NIFTY Pharma index drops 3.3%, all stocks end in red; here is why pharma shares fell today

Indian pharmaceutical stocks came under heavy selling pressure on Friday, August 1, after reports emerged that US President Donald Trump had sent letters to 17 global drugmakers demanding immediate price cuts in the United States.

The NIFTY Pharma index plunged as much as 3.5% or 789 points to hit an intraday low of 21,981.85. 19 stocks in the twenty share index were trading lower led by Aurobindo Pharma's nearly 5% decline. Sun Pharma, Granules India, Dr Reddy's Labs, Gland Pharma, Cipla, Glenmark, Laurus Labs, Divi's Labs and Lupin also dropped between 3%-4.8%.

The letter sets a 60-day deadline for compliance, failing which the administration warned it would use “every tool in our arsenal” to prevent continued “abusive drug pricing” practices.

While no Indian companies were directly addressed in the letter, the Indian pharma sector, which heavily depends on exports to the US, reacted sharply to the potential implications of a broader pricing reset in the US market.

Trade tariff jitters

India exported pharmaceutical products worth $8.1 billion to the US last year, accounting for 10.4% of total Indian exports to the country. Indian companies also supply nearly 47% of the US's generic drug requirements, making India a vital player in the global pharma supply chain.

Analysts fear that if US pricing standards are aligned with other developed markets, margins for Indian exporters especially in the branded generics space could shrink significantly. Analysts have cautioned that shipping generic drugs to the US may become commercially unviable if prices are pushed lower, as they are already sold at thin margins.

The pharma sector's troubles are further compounded by the US government's recent decision to impose a flat 25% tariff on a wide range of Indian exports, including pharmaceuticals, electronics, gems & jewellery, and industrial machinery. Previously, tariffs on these items ranged from zero to 10.8%.

Alongside pharmaceuticals, electrical machinery, precious stones, textiles, and chemicals make up nearly half of India’s total exports to the US, according to Deutsche Bank.

If the US moves to ramp up domestic production or shifts sourcing to alternative markets, analysts warn it would take at least 3–5 years for meaningful capacity to develop elsewhere.