100% Tariff on US Branded Drugs
The United States of America has levied a 100% tariff upon branded and patented drug imports from October 1. The decision is not expected to impact most of the Indian drug companies. It can hurt Sun Pharma due to its high reliance on patented drug sales in the US.
Sun Pharma's Exposure to the US Market
Sun Pharma alone among major Indian pharma firms has significant US revenue from patented drugs. A report by HSBC Global Investment Research states:
- Patented drugs will account for 17% of Sun Pharma's revenue in 2024-25.
- It sold $1.217 billion of patented drugs overseas in the same period.
- Out of this, $1.1 billion (85–90% of overseas sales) were from the US market.
- The US accounts for 17% of Sun Pharma's overall revenue and 8-10% of its consolidated EPS.
Manufacturing and Tariff Issues
Sun Pharma produces patented products via global contract development and manufacturing organization (CDMO) partners located in South Korea and Europe. In order to circumvent tariff expenses, the company might have to transfer manufacturing to CDMO partners with facilities within the US.
Effect on Other Indian Pharma Firms
HSBC observed that generic (off-patent) medicines are tariff-exempt. This exemption benefits the majority of Indian drug firms since their US exports primarily comprise generics.
- Approximately 20% of Indian pharmaceutical exports are destined for the US.
- These are largely generic and off-patent medicines.
Anuj Sethi, Senior Director at Crisil Ratings, clarified that few Indian companies export branded and patented drugs. But these account for only a fraction of their total business, restricting the potential impact of the new US tariffs.
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