The CEO of India’s Dr. Reddy’s Laboratories warns that U.S. President Trump’s proposed tariffs on generic drugs will lead to higher prices for American consumers. Manufacturing generics in India significantly lowers costs for the U.S. market, and relocating production could take years.
Industry experts believe that Indian companies cannot absorb such tariffs and that the move is unlikely to prompt a shift in manufacturing due to higher production costs in the U.S.
Indian Pharma CEO Warns Tariffs Will Drive Up US Generic Drug Prices
Byline: CNBC
Date: February 18, 2026
Key Points
- U.S. President Donald Trump's proposed tariffs on generic drugs are expected to increase prices for American patients, according to the CEO of Dr. Reddy's Laboratories.
- Manufacturing generic drugs in India significantly lowers costs for the U.S. market.
- Relocating generic drug manufacturing to the U.S. could take four to seven years, stated the CEO.
The planned tariffs on generic drugs by U.S. President Donald Trump will inevitably lead to higher prices for patients in the United States, warned Erez Israeli, the chief executive of Indian pharmaceutical giant Dr. Reddy's Laboratories, in an interview with CNBC's 'Inside India'.
Israeli emphasized that the generic drug business operates on very thin margins, making it impossible for companies to absorb the proposed tariffs. He indicated that price increases would likely be 'in the magnitude of the tariff.'
Furthermore, Israeli cautioned that the two-year grace period before the tariffs take full effect might be insufficient for companies to relocate their manufacturing operations to the U.S., a process he estimates could take anywhere from four to seven years.
President Trump announced on Tuesday that imported generic drugs would face zero tariffs for two years, beginning August 1. However, a 100% levy is scheduled to be imposed in August 2028, escalating to 200% a year later. This initiative is part of an effort to encourage the onshoring of the generic medicine industry within the U.S., which currently accounts for over 90% of prescriptions.
Indian pharmaceutical companies are a significant supplier to the U.S. market, providing nearly half of all generic drug supplies, according to the Indian Pharmaceutical Alliance. Industry representatives have voiced concerns that absorbing tariffs of 100% to 200% is not economically feasible.
'Right now, we are operating on a very thin margin,' stated Namit Joshi, chair of the Pharmaceuticals Export Promotion Council of India, in a recent interview with ANI.
Dr. Reddy's CEO also noted that sales to the U.S. now represent only 27% of the company's total revenue, a decrease from 50% a few years ago, and is projected to fall below 25% this year as other business segments experience faster growth.
The imposition of these tariffs is unlikely to incentivize generic drug companies to shift their manufacturing to the U.S., given the significantly higher production costs compared to India, making the manufacture of low-margin products there economically unviable.
"The operation in India by us and also by others allowed a significant decrease in the cost of medicine to the United States," Israeli stated.
Global brokerage Nomura echoed these sentiments in a report, suggesting that Indian companies are unlikely to relocate generic manufacturing to the U.S. due to low economic viability. However, they noted that the tariffs could potentially allow manufacturers to increase prices and improve their profit margins.
