Branded Now, Generics Next? Mapping the U.S. Pharma Tariff Overhang

The Supply Chain Reality

A large share of the medicines consumed in the United States, particularly their active pharmaceutical ingredients (APIs), is manufactured abroad. APIs are the essential components of any drug that produce the intended therapeutic effect.

 According to the U.S. FDA’s FY2024 quality report, only 41% of registered manufacturing sites supplying drugs to the U.S. are located within the country. The dependence is even more pronounced for APIs, with about 72% of API manufacturing facilities that supply the U.S. market situated overseas. While the production of finished-dose medicines (the tablets and capsules patients actually consume) is somewhat more balanced, it too relies heavily on foreign production. For generic medicines, prior FDA analyses show that around 60% of finished-dose manufacturing sites are located outside the U.S.

India’s Role in Global Pharma

This is where India’s pharmaceutical industry plays a crucial role. India ranks third globally in pharmaceutical production by volume and 14th by value, underscoring its importance in the global supply chain.

The country’s pharmaceutical exports reached ₹2,59,658 crore (US$30.38 billion) in FY25, up from ₹2,43,119 crore (US$27.82 billion) in FY24. Of this, exports to the United States alone were valued at US$8.72 billion in 2024, as per UN COMTRADE data.

Most of these exports consist of generic APIs, the same drug molecules produced by approved manufacturers once the original patents or exclusivities expire. Branded APIs, by contrast, are produced by the innovator companies while their patents remain in force.

Branded Drugs and the Cost Equation

It’s important to note that for brand-name drugs, U.S. pricing is driven far more by patent protection, market exclusivity, and negotiations between payers and pharmacy benefit managers (PBMs) than by manufacturing location. Production costs are typically a small fraction of the final price, so simply relocating production to the U.S. is unlikely, on its own, to make branded medicines significantly cheaper.

Trump’s New Tariff Policy

U.S. President Donald Trump has unveiled a new round of tariffs, announcing a 100% duty on imports of branded or patented drugs starting 1 October, unless the companies importing them are actively building manufacturing facilities within the United States.

The tariffs imposed on pharmaceuticals are primarily driven by two interconnected goals:

• To compel drug manufacturers to move production back to the U.S. by exempting companies that are actively building new American manufacturing plants from the 100% import tax.
• To address national security concerns, given U.S. dependency on foreign supply chains (like India and China) for essential medicines, which poses a critical risk during crises and necessitates a “Buy American” policy to ensure a secure, self-sufficient domestic supply.

Impact on Indian Pharma

Indian pharma exports, mostly low-cost generics, aren’t expected to be hit right now because generics are currently exempt from the new U.S. tariff move. But they could still be targeted later.

In May, President Trump signed an executive order pushing drugmakers to cut U.S. prices to match those abroad, warning that if they don’t, the government could change rules or allow more imports of cheaper medicines. Sun Pharma, on its Q1FY26 call, said it’s in “wait and watch” mode.

Meanwhile, the U.S. Commerce Department has opened a Section 232 national-security review of pharma imports (finished drugs, APIs, key starting materials, and medical countermeasures). A report is due December 27, 2025, with a presidential decision expected by March 2026. Potential actions include tariffs, quotas, licensing, or negotiated agreements. So even though generics are exempt today, tariff risk for generics and APIs still hangs over the sector.

Conclusion

At present, the announced U.S. tariffs apply only to branded or patented drugs, while generics remain exempt. However, the ongoing Section 232 national-security review covering finished drugs, APIs, key starting materials, and medical countermeasures is scheduled to deliver findings by December 27, 2025, with a presidential decision expected by March 2026. The review could result in further actions, including tariffs, quotas, licensing, or negotiated agreements, which may extend the scope of trade measures to generics and APIs.

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