By The White House
The United States and the United Kingdom have unveiled a new trade agreement focused on the pharmaceutical and medical sectors, under which zero tariffs will apply to UK-made medicines, drug ingredients, and medical technology. In return, the UK has agreed to significantly increase its spending on medicines, marking the first substantial rise in more than two decades, and to reform the methodology it uses to assess drug value.
As part of the deal, announced Monday, the state-run National Health Service (NHS) will boost spending on treatments by 25 percent over at least the next three years. “The United States and the United Kingdom have reached a negotiated outcome on pricing for innovative pharmaceuticals, which will foster investment and innovation in both countries,” said US Trade Representative Jamieson Greer in an official statement.
The USTR statement further explained that under this agreement, the UK will pay a net 25 percent higher price for new medicines. In return, UK-produced pharmaceuticals, medical technology, and drug components will be exempt from existing Section 232 sectoral tariffs and any potential future Section 301 country tariffs.
Two sources familiar with the deal confirmed that it includes a major overhaul of the value appraisal system at the National Institute for Health and Care Excellence (NICE), the UK government body responsible for determining whether new drugs are cost-effective for the NHS. NICE uses a metric called the “quality-adjusted life year” (QALY), which measures the cost of a treatment per additional healthy year it provides a patient, with an upper threshold of £30,000 ($39,789) per year.
US President Donald Trump has long urged the UK and other European countries to increase payments for American medicines, aiming to align prices more closely with those paid by other wealthy nations. The pharmaceutical industry has previously criticized the UK’s challenging operating environment, with some major companies, including AstraZeneca—the largest by market value on the London Stock Exchange—pausing or canceling investment in the country.
A key area of tension between the industry and the government has been a voluntary pricing scheme, under which firms return a proportion of sales revenue to the NHS. According to the office of the USTR, the UK has agreed that the rebate rate under this scheme will drop to 15 percent by 2026.
British Science and Technology Minister Liz Kendall described the deal as a boost for the life sciences sector. “This vital deal will ensure UK patients receive cutting-edge medicines sooner, while our world-leading firms continue to develop treatments that can transform lives,” Kendall said. “It will also provide the incentives for life sciences companies to keep investing and innovating here in the UK.”
Pharmaceutical companies such as Bristol Myers Squibb are among the beneficiaries of the deal. The company’s CEO stated that the agreement will enable the firm to invest more than $500 million over the next five years.
On Wall Street, the market reaction was muted: Bristol Myers Squibb (traded under the ticker BMY) fell slightly by 0.1 percent. Other heavily impacted companies included AstraZeneca, which declined by roughly 1 percent, and GSK, down by 0.4 percent.
About the Author
