the sector through the schemes (like PRIP, PLI and promotion of medical device parks) and bilateral trade agreements by different countries.
The ongoing tariff fusillades and retorts by economies like China have precipitated several conundrums and made the trade future nebulous. The flat 26 percent reciprocal tariff across the sectors also includes medical devices. The pharmaceutical sector has been kept exempt. The current tariff on Indian drugs to the U.S. is zero, while the tariffs on U.S. medicines by India are 0 percent to 10 percent. The reason behind it is much more obvious. India is one of the largest suppliers of generic medicines (around 80 percent of the US pharmaceutical market) to the US (i.e., around $9 billion), which includes diseases like diabetes, hypertension, hypolipidemia, CNS disorders, and infections.
Drug products from Indian companies had offered around $219 billion in savings to the U.S. healthcare system in 2022, according to a study by IQVIA. In the given circumstances, the U.S. is not in a position to jeopardize its domestic pharmaceutical supply chains. On the other hand, the U.S. views India as a counterbalance to China in the Asia-Pacific region. It might be a far-fetched idea to have independence for the pharma sector too, but it is difficult to erect such a large-scale domestic production capacity in a cost-effective manner in the near future, which requires around $2 billion and 5-10 years of investment. But the American pharma giants like Novo Nordisk, Eli Lilly, and others have started working on increasing the production capacities within America. It is also a truth that around 30 percent of the pharma export business to India comes from the U.S., but bilateral agreements from other regions (like the European Union, ANZ, Latin America, and RoW) are open to compensate, and the companies should diversify and de-risk their operations. There is a rough estimate that India produces around 60,000 generic brands across 60 therapeutic areas.
The medical device sector has a different scenario. The previous tariffs on Indian medical device exports to the U.S. ranged from 0 percent to 6 percent in the categories of low-value, high-volume products. The tariff imposed by India on the U.S. on most of the top ten products is 7.5 percent, with a tariff of 10 percent on the gas analysis apparatus and 0 percent on chromatographs and mass spectrometers (high-end equipment used in hospital laboratories). This sector in India is still fledgling and expected to be impacted adversely. The government of India is considering addressing the trade barriers on U.S. medical device products in exchange for greater accessibility of Indian pharmaceutical products to the American market. On the other hand, the government of India is already working to strengthen the sector through schemes like PRIP (Promotion of Research and Innovation in Pharma MedTech Sector), PLI (Production Linked Incentive), and promotion of medical device parks.
Pharma focus asia pharmaceutical industry US tariff threat Indian healthcare export
