US-UK Pact Keeps Drug Tariffs Zero for Three Years, Boosting Life Sciences

Introduction

The United States and the United Kingdom have reached a pact to keep tariffs on UK-made medicines at zero for three years. The agreement aims to protect jobs, encourage investment, and strengthen the UK's growing life-sciences sector.

What the deal covers

• Tariffs on medicines exported from the UK to the United States will remain zero for three years.
• The UK will raise the price threshold for deeming new treatments unaffordable by 25%.
• The NHS will increase overall spending on medicines from 0.3% to 0.6% of GDP over the next decade.
• Pharmaceutical rebates to the NHS will be capped at 15% of any overspend, down from last year’s level above 20%.
• UK medicine exports to the US are protected from tariff increases for the next three years and are worth at least £5 billion annually.

Industry context and investment

In the year to September, UK medicine exports to the US reached £11.1 billion, about 17.4% of total UK goods exports. The arrangement comes amid a broader push-and-pull between cost containment and the attractiveness of the UK market for drugmakers.

• GSK pledged to invest $30 billion (£22 billion) in US research and manufacturing over the next five years.
• Merck, known as MSD in Europe, scrapped its planned £1 billion expansion of UK operations.
• AstraZeneca paused a £200 million investment in a Cambridge facility, while outlining a larger US plan that could reach about $50 billion in manufacturing and research and development investments.

Official reactions

Health Secretary Wes Streeting said the government will not permit drugmakers to “rip off” the NHS and emphasized fair pricing. Science Minister Sir Patrick Vallance acknowledged the need to increase NHS drug spending after years of tighter drug budgets.

What this means for patients and the NHS

The agreement provides tariff certainty for UK exports and ties it to reforms that support the availability of innovative medicines at home, while aiming to shield the NHS budget from overspend.

Conclusion

Overall, the deal preserves three years of tariff-free access for UK medicines to the US and encourages higher NHS spending and steadier pricing. It could influence future cross-border collaboration in life sciences and attract more investment to both sides.

Expert comment

Expert comment: The pact reduces tariff risk for UK pharmaceuticals and marks a new balance in the US-UK drug trade. It may spur further life-sciences investment and provide a clearer budget outlook for the NHS.

Summary

The agreement secures three years of tariff-free UK medicine exports to the United States and links this to higher NHS drug spending and a revised pricing framework. It comes amid ongoing debates over how to fund and regulate innovative medicines while preserving patient access. While some UK investments have shifted to the US, this arrangement aims to sustain collaboration and growth in the life-sciences sector.

Key insight: The US-UK pact preserves tariff-free access for UK medicines for three years while nudging NHS spending and price controls to sustain innovation and jobs. Source