US, UK agree to zero tariffs on medicines; UK commits to higher spending

The United States has signed a new trade agreement with the UK that eliminates all pharmaceutical and medical products and changes how the country values drugs. This is the first significant spending increase in more than 20 years.

The state-run National Health Service (NHS) will spend at least the next three years on treatments for at least 25 percent more in accordance with the deal announced on Monday.

US Trade Representative Jamieson Greer stated in a statement that the US and the UK have agreed to set up negotiated outcome pricing for novel pharmaceuticals. This will encourage investment and innovation in both nations.

According to the USTR statement, the UK will increase the cost of new medicines by 25% under the agreement. In exchange, any future Section 301 country tariffs on products made in the UK, including pharmaceuticals, drug ingredients, and medical technology, would be exempt from the so-called Section 232 sectoral tariffs.

According to two sources with knowledge of the deal, the value appraisal process at the UK government body NICE, which determines the cost-effectiveness of new drugs for the NHS, had to be significantly altered.

The upper threshold is $30,000 ($39,789) per year for a patient under NICE’s “quality-adjusted life year,” which measures the cost of a treatment for each healthy year.

As part of his campaign to bring the costs of US medicines more in line with those of other wealthy nations, US President Donald Trump has pressed UK and rest of Europe to pay more for them.

The UK’s tough operating environment has drawn criticism from the pharmaceutical sector, and some big companies, including AstraZeneca, the largest by market value on the London Stock Exchange, have canceled or halted investment there.

The implementation of a voluntary pricing system, which allows businesses to return a portion of sales to the NHS to the government, has been a source of conflict between the sector and the government.

The UK’s office for USTR claimed that the rebate rate would go down to 15% in 2026.

“Advanced medicines”

Life sciences companies will be encouraged to continue investing and innovating in the UK thanks to a new pharmaceutical agreement signed by the UK’s Liz Kendall, the minister of science and technology, on Monday.

Our world-leading UK companies keep developing the treatments that can transform lives, Kendall said in a statement. “This vital deal will ensure UK patients receive the cutting-edge medicines they need sooner.”

Additionally, Kendall added, “It will encourage and spur life sciences companies to keep investing and developing right here in the UK.”

Bristol Myers Squibb is one of those businesses. The deal allows the pharmaceutical industry to invest more than $500 million over the next five years, according to the CEO of the company.