The United Kingdom and the United States have reached an agreement to keep tariffs on pharmaceutical imports from the United Kingdom to the United States at zero.
Under the deal, the UK will pay more for medicines through the NHS in exchange for a guarantee that import taxes on pharmaceuticals will remain at zero for three years.
The agreement comes after US President Donald Trump threatened to increase tariffs up to 100% on imports of brand-name drugs.
Pharmaceuticals are one of the UK’s biggest exports to the US, which is also by far the biggest market for big UK drugmakers including GSK and AstraZeneca.
Earlier this year, US President Donald Trump announced massive tax increases on goods imported into the country, which he said would create jobs and boost American manufacturing.
In June, Trump signed a deal with the United Kingdom to remove some trade barriers between the countries and reduce taxes on most goods exported to the United States to 10%. But pharmaceuticals remained a big unknown.
Trump has argued that American consumers effectively subsidize drugs for other developed countries by paying premium prices for those drugs.
US Health Secretary Robert Kennedy Jr said Americans “should not have to pay the highest drug costs in the world for drugs they helped fund.”
“This agreement with the United Kingdom strengthens the global environment for innovative medicines and brings a long-awaited balance to pharmaceutical trade between the United States and the United Kingdom,” he said in a statement.
In the 12 months to the end of September, the UK exported £11.1bn worth of medicines to the US, representing 17.4% of all goods exports in that period, according to the Department of Business and Trade.
Business and Trade Secretary Peter Kyle said the deal “ensures that UK pharmaceutical exports – worth at least £5bn a year – will enter the US tariff-free, protecting jobs, boosting investment and paving the way for the UK to become a global hub for life sciences.”
The agreement will allow the United Kingdom to increase by 25% the price threshold at which it considers new treatments to be too expensive.
The UK will also increase the total amount the NHS spends on medicines, aiming to increase that spending from 0.3% of GDP to 0.6% of GDP over the next 10 years.
The amount pharmaceutical companies must return to the NHS to ensure the health system does not spend more than its allocated budget will be capped at 15%; Last year, pharmaceutical companies had to return more than 20%.
In return, UK drug exports will be protected from tariff increases for the next three years.
A long-running dispute between the industry and the UK government over spending levels and approval rates was intensified by the Trump administration’s insistence that American customers paid several times more for drugs than people in the UK and Europe.
Several large pharmaceutical investments in the UK have been paused or canceled over the past 18 months, while both GSK and AstraZeneca have recently announced multi-million pound investments in the US.
Health Secretary Wes Streeting said in August he was unwilling to allow pharmaceutical companies to “rip off” the UK, after talks between the government and pharmaceutical companies over the cost of drugs collapsed.
But Science Minister Sir Patrick Vallance subsequently told the BBC he accepted the NHS needed to spend more on medicines after seeing its spending on medicines shrink as a percentage of its budget over the past 10 years.
In mid-September, British pharmaceutical giant GSK pledged to invest $30 billion (£22 billion) in research and manufacturing in the United States over the next five years.
A week before GSK’s US investment announcement, US pharmaceutical company Merck (called MSD in Europe) revealed it was scrapping its planned £1bn expansion of its UK operations.
Shortly afterwards, AstraZeneca also announced it was suspending a planned £200m investment in a Cambridge research centre. In July, AstraZeneca said it would invest $50 billion in drug manufacturing and research and development in the United States.
