In contrast to the robust domestic outlook, the U.S. market outlook is more cautious for the Indian pharmaceutical sector and after a strong FY25, where revenues grew 9.9% over the previous year, growth is expected to slow down due to price erosion and declining sales of lenalidomide, a key revenue contributor in previous years, according to ratings agency ICRA. Lenalidomide is used to treat anaemia (low red blood cells) in patients with a certain type of myelodysplastic syndrome (MDS).
It added that regulatory scrutiny by the U.S. Food and Drug Administration (USFDA) remains an ongoing risk factor, with warning letters and import alerts delaying product launches and triggering the imposition of failure-to-supply penalties. These issues also impose significant costs for remediation, including consultant fees and increased management bandwidth, which tend to weigh on margins.
Adding to the uncertainty is the recent imposition of 50% tariffs by the U.S. on Indian imports across multiple sectors, effective August 27, 2025. “While pharmaceuticals have so far been exempted, the possibility of future inclusion remains a key monitorable. The U.S. government’s proposal for a ‘most favoured nation’ (MFN) pricing policy to bridge global drug price disparities could further impact Indian exporters,” said Kinjal Shah, senior vice president & co-group head, ICRA, speaking at a webinar on the Indian pharmaceutical industry, ‘Industry at a crossroad: navigating global challenges and local opportunities.’’
Commenting on the domestic market performance he said that the domestic market continues to be a key growth driver for Indian pharma companies. Sales force expansion, improved productivity of medical representatives, deeper rural distribution, and new product launches are expected to support 8-10% revenue growth in FY2026 in the domestic market. ICRA’s sample set companies continue to report a double-digit expansion (10.3% YoY growth in Q1 FY2026, following 11.6% growth in FY2025), driven by market share gains in chronic therapies, new product introductions, and regular price hikes—despite subdued volume growth for branded generics, partly due to rising genericisation.
Recent government measures, including GST exemptions and rate reductions on select lifesaving/ general medicines, and some medical supplies and equipment, are expected to enhance affordability and accessibility, aligning with India’s broader healthcare inclusion goals, the group noted.
The group also noted that the India’s pharmaceutical sector is poised for moderate growth in the current fiscal, even as global headwinds and regulatory uncertainties cast a shadow over its largest export market.
In its release, the group said that revenues for its sample set of companies are projected to expand by 7-9% in FY2026, supported by 8-10% growth in the domestic market and 10-12% growth in Europe.
However, performance in the US market is expected to moderate, with year-on-year growth slowing to 3-5%, from nearly 10% in FY2025. The operating profit margins (OPM) of ICRA’s sample entities is expected to remain at 24-25% in FY2026, broadly in line with 24.6% in FY2025, aided by favourable raw material prices, improved operating leverage, and a rising share of specialty products.
Published – September 18, 2025 11:22 pm IST
