Most people have never heard of the FTO U-3 factory in Hyderabad, India, but its products intimately affect millions of Americans. Inside the sprawling facility, around 1,900 Indian workers at Dr. Reddy Laboratories work around the clock to manufacture more than 100 generic medications, including antihistamines, statins and antidepressants. Of the nearly one billion oral doses produced there each month, 75 percent go to patients in the United States. The scale of India’s pharmaceutical industry has made it a cornerstone of the global drug supply. In a high-volume, low-margin business, India’s ability to make pills at a small fraction of what they would cost elsewhere has created a nearly insurmountable obstacle for the United States, which is trying to bring that production home. President Trump has said he wants to bring generic drug production back to the United States, using tariffs to pressure pharmaceutical companies. In a July social media post, Trump said he planned to impose a 100 percent tariff on generic drugs starting in 2028, followed by a 200 percent tariff a year later, when his term will have expired. Generics account for 90 percent of prescription drugs in the United States, and 40 percent of them are manufactured in India. When the United States imposed a new 100 percent tariff on certain pharmaceutical imports on Tuesday, it exempted generic drugs and many other products. Doctors and supply chain experts say taxing imported generics would raise costs, spur rationing and lead to shortages of crucial drugs. Even a 200 percent tariff on generic drugs might not erase India’s advantage. Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance, estimates that most tablets and liquids made in India would cost at least four times more to produce than in the United States. India started generics in the 1970s by prioritizing affordable medicines for its huge and largely poor population at a time when Western multinational pharmaceutical companies were not. For decades, India refused to recognize drug patents while its manufacturers patented processes they devised to reverse engineer drugs sold in wealthier markets. By the time India’s patent law was brought into compliance with World Trade Organization standards in 2005, its companies had become experts at processing complex drugs and producing them for much of Asia, Africa and Latin America. Around the same time, Americans began adopting generic medications. In 2004, they began to account for more than half of prescriptions filled in the United States. The biggest profits come from patented drugs, so “in the United States, once they go off patent, you forget about them,” Jain said. “But in India, entrepreneurs continue to work and develop it, and with these volumes, it gets better.” That business is poised to grow. Over the next five to seven years, Jain said, 55 major patents worth $300 billion a year will expire in the United States, widening the path for Indian manufacturers. India’s advantage is not just experience. American-born Peter DeYoung, CEO of Piramal Global Pharma in Mumbai, runs more than a dozen factories, including in Europe and the United States. In the United States, he said, labor is the highest cost “by a wide margin,” followed by energy and materials. In India, it is the other way around: materials are the biggest cost and workers are the least. Mennisha Paka, 23, supervises a line at the FTO U-3 factory for Dr. Reddy’s Laboratories, which packages generic metoprolol, a beta-blocker prescribed for heart patients. He earns $3,840 a year and uses part of his salary to earn a degree in pharmaceutical chemistry. One of his subordinates, Susmita, who goes by one name, earns about $2,000 a year. Both women earn less than a tenth of the average wage of a pharmaceutical manufacturing worker in the United States. India has other advantages. DeYoung said factories and processes that took four years to set up in the United States, Europe or Israel (home to Teva Pharmaceutical Industries, the largest generics maker) could be completed in a year in India. Custom equipment can be manufactured in half the time it would take in Germany or Austria. For years, relying so heavily on Indian factories had one downside: quality. A series of scandals beginning in the early 2000s tarnished the industry’s reputation. The most notorious offender, Ranbaxy, sold shoddy drugs and lied to the U.S. Food and Drug Administration about its processes before going under more than a decade ago. Since then, a book about the scandal has become required reading for many industry managers. His afterword said that as recently as 2019, the FDA was still announcing inspections of Indian factories days in advance, giving operators time to hide shoddy practices. That’s no longer the case, at least among the big manufacturers. Dr. Reddy’s underwent a surprise inspection two weeks after Trump declared a tariff on generics. Piramal said its factories, including the one in Digwal, three hours west of Hyderabad, have undergone 415 inspections since 2012, including 49 by the FDA, and no serious violations have been detected. Piramal makes generics, but an even bigger part of its business is contract manufacturing for clients who hold drug patents. Keeping smaller factories in the United States makes it easier for some customers to control production. That geographic dispersion points to another problem in trying to produce all pharmaceutical products locally. Modern drug supply chains are not clearly divided between products made in the United States and products imported from elsewhere. One sealed barrel among thousands at Piramal’s main warehouse in Digwal was made in India, shipped to Singapore and back, and bore the brand of a Japanese company with American management. Another drug, which DeYoung would describe only as a life-saving medication to treat central nervous system conditions, begins its journey in Digwal, then travels 8,000 miles by air to the Piramal facility in Riverview. Michigan. Riverview, a quiet Detroit suburb with sweeping lawns and white steeples, is a long way from Digwal, where nearby villages still get their water from stone-lined wells. But specialized machines at Piramal’s Indian and American laboratories collaborate to convert the drug into its final form. There are good reasons to combine facilities in India with plants in your target market, DeYoung said. Some drugs require especially dangerous chemicals, including some controlled by the Drug Enforcement Administration (DEA). Others, like sevoflurane, a generic anesthetic that Piramal manufactures in both India and the United States, must remain available even if international supply chains collapse completely. Which raises a more fundamental question than whether tariffs can force drug manufacturing back to the United States. “So what problem are you trying to solve?” Mr. DeYoung asked about the prospect of a tariff on imported generics. Is it to return pharmaceutical jobs to American workers? Is it to safeguard the supply of vital medicines? Even as Indian companies grapple with the Trump administration’s push to reduce their dependence on India, they are also grappling with their own dependence on another country for a critical part of the pharmaceutical supply chain. Starting in the 1990s, China became the world’s dominant manufacturer of the active ingredients required for most medicines. India is now trying to regain that capability. That, Jain said, creates an opportunity for the United States and India to work together, rather than separate their pharmaceutical industries. “Unless we work together with the United States, we will be dependent on China” for ingredients, he said. So, he added, it makes sense for American buyers to “stockpile in India” rather than in the United States “for six, seven or eight times the price.”
