The United States' 100% tariff on specified patented pharmaceutical products and their associated ingredients took effect for more companies on Tuesday, September 29, 2026, but qualifying specialty medicines from India will be eligible for zero duty, providing relief to a targeted slice of Indian drugmakers with US exposure.
How the Exemption Works
The US Department of Commerce's Bureau of Industry and Security (BIS), in a September 23 notice published in the Federal Register, listed India among 20 jurisdictions eligible for zero-tariff treatment. The other exempted countries include Ecuador, El Salvador, Thailand, Britain, Vietnam, the European Union, Argentina, Bangladesh, Cambodia, Guatemala, Indonesia, Japan, Jordan, Malaysia, North Macedonia, South Korea, Switzerland, Liechtenstein, and Taiwan. According to official notices, qualifying exports from these nations secure the zero percent rating by virtue of maintaining an active or upcoming trade and security framework agreement with Washington.
Which Drugs Actually Qualify
The zero-tariff category covers a specific list of specialty pharmaceuticals: rare-disease drugs with all approved uses designated as orphan indications, nuclear medicines using safe amounts of radioactive substances, infertility treatments, cell therapies, gene therapies, antibody-drug conjugates, and veterinary pharmaceuticals. The order also exempts raw materials used in manufacturing these treatments from the 100% tariff. Notably, the Commerce Department has stated that generic medicines and their associated raw materials do not fall under the scope of the Section 232 pharmaceutical tariffs at all — a distinction that matters enormously for India specifically.
The Original Tariff Announcement
President Donald Trump first announced the broader tariff via Truth Social in late September 2025, writing: "Starting October 1, 2025, we will be imposing a 100 per cent tariff on any branded or patented pharmaceutical product, unless a company 'IS BUILDING' its manufacturing unit in America." The measure, imposed under Section 232 of the Trade Expansion Act, was framed as part of a broader effort to encourage pharmaceutical manufacturing to relocate to the US, alongside separate tariffs on furniture, kitchen cabinets, and heavy trucks announced the same day.
Why India's Overall Exposure Was Always Limited
Analysts have consistently projected only a limited direct impact on Indian pharmaceutical exports from this tariff, since the vast majority of India's roughly $10 billion (rising toward $30 billion by some estimates) in annual US pharma exports consists of generic drugs rather than branded or patented products. According to ICICI Direct Research, "the direct near-term impact of the newly imposed tariffs on Indian pharma companies is limited since the majority of the exported drugs are generic in nature." Ajay Srivastava of the Global Trade Research Initiative (GTRI) said the tariff is primarily aimed at pressuring global pharma firms to shift manufacturing to the US.
Which Indian Companies Have the Most US Exposure
Despite the limited scope, several major Indian pharmaceutical companies derive a significant share of revenue from the American market — Dr. Reddy's, Aurobindo Pharma, Zydus Lifesciences, Sun Pharma, and Gland Pharma all draw between 30% and 50% of their overall revenues from the US, meaning any tariff-related friction, even on a narrower category of drugs, carries real stakes for these companies specifically.
An Additional Relief Pathway
The Commerce Department notice also created a process allowing companies to seek tariff relief for specialty pharmaceutical products that meet an urgent US health need, offering a case-by-case avenue for exemptions beyond the pre-listed categories. Separately, companies with approved arrangements to shift manufacturing to the US may qualify for different tariff treatment under the original April proclamation.
How Markets Reacted
India's Nifty Pharma index initially slipped 1.7% in intraday trading to 25,639.70 as the broader tariff took effect, before erasing about half that loss to trade around 1% lower at 25,385.30 by mid-morning — a relatively resilient showing given the specialty-drug exemption. G Chokkalingam, founder and chief investment officer at Equinomics Research, noted the sector's outperformance amid a broader market slump was helped partly by a weaker rupee, which improves realizations for exporters, adding: "Despite more than $133 billion in exports and remittances, the rupee has not improved, while oil prices continue to trade above $100."
What's Next
With the exemption structure now in effect and a supplementary relief process available for urgent-need cases, the coming weeks will show how many additional Indian specialty drug categories seek and receive similar carve-outs, and whether the broader 100% tariff meaningfully shifts pharmaceutical manufacturing investment toward the US as intended. For the official notice, see the Federal Register.