As the United States prioritises domestic manufacturing of pharmaceuticals, concerns over the Indian pharmaceutical sector becoming less competitive have risen. The doubts among stakeholders seem obvious given the NIFTY Pharma index slipping to over 10% since the beginning of 2025. However, the index has shown a slight recovery in April compared to May, recording a gain of 0.7%.
The new executive orders released by the US, vouching for keeping its pharma units localised, have hit the Indian pharma stocks significantly, shredding the prices of most trusted shares. Most recently, Aurobindo Pharma [NSE: AUROPHARMA], Glenmark Pharma [NSE: GLENMARK], and Cipla [NSE: CIPLA] have seen the maximum effects, with Aurobindo share price down by 2.12%, Glenmark stock price down over 1%, while Cipla stock fall by 0.5% as of May 12, 2025. However, despite the decline in the share prices, the sector still indicates a bullish sentiment.
The Shifting Landscape of US Supply Chains
The COVID-19 pandemic, escalating US-China tensions, and evolving manufacturing strategies have collectively reshaped the US supply chains, particularly in the pharmaceutical sector.
COVID-19
The pandemic exposed critical vulnerabilities in the US pharmaceutical supply chain, notably its heavy reliance on China and India for Active Pharmaceutical Ingredients (APIs). The US imports approximately 80% of its APIs, with 70% sourced from China as of 2020. However, in 2024, the dependence has come down to about 13%. This overdependence led to significant disruptions during the pandemic, highlighting the need for diversification and resilience in supply chains.
US-China Tensions
Geopolitical tensions between the US and China have increased concerns over supply chain security. US tariffs on Chinese goods made companies reconsider their sourcing strategies. This has led to a push for diversification, with many firms seeking alternative suppliers to mitigate risks associated with overreliance on a single country.
Advancing Trends
Companies seek to mitigate global supply chain risks. There’s a growing trend towards reshoring and diversifying the production of the Active Pharmaceutical Ingredient (API) for uninterrupted supply of essential medications. Additionally, advancements in manufacturing technologies to ensure continuous flow manufacturing, etc., are being explored to enhance production efficiency and reduce dependency on traditional manufacturing hubs.
India’s Traditional Role in US Pharma Supply
In 2022, Indian pharmaceutical companies supplied 47% of all generic prescriptions in the US, making them the largest foreign contributor to the US generics market. Indian firms also produced 15% of the biosimilars used by US patients in the same year. Moreover, as of 2024, India supplies 48% of APIs to the US, with only 10% of them being produced by three domestic manufacturers.
This dominance is underpinned by India’s cost efficiency, regulatory alignment, and established presence. The country boasts over 650 US FDA-approved manufacturing facilities, the highest number outside the US, enabling Indian companies to meet stringent quality standards. Major players like Sun Pharma [NSE: SUNPHARMA], Dr. Reddy’s Laboratories [NSE: DRREDDY], and Cipla have leveraged this infrastructure to become significant suppliers in the US market.
However, the landscape is evolving. Recent US drug manufacturing policy shifts, such as proposed US tariffs on pharmaceutical imports and initiatives to reduce drug prices, pose challenges to Indian exporters. Despite these hurdles, Indian pharmaceutical companies remain resilient, focusing on maintaining quality and affordability to retain their competitive edge in the US market.
Indian Pharma Market Impact: Opportunities for Investors Amid the Shift
Enhanced capabilities, strategic collaborations, and a commitment to innovation characterise the pharmaceutical landscape in India. It helps investors become a part of a dynamic industry looking forward to sustainable growth and leaving a global impact.
China Plus One Strategy
In response to the shifting challenges, the US is adopting strategies like onshoring and nearshoring to bring production closer to home. The China Plus One strategy involves maintaining operations in China while establishing additional manufacturing sites in other countries to reduce risk. Companies are increasing production in countries like Vietnam and India to ensure a more resilient supply chain. The US pharmaceutical supply chains away from China offer India an opportunity to capitalise on several strategic advantages and create a widened space for itself.
Government Support
India’s government has introduced initiatives to bolster domestic pharmaceutical manufacturing. The Production Linked Incentive (PLI) scheme for pharmaceuticals, with a financial outlay of ₹15,000 crore, aims to boost domestic manufacturing of high-value pharmaceutical products such as patented/off-patented drugs, biopharmaceuticals, complex generics, anti-cancer drugs, auto-immune drugs, and orphan drugs. Additionally, the government has approved the establishment of Bulk Drug Parks, with a total investment commitment of ₹47,944 crore, to enhance India’s capacity for the production of critical bulk drugs. These initiatives are expected to reduce import dependence and promote the formulation of pharma exports to the US and APIs in large numbers.
Innovation Potential
Indian pharmaceutical companies are increasingly focusing on high-value segments like biologics, complex generics, and contract manufacturing. For instance, Biocon Biologics [NSE: BIOCON] received USFDA approval for Semglee, the first interchangeable biosimilar insulin glargine. Syngene International [NSE: SYNGENE] acquired a biologics facility in the US worth $36.5 million to enhance its capabilities in large molecule discovery, development, and manufacturing services. Moreover, the Suven Pharmaceuticals [NSE: SUVENPHAR] and Cohance Life Sciences merger is likely to strengthen India’s position in contract drug manufacturing services.
Conclusion
India’s pharmaceutical sector remains a strong contender despite the US supply chains’ shift toward resilience and diversification. With growing government support, domestic API production, digital manufacturing, and a focus on regulatory compliance and R&D, India is well-positioned to meet evolving US demands. Hence, the doubts raised, questioning the competitiveness of the Indian pharma stocks and the sector as a whole, remain unjustified, given the opportunities and bullish sentiments that the market trends reflect.
