Trump fare is unlikely to be a bitter pill for pharmaceuticals – all you need to know – industry news

While US President Donald Trump has announced the probable 25 percent of imported pharmaceutical tariffs, Kotak Institutional Equities (Kie) analyzed the basic scenarios and the most serious cases for tariff hiking. “In the background of uncertainties around the US rates on Pharma, our basic case is high rates (> 10 %) is unlikely to be charged, as they are impractical. However, in the worst case of high tariffs, companies would be forced to delve their American portfolio (coming out in some cases) after they have exhausted other ways, such as transmitting higher costs for American customers, ”said the brokerage company.

Respecting its basic case, Kotak institutional actions reiterated the positive position on the sector: Sun Pharmaceuticals, Cipla, LUPINEJB and Emcure are the first choices. Earlier, in a conversation with the nomura, Cipla The General Director and the CEO, human Vohra, showed confidence in the sector and said that US tariffs and regulations will not affect the competitiveness of Indian generics and are a long -term positive for Indian The pharmaceutical sector. He reiterated: “The Indian generic industry will remain intact even if the US imposes rates.” Nomura stressed that comments are “mostly lined up to expectations.”

Trump has revealed that a 25 percent rate will be implemented pharmaceuticals In the initial phase and will grow “very substantially over a year”. However, he did not clarify the date he will enter into force, while maintaining that companies will have time to change their production in the US.

No gloomy result is expected

According to the Ministry of Trade, India Exports To the US has been up to $ 8.1 billion in 20124 and, in contrast, US imports have been up to about $ 400 million compared to 20124. Currently, there is no import tax on Indian drugs provided US, even if India requires 5-10 percent import fees for pharmaceutical imports from the country. Therefore, the Kotak Institution Equities said: “If the rates are perceived strictly on the principle of reciprocity within Pharma, the Indian government will have to sail with an impact of lower customs at less than 50 million dollars, which seems reasonably managed, in our opinion.”

The worst case

In the background of the erosion of predominant prices and with several molecules from the generic American portfolios of Indian companies that are already obtaining minimal margins, companies could be forced to stop them in the US, Kie’s report said. In addition, he added: “This could further aggravate the US Drug deficiency. Given the gestation period involved in setting up a manufacturing facility in the US (policies could change until American installations will appear) and, more importantly, high cost structure, we do not expect major efforts from Indian companies to gradually add manufacturing facilities to the US. “

In the worst case of companies that significantly cut their generic American portfolio, Kie’s analysis report claimed that “it does not exclude a domino effect, as Indian companies could be significantly more aggressive in tracking in India and EU/Row leading to pricing wars.” In the case of world blanket tariffs, he said, there will be a fair playing field and impact on the Indian generics Companies could be limited because of their inherent cost advantage.

How will it have an impact on the key segments in the pharmaceutical sector?

“Within the formulations/coverage of our biosimilations, at 45-50 percent, Aurobindo Pharma Bios also have the biggest EBITDA contribution in the US, ”Kotak said. Unlike generics, if the US has a great dependence on India, the US does not depend on India for biosimilation. Therefore, for Biosimillars, Kotak has maintained, it will not be easy to send higher rates to US patients. Compared to American generics, Sun Pharmaceutical’s The specialized portfolio could be more affected. This will result from the larger price points, which could make it more difficult to pass the higher costs. On the other hand, the limited availability of substitutes for Sun Pharmaceutical specialized products could prove to be a guarantee, he said.

“Within our API/CRDMO coverage, the gland has the largest direct contribution of the US EBITDA. However, given the B2B nature of the business, the API/CRDMO companies will be directly protected from tariffs and will have a slightly higher capacity to transmit their customers tariffs, ”said Kotak, while maintaining that these companies will be exposed to the indirect impact from American tariffs.

The way out

On estimates, the US is based on about 45 % of its generic deliveries on India and 10-15 % of biosimilar supply. According to a white book by API Innovation Center, 83 of the first 100 generics prescribed in the US have no US API source. While water production in the US has decreased by 61 % in the last decade, there has been an increase in API production capacities in India and China. In this background, Kotak Institutional Equities said: “We emphasize, in terms of the value, the size of the US generics market It is less than 10 percent of the US pharmaceutical market of $ 600 billion. Thus the value impact of Indian generics in general US pharmaceutical market It is quite low. We emphasize that the Indian government has made measures to demonstrate reciprocity. “

In the trade union budget, the government has fully exempted 36 life rescue drugs from the basic customs debt. In addition, the customs duty for six additional drugs was reduced to 5 %. In addition, 37 additional drugs will be completely exempt from customs duties within patient assistance programs.