How Trump's Tariffs On India Will Backfire On The US Healthcare System

The impending tariffs on India, set to take effect next month, may have far-reaching consequences for the US healthcare system. Indian Commerce Minister Piyush Goyal's recent unscheduled visit to the US was an attempt to negotiate a trade deal and mitigate the impact of these tariffs on India's pharmaceutical exports.

The US relies heavily on Indian generic medicines, with nearly half of all generic drugs consumed in the US originating from India. This has resulted in significant savings for the US healthcare system, with estimates suggesting that Indian generics saved the US $219 billion in 2022 alone, according to a study by consulting firm IQVIA. Generic drugs, which are cheaper versions of brand-name medications, account for nine out of 10 prescriptions in the US, making India's pharmaceutical industry a critical component of the US healthcare system.

However, the proposed tariffs could disrupt this delicate balance. Experts warn that the tariffs could make some Indian generics unviable, leading to drug shortages and exacerbating existing healthcare issues. Dr. Melissa Barber, a drug costing expert from Yale University, notes that the tariffs could "worsen the demand-supply imbalances" and disproportionately affect the uninsured and poor, per a report in the BBC.

The Indian pharmaceutical industry is deeply concerned about the potential impact of these tariffs. Companies like Sun Pharma and Cipla have expressed concerns about the viability of their businesses in the face of increased tariffs. Dilip Shanghvi, chairman of Sun Pharma, has stated that the tariffs "do not justify relocating our manufacturing to the US," citing the significant cost differences between manufacturing in India and the US.

The US has already seen the impact of tariffs on Chinese imports, with the cost of raw materials for drugs increasing by 20% since Trump took office. The pharmaceutical sector is India's largest industrial export, with the US being a critical market for Indian generics. Any reciprocal tariffs by the US would increase costs for both generic medicines and specialty drugs, affecting the livelihoods of millions of Americans.

To mitigate these risks, some experts suggest that India should drop its tariffs on pharma goods, which would have a negligible impact on the Indian economy. Ajay Bagga, a veteran market expert, told the BBC that "US drug exports into India are barely half a billion dollars, so the impact will be negligible".

The Indian Pharmaceutical Alliance (IPA) has also recommended zero duty on US drug exports to avoid reciprocal levies. However, this may not be a straightforward solution, as it would require significant changes to India's trade policies.

As the situation unfolds, all eyes are on the potential trade deal between the US and India. Mark Linscott, former assistant US trade representative, believes that "in the short term, there may be some pain through new tariffs, but I think they'll make significant progress by the fall of this year for a first tranche [trade] agreement". The outcome of these negotiations will have far-reaching consequences for the US healthcare system, the Indian pharmaceutical industry, and the livelihoods of millions of people around the world.

The US healthcare system is already facing significant challenges, including rising healthcare costs and increasing drug prices. The proposed tariffs on Indian pharmaceuticals could exacerbate these issues, making it even more difficult for Americans to access affordable healthcare.

In contrast, the Indian pharmaceutical industry is a significant contributor to the country's economy, accounting for a substantial portion of India's exports. The industry is also a major employer, providing livelihoods for millions of Indians.