Indian Pharmaceutical Companies 'Can Breathe Easy For Now' On U.S. Reciprocal Tariffs Exemption: Report

Despite a drop in the global stock market, shares of Indian pharmaceutical companies increased 5% on Thursday after the administration of U.S. President Donald Trump removed medicinal goods from the list of imports subject to reciprocal tariffs. Asian healthcare stocks also experienced a significant surge on Thursday, with Indian generic drugmakers leading the charge.

U.S. Tariff Exemption for Pharmaceuticals:

President Donald Trump imposed a 10% tariff on a wide range of imports into the U.S., including goods from both rival countries and allies. However, some products were temporarily exempt from these tariffs, with pharmaceuticals being one of them.

This exemption provided relief to countries like India and Japan, which are major exporters of pharmaceutical products, as it allowed their drugs to continue entering the U.S. market without the additional 10% tax, helping to protect their export industries and maintain competitive pricing in the U.S. market.

According to the data and research firm Observatory of Economic Complexity (OEC), the U.S. bought about one-third of all the medicines India sold to other countries, which was worth $9 billion in 2024. Most of these medicines were generic drugs, which are cheaper versions of popular brand-name medicines. In 2023, Japan also sold about $6.34 billion worth of products to the U.S. These numbers show how important the U.S. market is for countries like India and Japan, especially for their pharmaceutical industries.

Analysts' Perspective on Tariff Exemption and U.S. Sales Contribution:

Analysts at Jefferies said that Indian pharmaceutical businesses, who depend heavily on the United States for their income, "can breathe easy for now," but they also warned that tariffs at a later time could be ruled out, as per Reuters report.

The brokerage also highlighted the estimated U.S. sales contributions for key Indian pharma firms in FY25. Syngene is expected to generate 68% of its sales from the U.S., followed by Gland Pharma at 54%, Biocon at 50%, Zydus Life at 45%, Dr. Reddy's at 43%, Piramal Pharma at 41%, Lupin at 35%, Sun Pharma at 30%, Cipla at 28%, Alkem at 20%, and Laurus Labs at 17%.

These figures underscore how crucial the U.S. market is for India's pharmaceutical exports, particularly for generic drugs. While the current tariff exemption offers some relief, Jefferies advises staying cautious and monitoring potential policy changes as the trade situation continues to evolve.

According to Reuters, the government-supported trade organisation Pharmaceuticals Export Promotion Council of India (Pharmexcil) said the U.S. exemption will improve the two nations' healthcare cooperation.

According to the Boston Consulting Group cited in Reuters report, in addition to selling generic medicines in the United States, Indian businesses also provide contract manufacturing services to American companies; this industry is predicted to grow sevenfold by 2035.

Indian Pharmaceutical Stocks Outperforming the Market:

In contrast to the benchmark Nifty 50 (.NSEI), which opened a new tab down 0.25%, the country's pharmaceutical stocks index (.NIPHARM) soared more than 3%, setting a record for its largest one-day gain in ten months. The top three pharmaceutical companies in India by sales are Sun Pharma (SUN.NS), Cipla (CIPL.NS), and Dr. Reddy's (REDY.NS), all opened new tabs and saw gains of 3% to 6% on Thursday.

The pharmaceutical index of the Indian market itself was poised for its largest intra-day leap in more than four years, and all 20 of its components were trading higher.

Performance of Japan's Stock:

The benchmark Nikkei index (.N225), which opens a new tab, fell to an eight-month low in Japan, while Takeda (4502.T) and Daiichi Sankyo (4568.T) climbed 2% and 2.7%, respectively.