The Impact of Reciprocal Tariffs on U.S. Healthcare and Indian Pharma

The imposition of reciprocal tariffs in international trade is rarely a one-sided loss. While such tariffs may serve to protect domestic industries by making imports less attractive, they often come at the cost of making essential products more expensive for consumers. This is particularly concerning in the case of pharmaceuticals, where the United States is heavily reliant on imports from India.

The Indian Pharma's Role in the U.S. Healthcare System

India has been playing a progressively crucial role in providing affordable drugs to the U.S. health system. The IQVIA Institute for Human Data Science reports that Indian drug majors saved the U.S. nearly USD 219 billion in 2022, while the aggregate cumulative savings stood at nearly USD 1.3 trillion between 2013 and 2022. Indian firms supplied nearly 47% of all generic prescriptions made in the United States in 2022, underscoring their role in providing affordable healthcare solutions.

Notably, Indian pharmaceutical firms dominated five out of ten major therapy areas in the U.S., including hypertension, mental health, lipid regulators, nervous system disorders, and anti ulcerants. The volume of prescriptions filled by Indian manufacturers has also surged over the past decade, from 954 million in 2013 to a staggering 1.8 billion in 2022. This increasing dependence underscores the potential economic and healthcare consequences if trade barriers were erected through tariffs.

U.S. Medicine Imports and India's Contribution

The U.S. has long been the world's largest importer of pharmaceuticals. In 2023, packaged medicaments were the sixth most imported product in the country, with total imports valued at USD 82.7 billion. The primary sources of these imports included Ireland (USD 12.9 billion), Switzerland (USD 10.5 billion), India (USD 10.4 billion), Germany (USD 8.38 billion), and Italy (USD 5.47 billion).

Among these, India is not only a significant supplier but also one of the fastest-growing exporters to the U.S. Between 2022 and 2023, India’s pharmaceutical exports to the U.S. increased by USD 1.75 billion, second only to Slovenia’s USD 2.17 billion. This steady rise further illustrates the growing interdependence between the two nations in the pharmaceutical sector.

India’s Dependence on the U.S. Market

While the U.S. benefits from affordable Indian medicines, the trade relationship is also crucial for India’s booming pharmaceutical sector. Out of India’s total USD 23.6 billion in packaged medicament exports in 2023, nearly USD 10.5 billion (44%) was directed to the U.S. The U.K. was the second-largest recipient, albeit at a distant USD 0.9 billion.

Over the past two decades, India’s pharmaceutical industry has witnessed exponential growth, but its reliance on the U.S. market has also intensified. In 2000, India’s medicine exports to the U.S. stood at just USD 0.67 billion, accounting for only 3% of total exports. By 2010, this share had grown to 32%, and by 2023, it reached a significant 44%. While this growth is promising, it also highlights India’s vulnerability to potential disruptions in trade policies, including tariffs.

The Consequences of Tariffs on Pharmaceuticals

Reciprocal tariffs on Indian pharmaceuticals would have far-reaching consequences for both nations. For the U.S., higher tariffs would lead to increased costs for essential medications, directly impacting affordability for millions of American patients. Given that nearly half of all generic drugs in the U.S. come from India, any price surge could strain the healthcare system and burden consumers, particularly those reliant on low-cost prescription drugs. ^[1]

For India, restrictions on pharmaceutical exports to the U.S. could slow the industry's rapid growth and impact revenues. Given the dominance of Indian firms in the generics market, any decline in exports could disrupt business models, potentially leading to job losses and reduced innovation within the sector.

The pharmaceutical trade between India and the U.S. represents a deeply interwoven relationship that benefits both countries. While the implementation of tariffs may seem like a protective measure for domestic industries, it risks causing significant harm to the U.S. healthcare system by raising medication costs. Simultaneously, India's pharmaceutical sector, which relies heavily on exports to the U.S., could face substantial economic setbacks. Policymakers must consider the long-term repercussions before implementing trade barriers that could disrupt this mutually beneficial exchange.

References

1. IQVIA Institute for Human Data Science. "Impact of Indian Generics on U.S. Healthcare Savings." 2022.

‌(Input from various sources)

(Rehash/Pragati Sakhuja/MSM)