Trump's 100% Drug Tariff Threatens Indian Pharma, US Expansion Booms
US President Donald Trump's proposed 100% duty on branded and patented medications entering the US from October 1, 2023, has sent Indian pharmaceutical companies into a tailspin. Stocks of major players like Sun Pharma Ltd., Aurobindo Pharma Ltd., Gland Pharma Ltd., Lupin Ltd., and Cipla Ltd. slid by up to 5%.
The US Commerce Department's investigation under Section 232 for national security reasons has also included surgical masks, N95 respirators, gloves, and other medical devices, hinting at potential tariff increases across the sector. Eight of the top ten losers on the Nifty 500 index are pharmaceutical firms, reflecting the market's concern over the proposed duty.
The policy, however, will not apply to corporations establishing or already having medication manufacturing plants in the US. This has led to strategic decisions by multinational pharmaceutical companies. In September 2020, Novartis and Roche announced plans to build drug manufacturing plants in the USA. Novartis pledged to invest $23 billion in additional factories and research labs, while Roche planned $50 billion for capacity expansion over the next five years. These investments aim to circumvent the proposed tariffs.
The proposed 100% duty on imported medicines could significantly impact Indian pharmaceutical companies, with eight of the top ten losers on the Nifty 500 index being from this sector. However, companies like Novartis and Roche are responding by investing in US manufacturing plants, potentially avoiding the tariffs. The US Commerce Department's investigation continues, with the outcome expected to shape the pharmaceutical industry's future.
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