New Delhi, July 25 (IANS). US President Donald Trump recently announced tariffs on generic medicines. However, the announcement of phased-in tariffs on imported generic drugs in the US is likely to have limited impact on the credit profile of Indian pharmaceutical companies over the next two financial years.
According to an analysis by Infomerics Ratings, the US is one of the largest markets for Indian pharmaceutical companies. In the financial year 2025-26, the US imported pharmaceutical products worth $9.47 billion from India, which is about 30 percent of India’s total pharma exports.
The report said that the transition period given before the implementation of tariffs will give Indian pharma companies enough time to change their business strategy. This will limit the impact on their financial position and credit profile in the near future.
“Shifting the production base to the US will not be easy. There will be challenges like supply chain complexities, regulatory approvals, initial capital investment (capex) and cost-benefit equation,” said Rohit Inamdar, Chief Ratings Officer, Infomerics Ratings.
He said the key starting material (KSM) and active pharmaceutical ingredients (APIs) used in the manufacturing of drugs are produced primarily through established supply chains in India and China, which would not be easy to replicate in the US.
According to the report, Indian companies currently supply about 47 percent of the generic medicines supplied in America. At the same time, the share of total generic medicines in America is about 90 percent. However, these account for only 13 percent of total prescription drug spending.
Infomerics’ analysis of 25 major listed pharma companies found that their EBITDA margin was 26.1 percent in FY 2025-26. However, this is slightly less than 28.3 percent for the financial year 2024-25.
During this period, there was an increase of about 11 percent in the income of the companies, while the ability to repay the debt also remained strong. The report said that Indian pharmaceutical companies have gradually expanded their business in the domestic market, Europe and emerging markets like South Africa, Mexico, Brazil and Russia. This has reduced their dependence on the American market.
The share of the US market in the total business of seven major Indian pharma companies declined from 36.8 percent in the financial year 2024-25 to 33.4 percent in the financial year 2025-26.
However, companies with greater dependence on the US market, such as Sun Pharma, Dr Reddy’s Laboratories, Aurobindo Pharma, Zydus Lifesciences and Lupine, may face relatively greater pressure as 35 to 50 per cent of their revenues come from the US.
Under the recently announced tariff plan, there will be no tariffs on generic drugs imported into the US until July 31, 2028. After this, 100 percent tariff will be applicable for one year from August 1, 2028 and it will be increased to 200 percent from August 1, 2029. If companies set up production units in the US, they can avoid this additional tariff.
–IANS
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