India–US pharmaceutical trade is facing fresh challenges as the United States’ recent tariff policies, particularly those targeting Indian pharmaceutical exports, have sparked intense debate within the global healthcare industry. Indian drug makers, who supply nearly 40% of the generic drugs consumed in the US, are sounding alarms over the potential consequences of these tariffs, warning that American consumers and the healthcare system could face severe repercussions, including drug shortages and soaring prices. This article examines the potential fallout of increased tariffs on Indian pharmaceutical exports, the critical role India plays in the US drug supply chain, and the broader implications for both nations, supported by data and insights from industry experts.
India is a cornerstone of the global pharmaceutical supply chain, often dubbed the “Pharmacy of the World” due to its ability to produce high-quality, affordable generic drugs. According to the Pharmaceuticals Export Promotion Council of India (Pharmexcil), Indian companies supply approximately 47% of the US’s generic drug needs, including critical medications for chronic conditions like diabetes, cardiovascular diseases, and cancer. In 2022, Indian generics contributed US$ 219 billion in savings to the US healthcare system, with a cumulative savings of US$ 1.3 trillion between 2013 and 2022. Over the next five years, these generics are projected to save an additional US$ 1.3 trillion, underscoring their indispensable role in keeping healthcare costs manageable for American consumers.
India ranks as the fifth-largest pharmaceutical exporter globally, trailing Ireland, Switzerland, Germany, and Singapore. The US, absorbing 31.35% of India’s pharma exports, saw imports grow from $7 billion in 2020 to $8.9 billion in 2024, driven by demand for generics (47% of US supply). Russia, the fourth-largest market for Indian pharma, experienced a temporary dip in 2022 (US$ 68 million in April–May, down 24% due to the Russia-Ukraine conflict) but rebounded in 2023 with 294 million packages imported, a 3% increase, making India Russia’s top supplier, overtaking Germany.
India’s pharmaceutical exports to the US grew steadily from 2022 to 2024, led by medicaments for therapeutic or prophylactic uses (HS 3004) rising 14% 5- Year CAGR to US$ 8.57 billion. Strong growth was also seen in human and animal blood products (HS 3002, 30% 5- Year CAGR) and wadding, gauze, and bandages (HS 3005, 5- Year 35% CAGR), while pharmaceutical preparations (HS 3006) declined slightly. The trend highlights India’s dominance in generic formulations and emerging demand for biologicals and medical consumables.
India’s competitive edge in pharmaceuticals stems from its low-cost skilled labor and USFDA-approved facilities, evident in the dominance of HS 3004 (medicaments), which grew from US$6.42 billion in 2022 to US$8.57 billion in 2024 in the US market (14% CAGR). In Russia, India’s cost-efficient generics, such as antibiotics and analgesics, filled gaps left by Western firms post-sanctions, with companies like Ipca Laboratories boosting exports by 58% in 2023. This advantage enables India to outcompete higher-cost producers like Switzerland or Germany.
The Heckscher-Ohlin model emphasizes India’s abundance of skilled labor and manufacturing capacity. HS 3004 dominates exports to both the US and Russia, while high CAGRs for HS 3005 (35%) and HS 3002 (30%) in the US reflect India’s ability to scale niche segments like bandages and blood products. In Russia, demand for influenza vaccines and analgesics drives growth, supported by simplified registration norms extended to 2025.
Proposed US tariffs (10–25%) on Indian pharmaceuticals would significantly increase costs, particularly for HS 3004, which accounts for 95% of listed exports. Given the inelastic demand for generics, US consumers would bear most of the cost, with a 25% tariff potentially adding US$51 billion annually to drug prices. In Russia, sanctions-related payment challenges, such as SWIFT exclusion, have been mitigated by rupee-ruble mechanisms, ensuring trade continuity despite a 24% export drop in early 2022.
India’s ability to redirect exports is evident in Russia, where it overtook Germany as the top supplier in 2023. The high CAGR for HS 3005 (35%) in the US suggests flexibility to shift to markets like the EU or Africa if tariffs make US exports less viable. Russia’s simplified drug registration and demand for generics provide a stable alternative market.
The US relies on India for 47% of its generics and significant APIs, with no immediate alternatives due to regulatory and infrastructure barriers. Russia’s reliance on India grew post-sanctions, with 294 million packages imported in 2023. Tariffs could exacerbate US drug shortages (271 reported in Q3 2024) and disrupt Russia’s supply, though India’s Production-Linked Incentive (PLI) scheme aims to reduce API import dependence from China (72% in FY24).
Proposed US tariffs on Indian pharmaceuticals threaten to disrupt access to affordable medications, with significant consequences for American consumers. A 25% tariff on generics, which constitute 47% of US prescriptions, could increase drug prices by an estimated US$51 billion annually, directly impacting patients reliant on affordable treatments for chronic conditions like diabetes, hypertension, and cancer. The American Hospital Association has warned that such tariffs could exacerbate existing drug shortages, with 271 shortages reported in Q3 2024, including critical antibiotics and oncology drugs. Higher costs could lead to medication non-adherence, worsening health outcomes and increasing healthcare system burdens, particularly for Medicaid and Medicare programs. The lack of immediate alternative suppliers, due to regulatory and infrastructure constraints, underscores the risk of supply chain disruptions, potentially leaving patients without access to life-saving medications.
By 2030, India’s pharmaceutical exports could exceed US$ 12 billion to the US and US$ 1 billion to Russia, driven by demand for generics, vaccines, and biosimilars. In the US, addressing tariff threats through bilateral negotiations and diversifying to high-value products is crucial. In Russia, leveraging simplified regulations and EAEU market access will boost exports. Investments in cold storage, regulatory compliance, and partnerships with Russian retailers will enhance competitiveness. India’s ability to balance US tariff risks with Russia’s growing market, supported by its cost advantage and PLI-driven innovation, positions it as a long-term pharmaceutical supplier.
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