NEW DELHI: Indian pharmaceutical companies are poised to receive much-needed clarity and stability through the proposed India-US trade agreement, which is expected to sharpen their expansion strategies in the world's most lucrative pharmaceutical market. This development comes at a crucial time when major domestic players have been navigating significant challenges in their US operations.
Addressing Recent Headwinds in US Market
While the pharmaceutical sector has traditionally been insulated from punitive US tariffs, leading Indian companies including Sun Pharma, Dr Reddy's Laboratories, and Cipla faced substantial headwinds during the third quarter ending December 2025. These challenges stemmed from intensifying competition and persistent price erosion in the American market, which remains critical for India's pharmaceutical exports.
Strategic Importance of US Market
The United States accounts for approximately 35% of India's overall pharmaceutical shipments, valued at over $30 billion during the fiscal year 2024-25. This substantial market share underscores why the proposed trade agreement represents a significant opportunity to bolster growth prospects and enhance pipeline visibility for domestic manufacturers.
Industry experts emphasize that a potential India-US trade deal offers long-awaited stability for the domestic pharmaceutical sector, which plays a critical role in supplying affordable medicines to American consumers. Kartik Jain, Partner at JSA Advocates & Solicitors, noted: "The move strengthens India's competitive position vis-à-vis other exporting jurisdictions facing higher tariff barriers."
Legal and Commercial Considerations
Jain further elaborated on the practical implications: "From a legal and commercial perspective, however, until the detailed text and implementation framework are released, Indian companies will need to carefully assess how these commitments translate into actual commercial and regulatory benefits."
The market responded positively to this development, with major pharmaceutical stocks showing an upward trend on Tuesday. Sun Pharma led the rally with gains exceeding 4%, contributing to a broader surge in the BSE Healthcare Index.
Clarity on Generic Pharmaceuticals
Sujay Shetty, Global Health Industries Advisory Leader at PwC India, explained the significance: "Pharma generics was hitherto left outside the tariffs. The Free Trade Agreement now provides clarity on that. This will help domestic generic companies with their US plans."
Over recent months, Indian pharmaceutical firms have been actively recalibrating their US strategies and product pipelines to mitigate potential risks. This proactive approach reflects the sector's recognition of both challenges and opportunities in the American market.
Recent Performance and Future Outlook
Recently, Sun Pharma reported a decline in generic drug sales to the United States during the third quarter ending December 2025. However, this decrease was offset by robust performance in high-value specialty and innovative drug segments, highlighting the evolving nature of India's pharmaceutical exports.
Ayush Mehrotra, Partner at Khaitan & Co., emphasized the broader implications: "Equally, this strengthens India's role in resilient supply chains with a predictable and positive moving tariff headline."
Beyond Tariff Considerations
Manoj Mishra, Partner and Tax Controversy Management Leader at Grant Thornton Bharat, provided additional context: "Pharmaceuticals were kept outside the scope of previous agreements. Beyond tariffs, the sector's long-term growth will continue to hinge on regulatory compliance, timely FDA approvals, and resilient supply chains."
Analyst Perspectives on Economic Impact
Financial analysts anticipate that the proposed reduction in tariffs will not only enhance the competitiveness of Indian pharmaceutical exports in US markets but also trigger a chain reaction of positive developments across related sectors.
An analyst from Motilal Oswal Financial Services observed: "This is a high-impact development and will have a multi-layered positive effect on the Indian economy, prevailing market sentiments, and sectors exporting to the United States, which will benefit from improved competitiveness."
The proposed India-US trade agreement represents a strategic milestone for India's pharmaceutical industry, offering clarity that could transform market dynamics and strengthen the country's position as a global pharmaceutical powerhouse.
