The UK and US have reached an agreement to keep tariffs on UK pharmaceutical imports to the US at zero.
Under the deal, the UK will pay more for its medicines through the NHS in return 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 by up to 100% on imports of branded drugs.
Pharmaceuticals are one of the UK’s biggest exports to the US, which is also by far the biggest market for major 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 US manufacturing.
In June, Trump signed a deal with the United Kingdom to remove some trade barriers between the countries and reduce levies on most goods exported to the United States to 10%. But pharmaceuticals remain a big unknown.
Trump argued that American consumers are effectively subsidizing drugs destined for other developed countries by paying higher prices for those drugs.
US Health Secretary Robert Kennedy Jr said Americans “should not pay for the world’s most expensive drugs for drugs they helped fund”.
“This agreement with the United Kingdom strengthens the global environment for innovative medicines and brings long-overdue 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 £11.1 billion worth of medicines to the US, accounting for 17.4% of all goods exports in that period, according to the Department of Trade and Business.
The deal sees the UK raising the price threshold at which it deems new treatments too expensive by 25%.
The UK will also increase the overall amount spent by the NHS on medicines, with the aim of increasing this spending from 0.3% of GDP to 0.6% of GDP over the next 10 years.
The amount pharmaceutical companies must repay to the NHS to ensure the health system does not exceed its allocated budget will be capped at 15% – last year pharmaceutical companies had to repay more than 20%.
In return, UK medicines exports will be protected from tariff increases over the next three years.
A long-running feud between the industry and the British government over spending levels and approval rates was intensified by the Trump administration’s insistence that American customers were paying several times more for their drugs than citizens of the United Kingdom and Europe.
Several major pharmaceutical investments in the UK have been suspended or canceled over the past 18 months, while GSK and AstraZeneca recently announced multi-billion dollar investments in the US.
Health Secretary Wes Streeting said in August he was not prepared to let pharmaceutical companies “rip off” the UK, after negotiations between the government and pharmaceutical companies over the cost of medicines failed.
But subsequently Science Minister Sir Patrick Vallance told the BBC he accepted the NHS must spend more on medicines after seeing its spending on medicines fall 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 was announced, US pharmaceutical company Merck – known as MSD in Europe – revealed it was abandoning plans for a £1bn expansion of its UK operations.
Shortly after, AstraZeneca also announced it was suspending a planned £200 million investment in a research center in Cambridge. In July, AstraZeneca announced it would invest $50 billion in drug manufacturing and research and development in the United States.
