US Plans Stepped Tariffs on Imported Generic Drugs Starting 2028 to Boost Domestic Production
US President Donald Trump announced a new tariff framework targeting imported generic drugs, exempting them from tariffs for two years before imposing a 100% tariff in August 2028, which will rise to 200% the following year. The phased tariff aims to pressure generic drug manufacturers to relocate production to the United States. Trump described the future tariff hikes as a "punishment" for companies that fail to establish manufacturing facilities domestically. Patent-protected and branded drugs will not face tariff changes.
Earlier, on April 2, Trump imposed a 100% tariff on patented pharmaceutical products and components, excluding generics. Large pharmaceutical companies received a 120-day adjustment period before tariffs took effect, while smaller companies relying on subcontractors were granted 180 days. Over a dozen major drugmakers, including Eli Lilly, Pfizer, and Novo Nordisk, have agreed with the administration to lower prices on new and existing drugs as part of Trump's "most favored nation" policy, which ties US drug prices to lower prices abroad in exchange for three years of tariff exemptions.
This policy could significantly impact India, which supplies nearly half of the generic drugs consumed in the US and relies heavily on the American market for exports. China, a key supplier of active pharmaceutical ingredients, could also be affected. Generic drugs account for over 90% of US prescriptions, with about 70% produced outside the US, primarily in India and China.
Experts warn the tariff plan may reduce generic drug supply in the US, increase prices, limit competition, and restrict affordable options for consumers. Establishing new manufacturing plants typically takes over three years, longer than the tariff timeline, potentially prompting companies to reduce US market activity. Indian and European generic exporters, as well as Israeli companies like Teva, face strategic and operational challenges, with potential impacts on profitability and production decisions.
The announcement caused declines in the pharmaceutical index on the Mumbai stock exchange. While a two-year grace period precedes tariff enforcement, the need to shift production or absorb tariffs poses significant hurdles for the generic drug industry globally and in Israel.
