Trump threatens 200% tariffs on generic drugs in 2028, wants manufacturing to move to US

Analysts characterized the stock reaction, especially among large-cap generic players, as a “kneejerk reaction” driven by the ambiguity of the announcement and its uncertain timeline. Some called Trump’s plan unviable and difficult to implement.

“Practically speaking, bringing generic manufacturing to the US is very difficult,” said Shrikant Akolkar, a pharma analyst at Nuvama. This is because of factors such as constant price erosion, high competition and number of dosage types.

Generic drugs account for over 90% of prescriptions by volume in the US, of which almost half originate in India. Building production capacity in the US to meet this level of demand would take decades as the US has lost its edge in low-cost generic manufacturing, Akolkar added.

Economic viability

The concept of outsourcing generic drugs to countries like India is based on a 40-60% lower cost of manufacturing compared to that in the US, Tushar Manudhane, institutional research analyst – healthcare at Motilal Oswal Financial Services Ltd, said in a note. The proposed tariffs would be levied on all countries supplying generics to the US and not just India, and Indian firms could still retain a competitive advantage.

“Tariff implementation would still fall short and would not lower this advantage of low-cost manufacturing from India,” Manudhane said.

Setting up a manufacturing facility itself would take at least two years, after which plant inspections and product approvals could take another 12 to 15 months. These factors raise doubts about the economic viability of setting up plants in the US for generic drugs, he said.

According to Dr. Amit Varma, co-founder and managing partner of Quadria Capital, there will be pressure on Indian pharma companies to onshore in the US as time goes by, whether it's Trump or not, and India’s pharma sector must keep an eye open for it.

“But to use 2028 as a pressure tactic, quite frankly, that's not possible,” Varma said. “So, our trend now, even in our portfolio companies, is to find some kind of an onshore base and make sure that there is some amount of manufacturing that's taking place. But for the enormity in the volume that we are talking about, of what the US consumes today, it's a long way off.”

Indian pharma exports to the US fell almost 10% to $9.7 billion in FY26. Top firms like Dr Reddy’s, Aurobindo Pharma, Zydus, Lupin and Cipla garner between 30% to 50% of their revenue from the US.

While there have been some efforts to increase production in the US, most companies don’t have a meaningful manufacturing footprint in the US.

Options beyond US

Aurobindo Pharma and Senores Pharma, which have invested significantly in setting up plants in the US, could benefit if the proposal pans out, said Akolkar. However, it is unlikely that other companies would allocate capital to reshore manufacturing in the US.

“If at all it does pan out, companies will only look to onshore the high-margin portfolio products to the US,” said Vishal Manchanda, a pharma analyst at Systematix Group. “For commodity generics, it is not possible to reshore to the US, where very large-volume, high-scale facilities are needed.”

If Trump follows through on his words, Indian companies may increase focus on other lucrative markets. Companies have already started investing in other promising markets to derisk from the US.

Sun Pharmaceutical Industries’ Organon acquisition is expected to accelerate its emerging market expansion, unlocking access to China and over 10 other countries where it previously had limited or no footprint. Natco Pharma recently acquired a stake in South Africa’s second-largest drugmaker Adcock Ingram to expand in that market.

Experts also pointed out that Trump’s second term ends in January 2029, further lowering the risk of tariffs actually being imposed.

With inputs from Mansi Verma

Jessica Jani

Jessica has been tracking the pharmaceutical, life sciences and healthcare sector for Mint since November 2024. Based in the country's financial capital, she reports on everything to do with health and medicines. This includes corporate action, patent wars, deals, startup activity and consumer trends. She also keeps a keen eye on the ever-evolving world wellness and preventive health, which moves faster than regulation can keep up. She has a deep interest in what the future of health looks like and how science, innovation, policy and company decisions inform and impact the health of citizens. She has been a reporter for five years, working with publications like The Core and News18 prior to this, covering various sectors like automobiles, real estate, energy, sustainability and urban mobility. Jessica has a bachelor’s degree in English from St Xavier’s College, Mumbai and a postgraduate diploma in media from Sophia’s College, Mumbai. Her work is driven by a desire to decode how macro decisions and events alter and shape the lives of ordinary people. Drop her a mail or a message to discuss business scoops, exciting new medicines and inventions, or your latest wellness routine.