The coming US tariffs on Indian medicines, which are to come into effect next month, have the potential to impact the US healthcare system in general. Indian Commerce Minister Piyush Goyal’s recent spur-of-the-moment visit to the US was to try and negotiate a trade agreement and limit the effects of the tariffs on Indian pharma exports.
India’s Key Role in US Healthcare
The US relies almost exclusively on Indian generic drugs, with almost half of all the generic medicines available in the country being Indian in origin. It has resulted in huge savings as Indian generics alone saved the US $219 billion in 2022, reveals consulting firm IQVIA. Generic medicines account for nine out of ten US prescriptions and play a significant part in keeping healthcare affordable.
Effect of Tariffs on Drug Prices and Supply
Experts have warned that the tariffs would render Indian generics unviable, causing drug shortages and worsening healthcare conditions. Dr. Melissa Barber, a Yale University drug pricing expert, warned that the tariffs would “worsen the demand-supply imbalances” and disproportionately harm the uninsured and economically disadvantaged, according to the BBC.
Indian Pharma Industry Concerns
Indian drug makers such as Sun Pharma and Cipla have raised serious concerns regarding the sustainability of their business under the new tariffs. According to Dilip Shanghvi, chairman of Sun Pharma, “The tariffs do not justify us moving our manufacturing to the US,” citing the large differences in costs between India and the US.
The US has already felt the brunt of Chinese import tariffs, with drug raw material prices increasing by 20% during Trump‘s presidency. As pharmaceuticals are India’s biggest industrial export, any retaliatory US tariffs would increase prices for generic as well as specialty drugs, affecting millions of Americans.
Possible Trade Negotiations and Solutions
In a bid to thaw tensions, some experts recommend India withdraw tariffs on drugs, citing it would have little economic effect. Market analyst Ajay Bagga said to the BBC, “US drug exports to India are hardly half a billion dollars, so the effect will be small.”
The Indian Pharmaceutical Alliance (IPA) put forward zero duty on US drug exports to avoid retaliatory levies, although this would need drastic policy realignments.
Former US trade representative Mark Linscott is optimistic that progress will be made, saying, “In the short term, there may be some pain through new tariffs, but I think they’ll make significant progress by the fall of this year for a first tranche [trade] agreement.”
With escalating healthcare expenditures already putting a squeeze on the US system, the new tariffs will further constrict access to low-cost drugs. The results of these negotiations will determine the destiny of Indian pharma exports and US healthcare affordability.
