August 19, 2025

What US-India Trade Deal Will Mean For Indian Pharma

Business Law active pharmaceutical ingredients, biosimilars, generics, intellectual property, pharmaceutical industry, supply chain, tariffs, trade negotiations, US-India trade, vaccines

By Jashaswi Ghosh (August 13, 2025)

As the ongoing trade negotiations between the U.S. and India seem to enter their final stages, few sectors are watching the developments more closely than India’s pharmaceutical industry. With the U.S.imposing sweeping new tariffs, potentially reaching up to 200% on pharmaceutical imports,[1] and India continuing to push for broader market access and policy flexibility, the stakes have never been higher. The outcome of these talks is poised to reshape not just trade policy but the strategic alignment of the two countries’ pharmaceutical ecosystems. On Aug. 7, the U.S. issued an additional 25% duty on a range of Indian exports, with some categories now facing combined tariffs of up to 50%. This escalation, set to take effect on Aug. 27, adds a sharp new layer of pressure to already sensitive trade negotiations.[2] The Trade Deal in Context The bilateral trade pact currently being negotiated between the U.S. and India is poised to significantly expand economic engagement, targeting an ambitious increase in total trade from approximately $190 billion to $500 billion by 2030.[3] This strategic push toward deeper commercial ties originated during a February summit between U.S. President Donald Trump and Indian Prime Minister Narendra Modi, where they jointly unveiled Mission 500.[4] The initiative set forth a bold vision to more than double trade in goods and services, rising from $210 billion in 2024 to $500 billion within the decade. As part of this effort, the two leaders announced their intent to conclude the first phase of a “mutually beneficial, multi-sector Bilateral Trade Agreement” by fall of this year.[5] They also pledged to adopt a framework of new fair trade terms to serve as the foundation for future U.S.-India commercial relations. For the U.S., India is a strategic partner in the Indo-Pacific and a key member of the Quad alliance, alongside Australia, Japan and the U.S., which seeks to uphold a stable, rules-based regional order in response to shifting geopolitical dynamics. A robust U.S.-India trade agreement would not only advance commercial interests, but also strengthen their strategic alignment across defense, technology, and global governance. India’s significance also lies in its growing role as a hub for innovation and technology. With deep capabilities in digital infrastructure, engineering and software development, India complements the U.S. in co-developing advanced and emerging technologies, including semiconductors, AI tools and clean energy solutions. The economic relationship is already substantial, with nearly 2,000 U.S. firms operating in India and growing Indian demand for U.S. energy and defense exports.[6] A particularly vital area of collaboration is the pharmaceutical and life sciences sector. India is the world’s largest supplier of generic medicines and a key global producer of vaccines,

active pharmaceutical ingredients and biosimilars.[7] Indian pharmaceutical exports to the U.S. contribute significantly to affordable healthcare and public health resilience. Deeper regulatory coordination and mutually beneficial trade terms could unlock new opportunities in drug innovation, biotechnology, digital health and clinical research. With both countries invested in strengthening healthcare supply chains and fostering biomedical innovation, the sector is poised to become a central pillar of the bilateral trade agenda. For any U.S. administration aiming to showcase its ability to negotiate impactful trade partnerships, India remains an economically and strategically compelling choice. A well-structured agreement would reinforce shared democratic values, enhance resilience across supply chains and signal a joint commitment to shaping the future of global trade. Despite current short-term strains, several commentators note that the broader U.S.–India relationship is underpinned by strategic, economic and geopolitical factors that are likely to outlast the current tariff turbulence.[8] Tariff Speculations and Market Impact While much of the current discourse around U.S.-India relations centers on tariffs, technology and geopolitical alignment, the pharmaceutical sector has emerged as a particularly critical and vulnerable area of focus. The U.S. is India’s largest pharmaceutical export destination, accounting for over 30% of India’s total pharma exports.[9] Notably, nearly half of all generic drugs consumed in the U.S. are manufactured in India,[10] underscoring the depth of bilateral supply chain integration, an interdependence now facing significant pressure. Amid this backdrop, President Donald Trump has reintroduced the concept of reciprocal tariffs following a 90-day suspension, placing the pharmaceutical sector squarely in the policy crosshairs. While pharmaceuticals had previously enjoyed exemptions from such duties, recent signals from the administration suggest this carve out may be revoked. On Aug. 5, the administration also signaled that pharmaceuticals may soon be brought under a Section 232 national security review, with initial tariffs potentially increasing in stages to 150% and then 250% over the next 18 months, framing the move as part of a push to expand domestic drug manufacturing.[11] Even the anticipation of these tariffs has triggered measurable turbulence in Indian markets. The Nifty Pharma index, a benchmark index on the National Stock Exchange that tracks the performance of leading Indian pharmaceutical companies, has fallen by nearly 1%. Key players such as Aurobindo Pharma Ltd., Lupin Pharmaceuticals Inc. and Dr. Reddy’s Laboratories Ltd. saw stock declines ranging between 1.6% and 3%, reflecting investor sensitivity to U.S. market exposure. For many of these firms, revenues from the U.S. comprise 30% to 40% of total earnings, making them particularly vulnerable to policy shifts.[12]

The market’s reaction highlights growing investor concerns about shrinking profit margins, declining competitiveness and the potential loss of market share. Many Indian pharma companies are already navigating pricing pressures and heightened scrutiny from the U.S. Food and Drug Administration. The imposition of steep tariffs could significantly exacerbate these challenges, particularly for companies operating on thinner margins or those heavily reliant on U.S. exports, potentially forcing a strategic reckoning across the sector. The wider 25% surcharge announced on Aug. 7, which raises duties on some Indian exports to as high as 50%, also has the potential to ripple through pharmaceutical supply chains, affecting active ingredient costs, supporting materials, and freight, even if finished drug products are handled under a separate timeline.[13] Structural Concerns: Tariffs and Beyond The current trade negotiations between the U.S. and India are shaped by more than just tariff disputes. They are also defined by deeper structural tensions around intellectual property rights, technology transfer policies and the broader regulatory climate. As part of the proposed deal framework, India has reportedly offered to reduce its import tariffs on select U.S. pharmaceutical products from 10% to zero.[14] However, despite this substantial concession, concerns persist about the U.S.’ moves and any substantial tariff on the Indian pharmaceutical exports would significantly undercut the perceived goodwill embedded in India’s tariff reductions. Concurrently, India is advocating for increased access to advanced manufacturing tools, research and development infrastructure, and supply chain collaborations akin to those offered to strategic allies like the U.K. and Australia.[15] However, progress has been hampered by long-standing U.S. apprehensions over India’s IP framework, particularly issues around patent evergreening, procedural delays, and the scope of exclusivity protections. In response, Indian policymakers have proposed revisions to domestic patent law, such as tightening the definition of inventive step and shortening exclusivity periods, in an attempt to strike a balance between access to medicines and incentivizing innovation. While these proposals are still under deliberation, they have done little thus far to assuage U.S. concerns, as India remains on the U.S. Trade Representative’s Priority Watch List for intellectual property rights enforcement inconsistencies.[16] Failure to reconcile differences in intellectual property IP frameworks would be a strategic setback for both jurisdictions. While the U.S. has expressed concerns regarding practices such as patent evergreening and the scope of data exclusivity, India’s legislative safeguards, particularly Section 3(d) of the Patents Act of 1970, are designed to prevent evergreening and to ensure accessibility of essential medicines.[17] Delays where they occur are largely attributable to structural capacity constraints rather than deliberate obstruction or policy design.

In recent years, the Indian patent office has taken steps to implement expedited examination, digitization of prosecution and capacity building to improve turnaround times. India does not recognize regulatory data exclusivity as an independent right, nor does it provide any statutory period during which generic applicants are barred from relying on innovator data. Instead, it adheres to Agreement on Trade-Related Aspects of Intellectual Property Rights-compliant protections against unfair commercial use without creating de facto market exclusivity — a deliberate policy calibrated to support timely access to affordable medicines. From a strategic standpoint, it would be shortsighted for either side to let differences on intellectual property rights derail an otherwise promising trade trajectory. India’s pharmaceutical and life sciences sector is indispensable not only for the U.S. healthcare system, given its role as a leading supplier of generics and active pharmaceutical ingredients, but also as a critical partner in future biopharma innovation. For the U.S., doubling down on punitive tariffs while maintaining high standards for technology sharing could result in a missed opportunity to deepen ties with a trusted democratic partner. Conversely, for India, aligning its intellectual property rights regime more closely with international expectations may unlock greater access to high-value trade, advanced medical technology, and capital investment. To realize this potential, the focus must shift toward building institutional mechanisms for regulatory convergence, transparent patent examination standards and collaborative enforcement frameworks, rather than imposing rigid conformity. Bilateral working groups on pharmaceutical innovation, periodic IP dialogues and mutual capacity building between patent offices can serve as more constructive alternatives to tariff-driven pressure. Strategic alignment will emerge not through uniformity of rules, but through calibrated cooperation that respects domestic policy space while enabling high-quality innovation and equitable access. While these tariff shocks are real, both Washington and New Delhi have strong incentives, economic as well as strategic, to prevent the dispute from becoming a long-term rupture.[18] India’s Strategy: Concessions and Resilience India’s approach to the ongoing trade negotiations with the U.S. has combined strategic assertiveness with calibrated pragmatism. Key industry stakeholders, particularly the Indian Pharmaceutical Alliance, have advocated for tariff exemptions, relaxed export regulations and targeted incentives to encourage Indian pharmaceutical firms to scale up their U.S.-based manufacturing footprints. In line with this push, the Indian government has proposed allowing generic drug imports into the U.S. at steeply discounted rates, between 20% to 25% of branded reference prices

for three years following patent expiration, with a further 10% to 15% discount extended over the subsequent seven years.[19] This pricing framework aligns with U.S. efforts to reduce healthcare costs while offering a meaningful tradeoff against the threat of new pharmaceutical tariffs. In parallel, India is actively promoting outbound investment into U.S. facilities for API and drug formulation manufacturing. Several Indian companies have already begun expanding their footprint in North America through joint ventures, tech partnerships and localized production hubs. This initiative is not only in response to U.S. onshoring priorities, but also represents a strategic hedge for Indian firms seeking supply chain resilience and market continuity. Further, the newly announced across-the-board tariffs only heighten the urgency for Indian companies to diversify manufacturing locations and mitigate exposure, particularly as product-specific Section 232 measures could vary widely in scope and timing. Thus, while India’s proposals reflect genuine intent to support mutual interests, the broader success of this strategy hinges on Washington’s willingness to reciprocate. For now, Washington’s message mixes pressure with reassurance, tariffs to force cost and supply-chain shifts, paired with signals that the long-run partnership remains strategically valuable.[20] Looking Ahead: Risk and Opportunity As the dust settles on this interim deal, it’s clear that India has chosen strategic accommodation over brinkmanship, seemingly accepting a 10% to 15% tariff to safeguard long-term access to the U.S. market.[21] While not ideal, this outcome positions India more favorably than regional peers and keeps the door open for deeper engagement. But if this partnership is to mature meaningfully, both sides must move beyond transactional trade-offs and invest in a shared pharmaceutical future grounded in trust, innovation and mutual benefit. Two immediate developments will shape the next phase: the late-August implementation of the Aug. 7 tariffs, and any formal rollout of pharma-specific Section 232 actions, which, if introduced, could raise duties to 150%–250% and fundamentally alter the cost structure of U.S.–India pharmaceutical trade.[22]

Jashaswi Ghosh is counsel at Holon Law Partners LLP. The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

What US-India Trade Deal Will Mean For Indian Pharma

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