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The UK government has sealed a deal with Donald Trump guaranteeing that zero tariffs will remain on the imports of UK pharmaceuticals into the US and commits Britain to higher spending on NHS drugs.
The agreement, announced on Monday, secures continued investment by UK pharma companies in the US and will create jobs in the US, the Trump administration said.
The US would “work to ensure that UK citizens have access to latest pharmaceutical breakthroughs”, it said, saying it would “refrain from targeting UK pharmaceutical pricing practices” in any future investigations into the sector “for the duration of President Trump’s term”.
The deal calls for the NHS to increase the net price it pays for new medicines by 25%. The deal will also bring changes to a longstanding drugs-purchasing agreement with the NHS, which pharma industry leaders have argued is not competitive, discourages investment and needs reform.
The deal comes six months after Keir Starmer sealed a deal with Trump limiting tariffs to 10% on most exports.
Trade in medicines has largely been duty-free under a 1994 World Trade Organization agreement centring on public health, but which Trump broke after his election, with tariffs affecting imports from key drugs suppliers including the UK and the EU, home to many large US manufacturing bases.
At the heart of the new UK-US deal is an agreement to lower a so-called “rebate” under the controversial medicines payment arrangements between drug companies and the NHS.
Under the rebate scheme, drug companies are required to make payments to the NHS of between 23.5% and 35.6% of revenue from sales of branded medicines, if the amount the public health service uses is higher than an agreed rate.
These guarantee a continued suppressed price for the NHS for branded drugs, should the demand for them exceed a cap in any given year.
Similar schemes exist in other European countries, but the average rates for these payments are in the single digits, ranging from 9% for Ireland and 7% for Germany.
This is expected to be lowered in the UK as part of a new arrangement with the US administration.
At the same time the NHS will commit to increasing the percentage of its annual budget it spends on medicines.
Negotiations have been led by Varun Chandra, the prime minister’s chief business adviser, and Patrick Vallance, the science minister and former head of research and development at drugs company GSK.
Separately, Trump is trying to force US drugs companies to reduce their medicine prices to the US health sector, arguing they should be closer to those achieved by the NHS and other developed countries that buy drugs on a national scale.
But he has also threatened high tariffs on pharmaceutical imports in an attempt to repatriate manufacturing from places such as Ireland and create a domestic industry that can compete with the likes of India and China, which are now making major strides in R&D as well as producing generic medicines used in Europe.
