The United States and Britain announced a new agreement on Monday that will eliminate tariffs on British pharmaceuticals and medical technology. In exchange, the United Kingdom will increase its spending on medicines and revise how it evaluates the value of new drugs.
Under the deal, Britain will raise the net price it pays for new U.S. medicines by 25%. In return, UK-produced medicines, drug ingredients, and medical technology will receive full exemption from Section 232 sector-based tariffs and any future Section 301 country-based tariffs.
U.S. Trade Representative Jamieson Greer said the agreement establishes a new pricing framework for innovative medicines and will encourage investment and innovation in both markets.
UK adjusts its drug value assessment system
A major component of the deal is a change to how the National Institute for Health and Care Excellence (NICE) assesses whether drugs are cost-effective for the National Health Service. NICE’s “quality-adjusted life year” threshold—currently £30,000 ($39,789) per year—will increase to £35,000.
The UK government said this adjustment will help it align with current commercial conditions in the pharmaceutical sector. The updated evaluation framework will apply to all new medications but will not change prices for drugs already on the market.
NICE has historically declined coverage for several high-cost treatments, including Eli Lilly’s Alzheimer’s drug and AstraZeneca’s breast cancer therapy Enhertu.
Industry group ABPI welcomed the agreement, saying it would expand patient access to new medicines and support further investment in the UK. Shares of major UK drugmakers, including GSK and AstraZeneca, were mostly unchanged, reflecting the UK’s relatively small share of global pharmaceutical revenue.
GSK said the agreement provides a strong foundation for strengthening the UK’s position as a competitive, innovation-driven hub for life sciences.
Pressure to increase UK spending on U.S. medicines
U.S. President Donald Trump has repeatedly urged Britain and other European countries to pay higher prices for American medicines. Pharmaceutical companies have long argued that the UK’s pricing environment makes it difficult to justify large-scale investment, and several firms—including AstraZeneca—have paused or scaled back UK projects.
One ongoing point of friction has been Britain’s voluntary pricing scheme, which requires drugmakers to return a portion of NHS sales revenue to the health service. As part of the deal, the UK committed to lowering the rebate rate to 15% in 2026.
Bristol Myers Squibb CEO Chris Boerner said the agreement gives the company confidence to expand investment in the UK, estimating that BMS could invest more than $500 million over the next five years.
The British Chambers of Commerce also supported the deal, noting that pharmaceuticals account for about 20% of UK exports to the U.S. and that the zero-tariff arrangement provides “a distinct advantage.”
U.S. seeks to lock in trade deals ahead of key court ruling
The announcement follows a commitment made in May for both countries to pursue preferential treatment on pharmaceuticals and strengthen the UK’s business environment for drugmakers. It resolves one of the last major outstanding issues after Britain secured tariff relief in several industries earlier this year.
Trade expert Ryan Majerus noted that Washington is moving quickly to finalize detailed trade agreements and clarify existing frameworks ahead of a Supreme Court decision that could challenge the legality of Trump’s broad tariffs. A ruling is expected later this year or early next.
Majerus said the administration intends to use other legal authorities—such as Section 232 of the 1962 Trade Expansion Act and Section 301 of the 1974 Trade Act—to replace any tariffs the court may strike down. He added that the more formal agreements the U.S. completes now, the harder it will be for partner countries to challenge or renegotiate them in the future.
($1 = 0.7540 pounds)
