Global pharma performance: The massive US tariffs and retaliation will indirectly affect growth  

Pharmaceuticals have been exempted from US import tariffs for the time being, but high uncertainty remains. While pharmaceuticals are more detached from the business cycle than other sectors due to their essential nature, the sector will nevertheless feel the pinch from an economic downturn.

We expect global pharmaceutical production and sales to grow by 3% in 2025, about 0.5 percentage points lower than previously forecast.

Emerging markets will gradually gain a larger share of global pharmaceuticals output and sales, as improvements to healthcare systems and supply chains increase accessibility and production.

In the mid and long-term, producers of speciality products, medicines for chronic conditions and generic drugs will find opportunities for growth among ageing populations.

United States: Lower economic growth due to tariffs will impact pharmaceuticals demand

Lower US economic growth, price pressures and decreasing private consumption due to the far-reaching import tariffs will affect drug sales. US pharmaceuticals output is forecast to increase by 2.4% in 2025 and by 1.2% in 2026.

Businesses have started to stockpile medicines in anticipation of further disruptions. Should any tariffs be imposed, higher prices and shortages of generic drugs could be the result. 

Ongoing demand will be driven by the ageing population. A surge in demand for weight-loss drugs will also benefit the US pharmaceuticals market in the coming years. 

Margins for branded pharmaceuticals are robust, leading to strong cash flow and credit profiles. 

However, drug pricing regulation could impact the industry, as the US government has taken steps to reduce the price of pharmaceuticals for consumers.

China: Government support drives innovation and better access to healthcare

We expect Chinese pharmaceuticals production to grow by 4.2% in 2025 and by 4.6% in 2026.

Pharmaceutical exports to the US account for only 2% of nominal gross output, which means that any US import tariffs on pharmaceuticals would have limited impact on industry performance. 

The government strongly supports investment and R&D in order to shift away from producing generics and towards high quality drugs and biopharmaceutical innovations. 

Domestic demand will be boosted by a growing middle class that can afford high value-added drugs. At the same time the population is ageing, which will spur demand for drugs related to chronic illnesses. 

India: Government schemes and demographics drive growth 

We expect Indian pharmaceuticals output to grow by 5.9% in 2025 and by 9.6% in 2026. Most businesses have strong balance sheets and good access to bank financing. 

The government has introduced a National Pharmaceutical Policy, aimed at reducing drug costs and decreasing dependency on Chinese active pharmaceutical ingredient (API) imports. 

Together with a growing population and rising middle class, this could bolster India’s path to becoming one of the world’s largest pharmaceuticals manufacturers over the next decade. 

However, quality standard issues and incidents of alleged drug contamination remain downside risks. The US Food and Drug administration has increased the number of inspections at Indian drug manufacturing units amid growing concerns over quality. 

European Union and UK: A modest rebound amid tariff threats

After a 0.4% contraction in 2024, we expect pharmaceuticals output and sales in the EU and the UK to grow by 1.9% in 2025 and 0.4% in 2026. 
Due to the expected economic slowdown in Europe caused by US import tariffs, we forecast a slight decline in pharmaceuticals production in several European countries this year.

The EU pharmaceutical sector is highly exposed to targeted US tariffs. Exports of final goods to the US accounted for 14.7% of gross pharma output in 2023. 

For the most part, financial indicators in the industry are strong, but some SMEs could face financing challenges. This is due to high R&D costs, competition from India and China, ongoing supply chain problems and talent shortages.

There are some concerns about the international competitiveness of the European pharmaceuticals sector in the longer term, in particular against China and India and about innovation.