Trump's Generic Drug Tariffs to Increase Prices, Indian Drugmaker CEO Warns

U.S. President Donald Trump's proposed tariffs on generic drugs will increase the price of these medicines for patients in the country, Erez Israeli, the chief executive of Indian drugmaker Dr. Reddy's Laboratories, told CNBC's 'Inside India' on Thursday.

Generic drugs are a low-margin business and "this kind of level of tariff cannot be absorbed" by the company, Israeli said, adding it will lead to prices increasing "in the magnitude of the tariff."

Israeli also said that two years may not be enough time for companies to move operations to the U.S., as the process could take four to seven years.

On Tuesday, Trump announced that generic drugs imported into the U.S. will face zero tariffs for two years starting August 1, before a 100% levy takes effect in August 2028 and rises to 200% a year later.

The move is aimed at onshoring the generic medicine industry to the U.S., where it makes up for more than 90% of prescriptions.

Indian companies account for nearly half of generic drug supplies to the U.S., according to data shared by lobby group Indian Pharmaceutical Alliance. But despite the U.S. being a key market, industry representatives have said that generic companies cannot absorb tariffs to the tune of 100% to 200%.

"Right now, we are operating on a very thin margin," Namit Joshi, chair of the Pharmaceuticals Export Promotion Council of India, said in an interview with ANI on Wednesday.

During the interview, Dr Reddy's CEO highlighted that generic drug sales to the U.S. are now just 27% of the company's total sales, shrinking from 50% a few years ago. It will go below 25% this year, as the other segments are growing faster, he said.

The tariffs are unlikely to push generic drug companies to move to the U.S., as it is not feasible to manufacture these low-margin products in a country where production costs are higher than in India.

"The operation in India by us and also by others allowed a significant decrease in the cost of medicine to the United States," Israeli said.

Global brokerage Nomura agreed, saying in a report Wednesday that Indian companies are unlikely to move generic manufacturing to the U.S. due to "low economic viability," but said the tariffs could allow for manufacturers to boost prices and improve their profits.