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If Indian and global pharmaceutical companies absorb the 100% tariff, many segments, especially those with low margins, such as oral solids, would become commercially unviable, said Chandrachur Datta, partner , Vector Consulting Group.
Companies may leave these segments or cease supplying this market. As alternative suppliers cannot step up due to the lengthy and complex FDA approval and regulatory requirements, drug shortages are expected to grow in the US, thereby adding stress to an already limited supply and causing price escalations. On the other hand, if companies decide not to absorb the tariff, the distributors in the US will carry the burden, and who knows, that might be passed on to the consumer, he added.
Establishing manufacturing sites within the United States could be a longer-term solution; however, setting up a plant, executing technology transfer, and gaining FDA approvals would likely take years. Having said that, near-term disruptions are likely to persist, and many companies could start reviewing their development pipelines with a view to prioritizing other markets or complex molecules. For CMO business packaging for US-based brands, there is currently no impact. Customers within the US, primarily wholesalers, are unaffected, said Datta while commenting on US President Donald Trump’s 100% tariff announcement on pharma and its impact on Indian companies.
Additionally, India exports approximately 40 percent of its generic drugs to the US, so that any disruption would have a significant impact. Higher prices would then increase healthcare costs, raise insurance premiums, and place a burden on public programmes such as Medicare or Medicaid.
In either case, what was meant to protect US interests may backfire in the form of either drug shortages or rising costs, all the while making the investment in the US market less attractive for pharma, said Datta.
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