The United States and Britain unveiled a new agreement on Monday aimed at maintaining zero tariffs on British medicines and medical technology. In exchange, the UK will boost its spending on medicines and reassess how these are valued.
Specifically, the UK will raise the net price it pays for new drugs from the U.S. by 25%. In return, medicines produced in the UK, alongside pharmaceutical ingredients and medical tech, will avoid Section 232 tariffs as well as future Section 301 national tariffs.
“The United States and the United Kingdom will announce negotiated prices for innovative medicines, which will help drive investment and innovation in both countries,” remarked U.S. Trade Representative Jamison Greer.
UK to Revise Cost-Effectiveness Assessment Framework
This agreement also brings notable changes to NICE’s value assessment framework, crucial for determining whether new drugs are cost-effective for the National Health Service (NHS).
The threshold for NICE’s ‘quality-adjusted life year’ will increase from £30,000 ($39,789) annually to £35,000. The UK government asserts that these improvements align NICE with the current commercial landscape in which pharmaceutical firms operate.
These adjustments will apply to all new drugs, rather than just those from the U.S., although they won’t influence the pricing of existing treatments.
NICE has frequently declined to approve expensive new medications, such as Eli Lilly’s Alzheimer’s treatment and AstraZeneca’s breast cancer medicine, Enherz.
The British pharmaceutical association, ABPI, expressed that the deal could enhance access to new medications for patients and lure investments from drug manufacturers.
Despite the agreement, shares of UK-based pharmaceutical companies GSK and AstraZeneca remained relatively stable. For instance, AstraZeneca generates only about 2% of its total revenue from the UK market.
GSK expressed its optimism, stating: “These excellent foundations offer a real opportunity to secure the UK as a world-leading and attractive environment for life sciences that rewards long-term innovation.”
President Trump has been advocating for Britain and other European nations to increase their payments for U.S. medications, seeking to align U.S. drug costs more closely with those in other affluent countries.
Bristol-Myers Squibb’s CEO noted that the agreement represents progress and fosters a favorable environment for continued operations in the UK.
The industry has often criticized the challenging business conditions in Britain, leading some large firms to halt or withdraw investments, including AstraZeneca, the top company by market value on the London Stock Exchange.
One point of contention has been a voluntary pricing framework where companies return a portion of their NHS sales to the health services. The USTR has announced that the UK will lower the rebate rate to 15% by 2026.
Chris Berner, CEO of Bristol-Myers Squibb, indicated that the UK’s commitment to investing in innovative medicines under this deal “expects to enable BMS to invest more than $500 million over the next five years.” He added, “This agreement is a sign of progress and creates a conducive environment for our continued presence in the UK.”
The British Chambers of Commerce praised the agreement, highlighting that pharmaceuticals make up a significant part of UK exports to the U.S., stating: “The UK has entered into an agreement that few other countries have achieved, giving us a clear advantage.”
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