Shifting manufacturing operations to US not practical, says Dr. Reddy's CEO amid Trump's proposed generic drug tariffs

Dr. Reddy's Laboratories CEO Erez Israeli on Wednesday said it is not practical to shift the company's manufacturing operations to the US, warning that higher tariffs on imported generic medicines would ultimately lead to higher drug prices for American consumers. 

His comments came after US President Donald Trump announced that the US would maintain a zero tariff on imported generic drugs for the next two years before imposing a 100% tariff for one year from August 2028, followed by a 200% tariff thereafter. 

When asked whether the company was considering partnerships, technology transfers or contract manufacturing in the US to mitigate the impact of the proposed tariffs, Israeli said Dr. Reddy's remains open to opportunities that make business sense. "We are always open to anything that will be good for the business," he said. 

However, he added that relocating manufacturing to the US was currently not a viable option given the significant cost differential. "Considering the magnitude and cost difference between the US and some of the markets where we operate, we are very far from such a step. But if required, we will look at it," Israeli said. 

Responding to the announcement during the company's post-earnings interaction with reporters, Israeli said Dr. Reddy's would closely monitor policy developments but had no immediate plans to alter its strategy. "If the tariff is increased, we will have to increase prices in the US," Israeli said, adding that the company would "see how this evolves" and was "not going to do anything special because of the announcement." 

He cautioned that any tariff hike would increase costs across the supply chain, which would eventually be reflected in higher prices for medicines. 

Earlier in the day, Trump said in a post on Truth Social that the US would continue to impose zero tariffs on all imported generic medicines for two years starting August 1. Thereafter, tariffs would rise to 100% for one year and then to 200%. 

The proposed tariff regime could have key implications for Indian pharmaceutical companies, as India is the largest supplier of generic medicines to the US market.