Indian drugmakers in no rush to shift to US despite tariff threat

Despite former US President Donald Trump's renewed threat of tariffs up to 200 per cent on imported generic drugs, Indian pharmaceutical companies are strategically maintaining India as their primary production base while making selective investments in the US for complex products and contract manufacturing.

Indian pharmaceutical companies are not rushing to move to the United States despite the Trump administration’s renewed tariff threat.

They are relying on existing US plants, contract manufacturers and selective investments in complex products while retaining India as their principal production base.

US President Donald Trump earlier this month threatened to impose a tariff rate of up to 200 per cent on imported generic drugs after a two-year transition period.

“This is done in order to RESHORE Generic Pharmaceutical Production into America, with a penalty to those Companies that decide not to build Plant and Equipment within the stated period of time given to them,” Trump wrote on Truth Social.

Strategic Investments Over Wholesale Relocation

An analysis of annual reports for FY26 and recent earnings calls shows that drugmakers are increasing research and development (R&D) spending, preparing complex-product launches and adding capacity across markets in line with existing strategies rather than undertaking a wholesale relocation of manufacturing to the US.

Dr Reddy’s Laboratories Chief Executive Officer (CEO) Erez Israeli said moving a manufacturing facility within the two-year tariff-free window proposed by Trump was not practical.

“As we speak, I don’t see any reason to be concerned,” Israeli told analysts after the company’s April-June quarter results.

“It’s not practical to move any facility in two years.”

“Personally, I don’t, at this stage, give too much weight to that,” he added.

Dr Reddy’s already has some local manufacturing exposure. Products accounting for around 25–30 per cent of its revenue are manufactured by contract manufacturing organisations (CMOs) in the US, investor relations head Aishwarya Sitharam said on the call.

The company had considered engaging a US contract manufacturer for Abatacept, its proposed biosimilar of Bristol Myers Squibb’s arthritis drug Orencia, to mitigate potential tariff risks.

However, Israeli said the option was no longer being pursued and the product would be launched from the company’s Bachupally facility in Hyderabad.

Adding a US manufacturing site after approval would require a regulatory supplement and entail significant costs, he added.

Dr Reddy’s launched six products in North America during the first quarter of FY27, including complex generics bosutinib (for leukaemia) and nintedanib (lung disease).

Cipla's Dual Manufacturing Approach

Cipla, meanwhile, is using a combination of American and Indian plants for its forthcoming US launches. managing director and global CEO Achin Gupta said its pipeline for the remainder of FY27 included four significant launches—three respiratory products and one “peptide opportunity”.

“Two of these three respiratory assets have been filed from our US manufacturing facilities, while the third has been filed from our Goa facility,” Gupta told analysts.

The company launched generic Ventolin in the US during the quarter and has started commercial shipments.

Its remaining respiratory pipeline includes generic Advair. Cipla spent Rs 486 crore, or 6.8 per cent of revenue, on research and development during the quarter, largely on filings and key development programmes.

Cipla has continued targeted investment in its US manufacturing network.

Its FY26 annual report said the company had commissioned a metered-dose inhaler facility at Fall River, Massachusetts, which has been approved for generic Proventil and Ventolin.

It is investing further to scale capacity there, while its Long Island dry-powder inhaler facility will support generic Advair and other products.

The annual report identified trade protectionism as a risk, saying measures to promote local manufacturing could restrict pricing flexibility and reduce margins.

Its mitigation measures include local manufacturing partnerships, greater active pharmaceutical ingredient (API) backward integration and supply-chain efficiency.

At the same time, Cipla’s broader capacity programme remains India-heavy. It has commissioned a greenfield respiratory API facility at Kurkumbh (Maharashtra) and is expanding its oncology API block at Bommasandra (Karnataka) and dosage-form capacity at Sikkim, Patalganga (Maharashtra) and Goa.

Lupin and Other Drugmakers' Strategies

Lupin has made one of the largest disclosed US investments among Indian drugmakers.

The company said in its FY26 annual report that it has invested around $250 million in its Coral Springs, Florida, facility, “significantly expanding manufacturing and development capabilities for complex and specialty products”, particularly respiratory therapies.

However, Lupin’s wider manufacturing investments remain centred in India.

It commissioned an oncology-focused, high-potency API facility at Visakhapatnam and expanded its peptide and contract development and manufacturing organisation platform at Dabhasa, Gujarat.

Lupin described the tariff hike and pressure to localise manufacturing in the US and Europe as a significant risk.

It said it would respond through a diversified manufacturing footprint, flexible sourcing and “selective investments in onshore and nearshore manufacturing”.

Other companies are similarly making targeted investments based on product and technology requirements.

In January 2026, Zydus Lifesciences acquired two biologics facilities in Emeryville and Berkeley, California, for an upfront consideration of $75 million, with potential contingent payments of up to $50 million over three years, linked to revenue milestones.

According to its annual report, the plants will initially operate as a biologics contract development and manufacturing organisation and, over the longer term, support Zydus’s US biosimilar portfolio.

The investment is focused on biologics and contract manufacturing rather than shifting conventional generics capacity from India.

Biocon has commissioned an oral solid-dosage facility at Cranbury, New Jersey, and begun commercial supplies.

But its largest ongoing expansion is in Malaysia, where it is doubling insulin drug-substance and drug-product capacity.

Additional fill-finish capacity is expected in FY27, while the drug-substance expansion is scheduled for completion in FY28.

In India, Biocon is developing a greenfield injectables facility in Bengaluru for prefilled syringes, cartridges, vials and drug-device combinations.

The company said in its annual report that its major infrastructure investments were “largely behind us”, with the focus shifting towards asset utilisation, operating efficiency and commercial scale-up.

Torrent Pharmaceuticals offered the most explicit expectation of continued tariff protection for generics.

“Tariffs on pharmaceuticals was a grave concern in 2025.

Fortunately, as of now, generic pharmaceuticals are exempt, and we expect this to continue in 2026,” the company said in its annual report.

Torrent’s four plants supplying finished products to the US have US Food and Drug Administration clearance, and the company has started receiving new product approvals.

However, it has announced no new US manufacturing project.

Divi’s Laboratories, which earns most of its revenue from exports and custom synthesis, is also directing its expansion to India.

It invested more than Rs 1,500 crore across its manufacturing network in FY26.

Six blocks are operating at its Kakinada, Andhra Pradesh, facility and two more are under construction, while three large projects backed by long-term customer commitments are progressing at its other Indian units.

Industry Outlook and Challenges

The investment pattern is reflected in a recent Deloitte survey of CXOs at pharmaceutical companies with annual revenue exceeding Rs 10,000 crore.

It found that 67 per cent prioritised portfolio and revenue diversification, with an equal proportion identifying capital expenditure and geographical expansion as priorities.

Ninety per cent planned some manufacturing capacity expansion over the next two to three years, while biologics and biosimilars were the leading R&D focus, cited by 45 per cent.

“The difference is that companies are now likely to examine these plans through a more practical risk lens,” said Joydeep Ghosh, partner and leader—life sciences and health care, Deloitte South Asia.

Companies would place greater emphasis on alternative sourcing, inventory management, supply-chain visibility and reducing dependence on any single market or route, he added.

Shrikant Akolkar, analyst at Nuvama Institutional Equities, said producing generics in the US was difficult because of persistent price erosion, intense competition, the large number of dosage forms and stringent quality requirements.

“Building such large-volume capacities locally would take decades, as the US has lost its edge in low-cost generic manufacturing,” Akolkar said.

The disclosures suggest that tariff uncertainty is influencing supply-chain, sourcing and capacity planning but has not triggered a broad relocation of pharmaceutical manufacturing from India to the US.

Indian companies investing in America are concentrating on complex inhalation products, specialty medicines, biologics and contract manufacturing—segments where proximity to the market and specialised capabilities can justify higher costs.