Tariff uncertainties may spur rise in third-party pharma manufacturing

Uncertainties around America's tariff policies may encourage more third-party manufacturing and geographical diversification in the pharmaceutical sector in the medium term, say analysts and industry insiders.

- SOHINI DAS

United States (US) President Donald Trump last week announced on social media a 100 per cent tariff on imports of branded or patented drugs. Pharmaceutical companies that have begun constructing plants in the US may be spared from this.

Among Indian companies, Sun Pharma has sizeable sales in the US from patented products. Of the reported global sales of $1.2 billion from patented products in FY25, the US market accounted for $1.1 billion (or 85-90 per cent of global sales), amounting to around 17 per cent of revenues.

HSBC Global Investment Research said Sun Pharma's patented products were mostly manufactured by global contract development and manufacturing organisations (CDMOs). For Ilumya, its largest product in the patented portfolio (56 per cent of patented product sales in FY25) is done by a CDMO in South Korea while the finished dose is by a European entity.

Analysts say while this tariff development is broadly negative for Sun Pharma, the impact on earnings depends on multiple factors -the spread of supply chains (from active ingredients to Fill Finish), the intellectual property (IP) location of the brand, the use of third-party manufacturers, etc.