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A year after he imposed reciprocal trade tariffs on countries, a move since overruled by the US Supreme Court, President Donald Trump has now levied new tariffs on patented pharmaceutical imports.
The steep tariffs imposed by the Trump administration will impact global supply chains. (AFP)The move primarily aims to pressure pharma companies to manufacture more in the United States of America. It was taken citing national security and supply chain risks following a probe. However, generic medicines are currently exempt from the tariffs; officials have cautioned that this could change if the generics industry does not move production to the US.
For India, the exemption of generic drugs, as clarified in the proclamation, proves crucial. Indian firms dominate global markets in the generic drugs sector.
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Therefore, in the short term, the exclusion of generics offers a buffer, and facilitates the exports of low-cost medicines, which form the backbone of India's pharmaceutical trade with the US, news agency ANI reported.
“Generics, which constitute the majority of Indian pharma exports, are exempt from tariffs, but the Commerce Department will evaluate the state of generics reshoring and re-evaluate tariffs accordingly,” a senior White House official told the news agency.
According to a report by Global Trade Research Initiative, cited by The Times of India, about 90% of India’s pharmaceutical exports to the US are generic medicines. However, while Indian drugmakers are unlikely to face immediate challenges, the long-term implications could be more serious.
The steep tariffs imposed by the Trump administration on patented drugs and active pharmaceutical ingredients will impact global supply chains, in which Indian firms play a vital role.
This will especially be visible in contract manufacturing and supplies to intermediates to multinational pharmaceutical companies, according to ANI.
Siddharth Mittal, CEO and Managing Director of Biocon Limited, told ANI that the exclusion of generics would prevent immediate disruption. “That said, the move does introduce a layer of policy uncertainty. While the direct impact is contained for now, the broader signal is one of increasing protectionism, which industry will be closely watching,” Mittal added.
However, the think tank GTRI has flagged that some Indian companies could still be affected, including those producing branded or specialty drugs, or those supplying inputs for patented medicines.
What about other countries?According to a senior US official cited by AFP, large firms have 120 days to commit to “reshoring plans”, while smaller companies have a 180-day buffer.
Countries which have already signed a reshoring agreement with the US Commerce Department or a Most Favoured Nation (MFN) pricing deal with America's Department of Health and Human Services (HHS) will face reduced or no tariffs. For example, the European Union, Japan, South Korea, and Switzerland will each face a 15% tariff. The United Kingdom, whose major firms have signed reshoring and MFN agreements, will face 10% duties.