US waives 100 pc tariff on select Indian speciality drugs: What it means for pharma industry

The US has placed India among 20 jurisdictions eligible for a zero per cent tariff on specified speciality pharmaceutical products and associated ingredients, offering relief to Indian drugmakers even as Washington’s 100 per cent tariff on certain patented pharmaceutical imports takes effect for additional companies from September 29.

The move is significant for India, one of the world's major suppliers of medicines to the US, but the relief is product-specific and does not amount to a blanket exemption for Indian pharmaceuticals. The US Commerce Department's Bureau of Industry and Security (BIS), in a notice published in the Federal Register on September 23, laid down the categories eligible for the zero tariff and the jurisdictions covered.

What gets zero tariff

The zero-tariff treatment covers specified speciality medicines and associated pharmaceutical ingredients, including drugs for which all approved indications are designated as orphan indications, nuclear medicines, plasma-derived therapies, fertility drugs, cell and gene therapy products, antibody-drug conjugates, certain medical countermeasures and animal-health products.

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India is among the 20 eligible jurisdictions. The list also includes the European Union, Japan, the UK, South Korea, Switzerland and Liechtenstein, Taiwan, Thailand, Vietnam, Indonesia, Bangladesh, Cambodia, Ecuador, El Salvador, Guatemala, Jordan, Malaysia, North Macedonia and Argentina.

The exemption is part of the implementation of US President Donald Trump's April 2 proclamation on pharmaceutical imports under Section 232 of the Trade Expansion Act of 1962. The administration has cited national security concerns and the need to encourage greater pharmaceutical production in the US.

100 per cent tariff begins for more companies

The same framework imposes a 100 per cent ad valorem tariff on specified patented pharmaceutical products and associated pharmaceutical ingredients.

The tariff had already taken effect on July 31 for companies listed in Annex III of the presidential proclamation. From 12.01 am US Eastern time on September 29, the 100 per cent tariff applies to other companies covered by the measure, subject to the different rates and exemptions specified in the proclamation.

The distinction is important for Indian pharma because generic pharmaceutical products and associated ingredients are not currently covered by the Section 232 pharmaceutical tariffs. This means India's large generic-drug export business does not face the new 100 per cent Section 232 levy at this stage.

Why the move matters for India

The US is a critical market for Indian pharmaceutical companies, particularly for generic medicines. The exclusion of generics from the current tariff regime therefore limits the immediate exposure of a large part of India's pharmaceutical exports.

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At the same time, the zero-tariff treatment for speciality medicines could benefit Indian companies operating in more complex pharmaceutical segments.

The categories specifically identified by Commerce include some of the industry's more specialised areas — such as rare-disease medicines, fertility treatments, cell and gene therapies and antibody-drug conjugates. Indian companies with products qualifying under these definitions will be able to avoid the 100 per cent tariff when the relevant conditions are met.

However, companies will need to establish that individual products meet the US definitions. Commerce has also said it can modify those definitions in future.

Not every speciality drug is automatically exempt

The Federal Register notice makes clear that the zero rate is tied to specific categories and conditions.

Under the proclamation, the speciality products can qualify for zero duty if they are products of a jurisdiction with a current or forthcoming US trade and security framework agreement, or if Commerce determines that they meet an urgent US health need.

For products seeking relief on the basis of an urgent US health need, companies can submit applications to Commerce. The department will make a fact-specific, company-specific determination after consultation with the US Trade Representative and Department of Health and Human Services.

A three-way impact on Indian pharma

For Indian drugmakers, the US policy effectively creates three broad categories.

First, qualifying speciality medicines and associated ingredients can enter the US at a zero Section 232 tariff.

Second, generic medicines and their associated ingredients remain outside the current Section 232 pharmaceutical tariffs.

Third, specified patented pharmaceutical products and associated ingredients that do not qualify for an applicable exemption can face the 100 per cent tariff.

This differentiation is important because it means the impact on Indian companies will depend heavily on their product mix and the status of individual products in the US market.

The Commerce notice also clarifies that, for the purpose of the tariff, "pharmaceutical articles" cover finished pharmaceutical products, active pharmaceutical ingredients and key starting materials for APIs (Active Pharmaceutical Ingredients). Inactive ingredients and excipients are not included in that definition.

Bigger strategic significance

For India, the immediate outcome is a measure of protection for its established generic-drug business and a potentially significant opening for exports of qualifying speciality medicines.

But the development also underscores the changing nature of the US pharmaceutical trade policy. Washington is seeking to use tariffs and trade arrangements to encourage drug manufacturing within the US, while carving out medicines considered strategically or medically important.

For Indian pharma companies, the policy could therefore reinforce the importance of diversifying beyond conventional generics into complex and speciality products, while continuing to expand US-based manufacturing where commercially viable.

The September 29 development is consequently not a blanket US tariff exemption for Indian pharma. Rather, it provides zero-tariff treatment to defined speciality products, keeps generics outside the current Section 232 regime and leaves specified patented medicines exposed to the new 100 per cent duty.