By Rishika Sadam
HYDERABAD, India (Reuters) - Indian pharmaceutical companies will be able to retain their dominant market share in the U.S. in selling generic drugs even if President Donald Trump imposes high tariffs because they are "highly competitive", a government-backed trade body said.
The U.S. accounts for nearly a third of India's pharmaceutical exports, mainly cheaper versions of popular drugs, with sales jumping 16% to about $9 billion last fiscal year.
Trump has said he could impose tariffs of 25% or more on pharmaceutical imports and an announcement could be made by next month. India's drug industry has said it hopes bilateral talks will earn them an exception, though Trump has ruled out any such concession so far.
The Pharmaceuticals Export Promotion Council of India (Pharmexcil), set up by the trade ministry, said it believed that the Trump warning was mostly directed at costly imports of patented and other such products from other countries.
"India pharma will not selectively be imposed high duties and its exports are highly competitive, so it can still compete in the newer environment (with import duties if at all imposed) without losing its share," Pharmexcil Director General Raja Bhanu told Reuters.
"The government will certainly have discussions about the changing situations and try to bring the best possible solution."
India imposes about 10% tax on pharma imports from the U.S. while paying nearly no tariff for its exports to the country, according to industry experts.
India sells about 65% of all generic drugs in the U.S, according to Citi Research. According to the Indian government, generic drugs are 50% to 90% cheaper than branded ones.
Higher tariffs will further pressure thin margins of up to 15% of core earnings for most Indian generic drugs unless costs are passed onto consumers, analysts said.
"Tariffs (if not passed through) may result in a large part of the Indian generic drug supply to the U.S. turning unviable," Citi Research said in a note.
"Companies may be forced to rationalize portfolios or (make) exits that may result in massive shortages in the U.S. and resultant drug price increases. If Indian players start exiting from the generics, drug shortages in the U.S. may escalate beyond control."
According to research firm IQVIA, overall cheaper generic drugs saved the U.S. healthcare system about $408 billion in 2022.
Sun Pharma, India's largest drugmaker that made 32%of its total revenue through U.S. sales last fiscal year, has already said it will pass on any costs to consumers.