US and UK agree zero tariffs deal on pharmaceuticals

The UK and US have agreed to maintain zero tariffs on pharmaceutical supplies from the UK to America.

Under the deal, the UK will pay more for medicines through the National Health Service in exchange for a guarantee that import taxes on pharmaceuticals made in the UK will remain at zero for three years.

The agreement was reached after US President Donald Trump threatened to raise tariffs to 100% on the import of branded drugs.

Pharmaceuticals are one of the UK's biggest exports to the US, which is also the biggest market for major UK drugmakers including GSK and AstraZeneca.

Earlier this year, US President Donald Trump announced a significant increase in taxes on goods imported into the country, which he believes will create jobs and boost American manufacturing.

The White House exempted pharmaceuticals from this round of tariffs and later signed an agreement with Britain to remove some trade barriers between the countries and reduce tariffs on most goods exported to the US to 10%. But pharmaceuticals remained a big unknown.

The White House has repeatedly threatened to raise drug tariffs, citing concerns about the country's dependence on drugs made abroad.

Trump also argued that American consumers are effectively subsidizing drugs for other developed countries by paying higher prices for those drugs, pushing other countries to pay more.

White House spokesman Khush Desai said the agreement with Britain was a “historic step towards ensuring that other developed countries finally pay their fair share.”

Under the terms outlined on Monday, Britain will increase the price threshold at which new treatments are considered too expensive by 25%.

The UK will also increase the total amount the National Health Service spends on medicines, aiming to increase spending from 0.3% of GDP to 0.6% of GDP over the next 10 years.

The amount drug companies must pay back to the NHS to ensure the health system does not overspend its allocated budget will be capped at 15% – last year drug companies had to pay back more than 20%.

In exchange, UK drug exports will be protected from tariff increases for the next three years.

Business and Trade Secretary Peter Kyle said the deal “will ensure that at least £5 billion a year of UK pharmaceutical exports are covered by US tariffs free of charge, protecting jobs, boosting investment and paving the way for the UK to become a global life sciences powerhouse.”

The UK exported £11.1 billion worth of medicines to the US in the 12 months to the end of September, accounting for 17.4% of all merchandise exports during the period, according to the Department for Business and Trade.

US pressure intensifies long-standing scandal between industry and the UK government over spending levels and approval levels.

Health Minister Wes Streeting said in August that he was not prepared to allow pharmaceutical companies to “rob” the UK.after negotiations between the government and pharmaceutical firms over the cost of drugs broke down.

But subsequently Science Minister Sir Patrick Vallance told the BBC he admitted the NHS needs to spend more on medicines after spending on medicines fell as a percentage of the budget over the past 10 years.

Meanwhile, several major pharmaceutical investments in the UK have been paused or canceled over the past 18 months, while GSK and AstraZeneca recently announced multibillion-dollar investments in the US.

In mid-September, British pharmaceutical giant GSK pledged to invest $30bn (£22bn) in research and production in the US over the next five years.

A week before GSK announced its investment in the US, US pharmaceutical company Merck, which is called MSD in Europe, said that scraps planned £1bn expansion of its operations in the UK.

Shortly thereafter, AstraZeneca also announced that suspension of planned £200 million investment at the Cambridge Research Centre. In July, AstraZeneca said it would invest $50 billion in drug manufacturing and research and development in the United States.

William Bain, head of trade policy at the British Chambers of Commerce, said he was pleased to see protection from US tariffs that British officials promised earlier this year had been implemented.

“This deal is a real win. It will boost exports, increase investment and improve the UK's competitiveness as a manufacturing and innovation base for the world's leading medicines and treatments,” he said.

In April, the White House launched a formal investigation into pharmaceutical imports and their impact on national security, taking the first step toward imposing tariffs.

In September, in a Truth Social post, Trump threatened to raise tariffs on brand-name drugs (a small group of drugs that the U.S. imports) to 100%, but the White House did not follow through with the plan, citing negotiations with manufacturers.

Announcing the new agreement, the UK government said it was the only country in the world to provide a zero percent tariff on pharmaceutical supplies.

European officials have previously said they believe their exports will be protected by terms agreed in the summer, which cap tariffs at 15%.

US Health Secretary Robert Kennedy Jr. said Americans “should not have to pay the highest prices in the world for the drugs they helped finance.”

“This agreement with the United Kingdom strengthens the global environment for innovative medicines and brings long-overdue balance to pharmaceutical trade between the US and UK,” he said in a statement.