Impact of Tariff on Pharma and Biotech Industry

One of the key hallmarks of a Trump Presidency in the U.S., is the policy of imposition of tariffs on a wide range of industries ranging from automobiles to pharmaceuticals. While the U.S. administration has currently exempted pharmaceuticals under the list of products subjected to tariffs, a risk of imposition of tariffs looms on these products. As pharmaceuticals are critical products in the global economy, imposition of tariffs on these products can lead to an unprecedented impact on global supply chains and disrupt the thin balance that the pharmaceutical companies have managed to maintain. In terms of the current scenario, U.S. has a considerable dependency on pharmaceutical imports, with the country coming at the pole position.

(Source: Observatory of Economic Complexity)

In 2024, U.S. imported pharmaceutical products worth USD 212 billion, therefore, ranking as the largest importer of pharmaceutical products worldwide. Pharmaceuticals were the 5^th most imported product in the U.S. According to an analysis, there are approximately 100 drugs prescribed in the U.S., whose availability is contingent on supply from a single factory in China

(Source: Observatory of Economic Complexity)

In terms of products, pharmaceutical products were the 7th most exported product category of the U.S. An imposition of tariffs would increase domestic manufacturing of pharmaceutical products in the U.S., but it would take a considerable amount of time to build capacity and raise costs of the medications.

An imposition of tariffs on the exporting countries such as India and China would potentially cut off the access of these countries to the U.S. markets, due to increased costs of production. Even exporters in the developed markets such as Ireland, where major companies have their manufacturing plants, are bracing for the impact of tariffs in the form of potential loss of investments.

Let Us Explore How The Imposition May Potentially Impact The Global Markets With Four Stages Of Analysis:

1. 
   

   Potential Repercussions on the Global Pharma & Biotech Industry

   
   

• Shortages of Critical Medicines: The U.S. pharmaceuticals market has been long subjected to shortfalls of critical, life-saving medications. According to the data published by the American Society of Health-System Pharmacists, there are currently active shortages of 270 drugs in the U.S. The supply of generic medications in the U.S. is heavily dependent on Indian and Chinese manufacturers, and these manufacturers grapple with tight profit margins on their products. Any increase in their production costs can potentially cut off their entry in the U.S. markets, potentially exacerbating the drug supply crisis in the U.S.

• Delays on Investments in U.S. Pharmaceuticals Industry: While the end goal of the Trump Administration for the imposition of tariffs is to move back pharmaceutical manufacturing back to the U.S., investments by foreign partners may be disrupted by this move. Kathleen Jaeger, U.S. spokesperson for the Indian Pharmaceutical Alliance states that imposition of these tariffs may further delay the investments of Indian pharma companies in the U.S. market.

• Price Hikes of Key Drugs: The move of imposition of tariffs aims to bring back manufacturing of generic medications, back to the U.S. This, however, requires a certain level of investments and amount of sufficient time, to build up the generic medications manufacturing capacity in the U.S. In the meanwhile, consumers in the U.S., will have to grapple with high costs for critical medications, which are already in short supply.

• Disruptions in Pharma & Biotech Supply Chains: Indian and Chinese companies supply the bulk of raw materials such as Active Pharmaceutical Ingredients (APIs) for the manufacturing of medications. An imposition of tariffs will affect all the stages of the pharma supply chain: beginning from raw material to final packaging. As these companies are already grappling with narrow profit margins in their manufacturing of generic medications, this additional financial strain of tariffs impacts, creates an unsustainable situation for them. These manufacturers may avoid the U.S. altogether then. In case of certain drugs, which only has 2-3 manufacturers for their continued supply, it may lead to unprecedented disruptions in the supply chain

• Adverse Impact on R&D Initiatives & Mergers and Acquisition: As pharmaceutical companies may respond to tariffs, by absorbing the initial costs of tariffs, these diversions of their funds may potentially lead to the slowing down on investments in R&D initiatives such as drug development and clinical trials. This may also impact the mergers and acquisition outlooks in the pharma and biotechnology sector.

2. 
   

   Ripple Effect: The Impact on Various Stakeholders

   
   

• Drug Manufacturers: The impact of pharma & biotech tariffs will be different for different types of manufacturers. For small and mid-sized manufacturers, based in the supplying markets for the U.S., such as India and China, the entry or the ability to sell their medications in the U.S. would be untenable, due to their significant increases in their costs. In terms of the global pharmaceuticals giants, there are two sets of players. Certain U.S. based pharma companies such as Bristol-Myers Squibb Company, Eli Lilly and Company, and AbbVie Inc. already balanced and maintained a major degree of domestic manufacturing in the U.S. They did so by establishing major manufacturing plants in the U.S. While other pharmaceutical giants such as Roche and Novartis are at a greater risk of exposure, as these companies are deeply reliant on the supply of their APIs from production sites based outside of the U.S.

(Source: Directorate General of Commercial Intelligence and Statistics, Pharmaceuticals Export Promotion Council, Ministry of Commerce and Industry)

Pharmaceutical products are one of the most critical products that India exports, with generic pharmaceuticals being the key one. U.S. is the largest importer of India’s pharmaceutical products. The imposition of tariffs may cause an impact to India’s revenue generated from pharmaceutical product tariffs.

• Patients/Consumers: In terms of regional distribution of patients, countries with the greater burden of patients such as India and China, are not heavily reliant on the U.S. for the procurement of their most critical medications. However, an average patient or consumer in the U.S. pays 3 to 7 times the average cost of their branded prescription medication, as compared to their counterpart in the U.K. This consumer may now have to potentially further suffer from increased drug prices especially in cases of inadequate insurance coverage or shortages.


• Healthcare Systems & Insurance Companies: U.S. healthcare system is heavily reliant on generic medications, which are potentially the biggest target segment of the proposed tariffs. As per the research published by The Petrie-Flom Center of Harvard University in April 2025, of the 47% of generic medications prescribed in the U.S., 90% of these prescriptions are manufactured in India. In the case of the India-based manufacturers, they are still able to access the U.S. market, but may potentially increase the cost of their products. The insurance companies in the U.S., which handle the access to medications for the substantial proportion of the general population, may respond by charging higher premiums and prices for covered products.

3. 
   

   Damage Control: Strategies for Navigating the Challenges

   
   

• For the manufacturers emphasizing on the uninterrupted access to the U.S. market, it may be helpful to redirect their investment initiatives and strategic activities back to the U.S. market. This is particularly relevant in terms of the expansions of capacities of manufacturing of critical raw materials such as APIs.


• Increasing operational efficiencies through greater integration of automation to reduce costs may aid companies in reducing their impact from the tariffs.


• Greater facilitation of international and regional trade agreements may also aid in the mitigation of the impact.

 4) Conclusions: Short Term Discomfort for Long Term Gain?

Imposition of tariffs is often beneficial to a very limited number of stakeholders. A relook into these policies by the involved stakeholders is often fruitful for all parties involved through greater dialogues and deal making. While in terms of the long term scenario, it may bring about the desired change of bringing back pharmaceutical manufacturing back to the U.S., and reduce greater dependencies on foreign partners. However, in the short term picture, the pain may prove to be very impactful for all the stakeholders, across both the sides of the table. Hence, an equilibrium or stability in terms of the policies imposed, is conducive for the global pharmaceutical industry.