The impact of tariff volatility on startups

India's pharmaceutical industry, often hailed as the “pharmacy of the world,” has long been a cornerstone of global healthcare, supplying affordable generic medicines to over 200 countries.

- DR. P V NAIK

Introduction

While large pharmaceutical firms have built robust export pipelines and diversified portfolios, Indian pharma startups—typically agile, innovation-driven, and resource-constrained—face a unique set of challenges in the current global trade environment. The uncertain international tariff landscape, particularly with the United States, has emerged as a critical threat to their growth, sustainability, and global competitiveness.

The Tariff Shock: A New Era of Protectionism

The recent imposition of 25% to 100% tariffs by the United States on various pharmaceutical imports, including branded and patented drugs, marks a significant departure from traditional trade norms. Although generics have largely been spared so far, the ambiguity surrounding “branded generics” and the potential expansion of tariff coverage has created a climate of fear and unpredictability.

For Indian pharma startups, many of which rely on exporting niche generics or biosimilars to the U.S., this uncertainty is more than a policy issue—it's an existential threat. The U.S. accounts for nearly 40% of India's pharma exports, and startups often depend on early success in regulated markets like the U.S. to attract funding and scale operations.

Key Challenges for Startups

1. Cost Inflation and Margin Compression

Tariff hikes directly increase the landed cost of Indian pharmaceutical products in foreign markets. For startups operating on thin margins, this can erode profitability and make their products less competitive compared to domestic or tariff-exempt alternatives. The price elasticity of demand in markets like the U.S. means even small price increases can lead to significant drops in volume.

2. Supply Chain Disruptions