US and UK Formalize Zero Tariffs on Pharmaceuticals, Boost Drug Value

The United States and the United Kingdom have finalized a significant agreement impacting pharmaceutical pricing and trade. This deal raises the UK’s cost-effectiveness thresholds for new medicines and eliminates tariffs on pharmaceutical imports between the two nations.

As part of the agreement, the UK has committed to increasing the National Institute for Health and Care Excellence (NICE) cost-effectiveness thresholds from £20,000-30,000 per quality-adjusted life year (QALY) to £25,000-35,000. This increase marks the first substantial adjustment in over twenty years, applying to both new appraisals and those already underway. NICE estimates that these higher thresholds will enable recommendations for an additional three to five medicines or indications each year.

Dr. Samantha Roberts, Chief Executive of NICE, emphasized the importance of this decision, stating, “In a health service funded by general taxation, it is right that the government decides on the level of health spending in the UK. The newly agreed thresholds aim to support the life sciences sector and broader economy.”

New Quality of Life Assessment Framework

The agreement also introduces a new framework for assessing health-related quality of life. This framework is based on extensive surveys conducted with thousands of UK residents evaluating various health states. The new value set will be employed alongside the established EQ-5D-5L tool, which is integral for health research and healthcare decision-making. After peer review and publication, this enhancement could improve average cost-effectiveness assessments for medicines.

Additionally, the UK has agreed to reduce the repayment rate under the Voluntary Pricing and Access Scheme (VPAG) to 15% by March 2026. This marks a decrease from current rates, with a commitment to maintain this lower rate throughout the duration of the scheme. The Office of the US Trade Representative confirmed this reduction as a key outcome of the negotiations.

Tariff Exemption Until 2029

In return for these pricing adjustments, the UK secured a complete exemption from all pharmaceutical and medical technology tariffs when exporting to the United States. The USTR confirmed that the UK would be shielded from potential Section 232 tariffs and would not be targeted in any Section 301 investigations until the end of President Trump’s current term. This agreement positions the UK as the only country with zero-tariff pharmaceutical access to the US market under these terms.

The industry response has been positive, with Bristol Myers Squibb announcing plans to invest over $500 million in the UK over the next five years, focusing on research, development, and manufacturing operations. CEO and Chair Chris Boerner stated, “This agreement is a sign of progress and one that creates an environment conducive to our continued presence in the UK.”

Jamieson Greer, USTR Ambassador, remarked on the broader implications of the deal, noting, “Today, the United States and the United Kingdom announce this negotiated outcome pricing for innovative pharmaceuticals, which will help drive investment and innovation in both countries.”

This agreement comes in the wake of significant withdrawals from UK investments by major pharmaceutical companies. Earlier this year, Merck abandoned plans for a £1 billion research center in London, citing concerns regarding the UK’s attractiveness for life sciences investment post-Brexit. Similarly, AstraZeneca paused its £650 million investment package in September 2025. The new deal aims to reverse these trends by improving market access conditions for pharmaceuticals in the UK.

As both countries move forward with this agreement, the implications for the pharmaceutical industry and healthcare access are significant, potentially reshaping the landscape of drug pricing and availability in both markets.