The UK and US governments have come to an agreement that will see the UK subject to zero tariffs on pharmaceutical products, along with a commitment to spend more on NHS drugs.
The UK becomes the latest country in President Donald Trump’s long line of trade agreements, though it is the first region to secure a zero-rate deal on pharmaceuticals imported into the US, with UK Science Minister Professor Patrick Vallance calling it a “landmark deal”.
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The US government said it would neither impose tariffs on UK-origin pharmaceutical products nor target UK pharmaceutical pricing practices, according to a joint release from the Office of the United States Trade Representative, the Department of Commerce, and the Department of Health and Human Services. The exemption is in place for three years.
In exchange for this pledge, the UK will pay 25% more in net price for new medicines on the NHS. The deal will also bring changes to the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG), a framework that has come under scrutiny for hampering access to innovative medicines in the UK.
The announcement states that the UK will ensure that higher prices for new medicines are not materially eroded by a demand for portfolio-wide concessions under VPAG.
The UK government said the deal will mean the NHS watchdog, the National Institute for Health and Care Excellence (NICE), will be able to approve medicines it previously rejected on cost-effectiveness grounds.
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By GlobalDataUK’s Science and Technology Secretary, Liz Kendall, is happy about the potential this offers for access to cutting edge medicines as well as providing skilled jobs in the country.
Meanwhile, Health and Human Services (HHS) Secretary Robert F. Kennedy Jr (RFK Jr) said that the deal brings “long overdue balance” in trade.
In July 2025, the European Union (EU) agreed to pay the US a tariff rate of 15% for pharmaceuticals as part of a new trade deal.
Agreement eases pharma industry concerns
GlobalData’s managing analyst for health economics and market access, Europe/CIS, Janet Beal, said: “A resolution to the long-running issues with the UK’s VPAG cost-containment scheme for branded medicines, an increase to the UK’s spending on NHS medicines, and a relaxation of NICE’s cost-effectiveness restrictions would be highly beneficial to the UK pharma sector as a favourable trading environment.”
Beal said the developments could help trigger a positive turnaround in the UK’s standing as a priority launch market and the return of pharma R&D investment to the UK market after a difficult year.
Concern about the state of the UK’s life science sector has intensified this year amid poor commercial forecasts. For example, MSD scrapped a £1bn expansion plan in London, a flashpoint of big pharma tensions with the government.
Following the deal, Bristol Myers Squibb (BMS) CEO, Chris Boerner, said: “Based on the UK commitments and increased investment in innovative medicines underpinning this agreement, BMS anticipates being able to invest upwards of $500m over the next five years.”
Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry (ABPI), said: “The deal is an important step towards ensuring patients can access innovative medicines needed to improve wider NHS health outcomes. It should also put the UK in a stronger position to attract and retain global life science investment and advanced medicinal research.
“These commitments begin to address industry concerns on NHS access to medicines, and the UK’s record-high and unpredictable payment rate,” Torbett concluded.
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