A proposed 100% tariff on patented pharmaceutical products comes with execution timelines of 120 days for larger firms and 180 days for smaller ones.
In contrast, products sourced from areas like the EU, Japan, Korea, Switzerland, and Liechtenstein will incur a lower 15% tariff, with imports from the UK facing an even lesser levy.
Companies that enter into Most Favoured Nation (MFN) pricing agreements combined with onshoring commitments will be exempt from tariffs until January 20, 2029. Those that choose only onshoring agreements will initially encounter a 20% tariff, which could escalate to 100% over four years.
Generic drugs
Currently, generic pharmaceuticals, biosimilars, and related ingredients are exempt from tariffs, although this exemption will be reevaluated after one year.
Certain categories, such as orphan drugs, animal health products, select specialty medicines, and supplies from countries with trade agreements, will continue to be exempt.
The US government also intends to implement stricter monitoring and enforcement measures, which will include external audits and the authority to impose or increase tariffs retroactively.
Supply chain focus
This policy emphasizes the US government’s commitment to bolstering domestic pharmaceutical manufacturing, citing national security concerns.
Officials noted that high dependency on imports, despite robust domestic R&D capacity, presents risks during disruptions in global supply chains. Section 232-related actions have already catalyzed about $400 billion in new investment commitments.
The administration has introduced a series of initiatives to stimulate domestic manufacturing. In May 2025, it enacted an executive order aimed at eliminating regulatory barriers to local production.
In August 2025, a further order focused on enhancing supply chain resilience, including the establishment of API reserves. Investigations under Section 232 have also been broadened to cover related sectors such as PPE, medical devices, and equipment.
Impact on Indian pharma
Patented segment
Sun Pharma stands as the sole major Indian player with substantial exposure to branded drugs. Although the company has not been explicitly identified, a lingering uncertainty is expected.
Approximately 20% of its worldwide revenue derives from branded products. Its primary medication, Illumya, potentially manufactured in the EU, could benefit from reduced tariffs. The company may also seek MFN agreements or consider onshoring to alleviate risks in the US market.
Generics
Generic drug manufacturers currently enjoy near-term relief since they are not subject to tariffs at this time. However, with a review scheduled in one year, uncertainty lingers. India’s cost advantages could make large-scale US onshoring less feasible in this sector.
India provides nearly 40-50% of generic drugs to the US. The US comprises about 34-35% of India’s total pharmaceutical exports, which were approximately $30 billion in FY25.
Exports to the US reached about $10.5 billion in FY25, with over 95% consisting of generics. Shipments to the US experienced a growth of 20.4% during the year.
What is Section 232?
Section 232 empowers the US President to impose restrictions on imports viewed as a threat to national security, including tariffs or other trade measures, with the flexibility to modify these actions over time.
Most Favoured Nation (MFN) pricing guarantees that a buyer receives the lowest price offered by a seller to any of its customers. If prices are lowered elsewhere, the same benefits must be granted to the MFN partner.
