Tariffs, PILLS Act, And India’s Pharma Pivot

The recent reintroduction of the Producing Incentives for Long-term Production of Lifesaving Supply of Medicines, or the PILLS Act, in the United States could spark concerns in the global pharmaceutical industry—but for Indian players, this need not spell catastrophe. Far from an existential threat, the legislation may encourage a strategic shift toward higher-value opportunities—if the industry takes proactive steps.

At first glance, the unease seems justified. The Nifty Pharma index has already lost 7% in 30 days, after the US President Donald Trump stated his intention to levy 25% import duty on drugs and other items effective from April 2. 

It is not without reason that the market is fretting. The US accounts for over 31% of India's $28 billion pharma exports. With the second biggest market for Indian pharma sector being the UK and  the Netherlands at 3% each—the worry is understandable. 

However, these tariffs would not target Indian firms alone; they would apply to all exporters to the US unless specific exemptions are negotiated. Trump has said tariffs would be enforced “without exceptions or exemptions”—a position that remains unchanged for now.

Moreover, the PILLS Act remains embryonic. Congressional committees must debate, amend, and vote on it—a process that could stretch for years. Even if passed, the US administration will have to strike a balance between the PILLS Act and the Inflation Reduction Act 2022, which could complicate implementation. The IRA has provisions aimed at lowering prescription drug prices, and McKinsey & Company expects these measures to result in $178 billion in savings through 2031. 

Indian generics, which fulfil 40% of all generic prescriptions in the US, thrive precisely because of their cost efficiency. Replicating this domestically would require US firms to undercut India’s economies of scale—a near-impossible feat without triggering price inflation. For perspective, the previous Trump administration also aimed to reduce high drug list prices, underscoring that while imminent danger appears unlikely, Indian firms cannot ignore medium-term risks.

Beneficial Pivot
Indian drugmakers will have to look at derisking their business model, as a market based on price arbitrage cannot last long—a model as unsustainable as the one confronted by India’s Information Technology sector.

Herein lies an opportunity. Contract Research Development and Manufacturing Organisations could be beneficiaries of regulatory shifts in the US. While the Biosecure Act —designed to reduce dependence on Chinese biotech suppliers—remains stalled, it has spurred US firms to re-evaluate their supply chains. Many American pharma companies are actively seeking partners with robust regulatory compliance, Active Pharmaceutical Ingredient expertise, and cost efficiency. India, already meeting a significant portion of US generic demand and adhering to stringent US and EU standards, is the logical “China+1” alternative. These factors, coupled with IRA’s focus on lowering drug prices, could lead to an increased reliance on Indian CRDMOs such as Divi’s Laboratories, Suven Pharma, Syngene International, and Piramal Pharma. Indian firms are likely to see rising interest from Western partners, particularly after Chinese peers such as WuXi AppTec and WuXi Bio sold their gene therapy and vaccine units in the US and EU to private equity outfits apprehending delay or denial of regulatory approval delays.

To capitalise on this opportunity, Indian CRDMOs must prioritise scale and regulatory compliance by investing in high-capacity facilities for complex generics and biologics, aligning with evolving US and EU norms. They could also forge strategic partnerships with US firms to co-develop drugs, share R&D risks, and reap intellectual property rewards. Finally, fostering a skilled workforce will allow Indian drugmakers to fully leverage the regulatory tailwinds.

The industry has navigated upheavals before. Much like IT firms turned protectionism concerns into a catalyst for AI and cloud innovation, CRDMOs can leverage the current situation to rise up the value chain. As the chestnut goes, opportunity has come knocking, and “PILLS” could act as a catalyst to shed commoditisation. Indian pharmaceutical firms can turn America’s self-reliance efforts into a springboard for global leadership. The door is set to open wider —it’s time to walk through, not complain about the noise.