Yes. The Sorcerer's substitution ability causes the Pygmy to lose a token. The Sorcerer's ability specifically states that the substitution causes a Loss (the example in the rule book uses Elves). The Pygmies ability allows them to roll the reinforcement die and get 0-3 Pygmies that are redeployed at the end of the current players turn.
The base game rule book says:
Sorcerers - Once per turn per opponent, your Sorcerers can conquer a Region by substituting one of your opponent's Active tokens with one of your own taken from the storage tray. If there are no more tokens in the storage tray, then you cannot conquer a new Region in this way. The token your Sorcerers replaces must be the only race token in its Region (A single Troll token with its Troll's Lair is considered alone for this purpose; likewise for a Race token in a Fortress or on a Mountain, these markers provide no protection to a lone Race token) and that Region must be adjacent to one of your Sorcerers'. Place the substituted opponent's Race token back into the storage tray. If an Elf is converted by a Sorcerer, the Elf does lose his token.
The Expansion rule book says:
Pygmies - Each time you lose a Pygmy token, roll a reinforcement die and receive as many new Pygmies from the storage tray as you rolled pips on the die (up to the number of Pygmies left). Deploy them on the board at the end of the current player's turn.