Erez Israeli, the CEO of Dr. Reddy's Laboratories, stated that the tariffs on generic drugs will lead to price increases for patients, as the low-margin nature of the business makes it impossible for companies to absorb such costs. The tariffs will start with zero for two years, then escalate to 100% in August 2028 and 200% the following year.
Israeli emphasized that the timeline for companies to relocate operations to the U.S. is unrealistic, estimating it could take four to seven years. Currently, Indian companies supply nearly half of the U.S. generic drug market, which is crucial since generic drugs account for over 90% of prescriptions in the U.S.
However, industry representatives, including Namit Joshi from the Pharmaceuticals Export Promotion Council of India, have expressed concerns that the tariffs will not incentivize companies to shift production to the U.S. due to higher manufacturing costs. Israeli noted that Dr.
Reddy's sales from the U.S. generic market have declined from 50% to 27% of total sales and are projected to drop below 25% this year, indicating a shift in the company's focus. Global brokerage Nomura also highlighted that while the tariffs may not lead to a relocation of manufacturing, they could enable companies to raise prices and enhance profitability