Shares of Sun Pharmaceutical Industries declined 2.10% to Rs 1,659, reflecting broader investor caution across the pharmaceutical sector following a significant policy move from the United States. The weakness is part of a wider sell-off that has gripped Indian pharma counters since Washington signalled a more protectionist stance on drug imports.

The trigger for the recent decline was a Presidential Proclamation issued by the United States titled “Adjusting Imports of Pharmaceuticals and Pharmaceutical Ingredients into the United States,” which invokes Section 232 of the Trade Expansion Act of 1962. This provision allows the US government to impose trade restrictions on the grounds of national security a framework historically used in sectors such as steel and semiconductors, but now being extended to pharmaceuticals.

The move marks a notable shift in how the US views pharmaceutical supply chains. By categorising drug imports as a national security concern, the policy signals an intent to reduce dependence on overseas manufacturing and incentivise domestic production. This aligns with broader strategic priorities articulated by Donald Trump, who has repeatedly advocated for reshoring pharmaceutical manufacturing and reducing drug prices in the domestic market.

Market reaction has been swift. In the trading session prior to the latest decline, Indian pharma stocks fell as much as 4%, with key names including Biocon and Divi's Laboratories among the notable laggards alongside Sun Pharma. The sell-off reflects investor concerns over potential margin pressures, regulatory uncertainty, and export risks in one of the most critical markets for Indian drugmakers.

However, the immediate impact appears limited. According to the Global Trade Research Initiative, the proposed tariffs are unlikely to significantly disrupt India’s pharmaceutical exports in the near term. This is primarily because India’s export basket to the US is heavily skewed toward low-cost generic medicines, which currently account for over 90% of prescriptions in the American healthcare system.

Crucially, generic drugs are expected to remain exempt from these tariffs for approximately a year to avoid supply disruptions and prevent a spike in drug prices. This temporary buffer provides relief to Indian manufacturers, who dominate the global generics space with cost-efficient production and scale advantages.

India’s pharmaceutical exports to the US stood at $9.7 billion in 2025, representing around 38% of its total global pharma exports of $25.8 billion. This highlights the strategic importance of the US market for Indian companies, not just in terms of revenue contribution but also for regulatory credibility and global positioning.

That said, the policy shift introduces medium- to long-term risks. Ajay Srivastava, founder of GTRI, has flagged that Indian companies with exposure to branded or specialty drugs, as well as those supplying active pharmaceutical ingredients (APIs) used in patented medicines, could face pressure under the new tariff regime. Unlike generics, these segments are more vulnerable to tariff imposition due to their higher value and closer linkage to intellectual property.

Globally, the tariffs are expected to disproportionately impact countries such as Ireland, Germany, Switzerland, Belgium, Denmark, the United Kingdom, and Japan—key exporters of high-value patented drugs and biologics to the US. Notably, the order does not provide exemptions even for countries with established trade agreements with Washington, signalling a hardening of trade policy irrespective of diplomatic alignments.

Adding another layer of complexity, several global pharmaceutical giants such as Pfizer Inc. and Eli Lilly and Company have secured three-year exemptions from the proposed tariffs through direct agreements with the US administration. This selective relief underscores an uneven playing field and raises questions about competitive dynamics in the global pharma landscape.