“Generics play a very pivotal role for the US healthcare economy. They bring down the overall healthcare cost burden, and India has established itself as a reliable and large-scale supplier. That’s why, despite tariff discussions, the US government knows the importance of Indian pharma,” Desai explained.
Impact of tariffs still unclear
Currently, the pharma sector remains exempt, but the outcome of the Section 232 probe will determine whether tariffs are imposed and at what levels. Desai believes the impact will vary depending on the magnitude:
Modest tariffs (10–20%) may be absorbed by the industry or partially passed on without severely affecting profitability.
Higher tariffs (20–30% or above) could pose challenges, but India may still retain a cost advantage compared to other regions.
“If tariffs are imposed uniformly across geographies, India’s scale and cost leadership could still work in its favor,” Desai added.
US manufacturing presence: Limited cost advantage
The Trump administration has also been pushing for global pharmaceutical companies to set up local manufacturing in the US. While some Indian majors already have plants in the US, widespread relocation is unlikely, Desai said.
“Setting up manufacturing in the US is both costlier—50–60% higher than India—and time-intensive, requiring three to four years for approvals. For Indian firms, the cost economics of manufacturing locally in India are far superior,” she noted.
Large firms better positioned
On the company-level impact, Desai highlighted that larger players like Lupin, Cipla, and Sun Pharma are better placed to weather any tariff-related headwinds. Their scale, diversified presence, and operational flexibility give them a relative advantage compared to smaller firms.
“These companies already have global supply chains and local presence in the US, so they can adapt faster if tariffs come through,” she explained.
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CDMO sector: High growth potential
Beyond generics, Desai pointed out the rising opportunity in India’s Contract Development and Manufacturing Organization (CDMO) segment. This industry, insulated from direct tariff impact since costs are borne by clients, has strong long-term potential.
Currently, India accounts for just 4% of the $200 billion global CRDMO market, but the sector is one of the fastest-growing globally.
Several macro tailwinds are driving this growth:
Rising outsourcing by global innovators.
Supply-chain diversification strategies like China+1 and EU+1.
Cost competitiveness and scientific talent pool in India.
Strong regulatory compliance and improving capabilities in advanced drug development.
Indian CDMO players are now expanding capacity and moving beyond small molecules into complex areas such as antibody-drug conjugates (ADCs), peptides, and oligonucleotides, increasing their addressable market.
Cost edge remains India’s strength
Despite near-term uncertainties, JPMorgan remains constructive on Indian pharma. The combination of cost leadership, scale, and global credibility provides a cushion against policy risks.
“While tariffs present an overhang, India’s role in the US generic supply chain is irreplaceable in the short term. At the same time, CDMO expansion offers a structural long-term growth story for Indian pharma companies,” Desai concluded.
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