US and UK clinch zero tariffs accord on pharmaceuticals
US and UK clinch zero tariffs accord on pharmaceuticals
The UK and the US have negotiated a deal to keep tariffs on UK pharmaceutical supplies into America at zero.
Under the agreement the UK will pay more for drugs through the NHS in return for a guarantee that US import duties on pharmaceuticals created in the UK will remain at zero for three years.
This is the first time the amount that the NHS spends for drugs is scheduled to increase in more than 20 years.
The agreement was reached after US President Donald Trump threatened to increase taxes on branded drugs, one of the UK's largest exports to the US, to 100%.
Peter Kyle, the Business and Trade Secretary, said the agreement "guarantees that UK pharmaceutical exports – worth at least £5bn a year - will enter the US tariff free, protecting jobs, boosting investment and paving the way for the UK to become a global hub for life sciences."
The Department for Business and Trade reports that over the 12 months ending in September, the UK exported £11.1 billion worth of medicines to the US, accounting for 17.4% of total goods exports during that time.
The wave of tariffs that US President Donald Trump imposed earlier this year did not include pharmaceuticals.
However, he has frequently threatened to increase drug tariffs, citing worries about America's reliance on foreign-made medications and a desire to boost domestic production.
Additionally, he has stated that by paying higher rates for pharmaceuticals, US consumers essentially subsidise such medications for other wealthy nations, and he has advocated for those nations to do the same.
Under the parameters handed forth on Monday, the UK would boost the price barrier, at which it judges new treatments to be too expensive, by 25%.
Over the next ten years, the UK plans to raise the NHS's overall spending on medications from 0.3% of GDP to 0.6% of GDP.
The amount drug companies must pay back to the NHS to guarantee the health system does not overspend its assigned budget will be restricted at 15% - last year, drug companies had to pay back more than 20%.
In exchange, UK medication exports will be safeguarded from tariff hikes for the next three years.
The deal with the UK was seen as a "historic step towards ensuring that other developed countries finally pay their fair share" by White House spokesman Kush Desai.
A long-running dispute in the UK between the government and the pharmaceutical sector over drug approvals and the cost of medications to the NHS had been exacerbated by US pressure.
Health Secretary Wes Streeting said in August that he was not willing to allow drug corporations "rip off" the UK, after discussions between the government and pharmaceutical manufacturers over the cost of medications broke down.
But afterward Science Minister Sir Patrick Vallance told the BBC he acknowledged that the NHS needs to spend more on medicines after watching its spending on drugs decline as a percentage of its budget over the last 10 years.
The NHS advisory group NICE said the modifications were expected to lead to an extra three to five medications a year being approved - currently it reviews roughly 70 a year and approves 90% of them.
It is not known what this will cost the NHS - pharmaceuticals already account for roughly 10% of the health budget.
But Sally Gainsbury, of the Nuffield Trust think tank, said the agreement might lead to an extra £3 billion being spent on medications, which was "bad news" given how stretched finances were.
"The extra cost will need to be fully-funded by the Treasury," she said, adding that it would be better to invest extra money into areas such as GP services or solving the hospital backlog instead of new pharmaceuticals.
In announcing the new arrangement, the UK government stated it was the only country in the world to have achieved a zero percent tariff rate for pharmaceutical goods.
European officials had stated that they thought the parameters reached during the summer, which would cap tariffs on most commodities at 15%, would secure their medicine shipments.
It comes after a number of significant pharmaceutical investments in the UK over the past 18 months have been cancelled or halted, putting pressure on the government as companies turn their focus to the US.
In mid-September, British pharmaceutical company GSK vowed to invest $30bn (£22bn) in research and manufacturing in the US over the next five years.
The US pharmaceutical company Merck, which is known as MSD in Europe, said a week before to GSK's US investment announcement that it was abandoning its intended £1 billion expansion of its UK business.
Shortly after, AstraZeneca also announced it was delaying a planned £200m investment at a Cambridge research site. In July, AstraZeneca said it would invest $50bn on drug manufacture and research and development in the US.
The British Chambers of Commerce's head of trade policy, William Bain, expressed his satisfaction with the delivery of the US tariff protections that UK officials had pledged earlier this year.
"This agreement is a huge victory. It will increase exports, boost investment, and enhance UK competitiveness as a production and innovation base for world-leading medicines and treatments," he said.
US pharmaceutical company Bristol Myers Squibb said it now anticipated being able to invest more than $500m over the next five years in areas like research, development and manufacturing.
"This agreement is a sign of progress and one that creates an environment conducive to our continued presence in the UK," chief executive Chris Boerner said.
In April, the White House took the first step towards imposing tariffs by formally investigating pharmaceutical imports and their impact on national security.
In September in a Truth Social post, Trump threatened to raise taxes on branded medications - a small subset of the medicine that the US imports - to 100%, but the White House did not put the proposal into force, citing negotiations with producers.
US Health Secretary Robert Kennedy Jr. stated that Americans "should not pay the world's highest drug costs for medicines they helped fund" when he announced the deal on Monday.
"This agreement with the United Kingdom strengthens the global environment for innovative medicines and brings long-overdue balance to US–UK pharmaceutical trade," he stated in a press release.
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