UK and US agree to zero tariff deal on pharmaceuticals
The government has agreed to a major deal with Washington that will see the UK become the only country to secure zero import tariffs on pharmaceutical products into the US for at least three years.
The deal follows months of negotiations between the government and the Trump administration, after the June trade deal left the future of pharmaceutical exports in the dark and the President threatened to raise tariffs to as high as 100 per cent on branded drug imports.
The agreement will also secure “preferential terms” for the UK’s medtech exports, meaning no additional tariffs will be added on top of the current 10 per cent.
Business and trade secretary, Peter Kyle, said: “This deal 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.”
In the 12 months to the end of September, the UK exported £11.1bn worth of medicines to the US, amounting to 17.4 per cent of all good exports in that period, according to the Department for Business and Trade.
William Bain, head of trade policy at the British Chamber of Commerce said: “Pharmaceuticals make up a fifth of all UK exports to the US by value, and the UK now has a deal which few others have achieved, giving us a distinct advantage.
“This deal is a real win.”
Company share prices are yet to feel the benefit of the deal, with GSK shares up only 0.17 per cent today to 1,794p, while Astrazeneca is down 0.87 per cent to 13,852p.
Increased price threshold
The deal will see the UK increase the price threshold at which it deems new treatments to be too expensive by 25 per cent, the first major increase in over two decades.
The “quality-adjusted life year” tracks the cost of a treatment for every healthy year it delivers for a patient, with the upper threshold standing at £30,000 per year.
The measure is used by the National Institute for Health and Care Excellence when deciding whether to recommend a new drug, with the price hike set to allow the body to approve medicines that were previously rejected on cost grounds.
Liz Kendall hailed the deal as key to getting patients “cutting-edge medicines”, and incentivising life science companies to continue investing in the UK.
The agreement will also be backed by over £2bn of investment as part of the government’s life sciences sector plan.
Pharma sector relief
Both the pharmaceutical sector and government will breathe a sigh of relief over the finalised deal, after a number of companies pulled out of UK investments and looked towards the US.
The deal could potentially repair relations between the industry and the government, who have been critical of the commercial environment in the UK, with many companies stating they lacked financial support.
This included US giant Merck, which scrapped its planned £1bn UK expansion, deciding to no longer occupy its research site in London’s King Cross despite construction set to be completed in 2027.
FTSE heavyweight Astrazeneca also paused its £200m Cambridge research site investment, following the decision to abandon plans for a new vaccine plant in Liverpool earlier this year.
Meanwhile, both Astrazeneca and GSK have unveiled fresh multi billion dollar investments into the US, with Astrazeneca pledging to invest $50bn in manufacturing and research.
The deal could potentially repair relations between the industry and the government, who have been critical of the commercial environment in the UK, with many companies stating they lacked financial support.
Richard Torbett, chief executive officer of the Association of the British Pharmaceutical Industry, said: “It should… 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.”
Chris Boerner, chief executive of Bristol Meyers Squibb, also credited the UK’s commitment to the industry to its decision to invest upwards of $500 into the country over the next five years.
Boerner said: “This agreement is a sign of progress and one that creates an environment conducive to our continued presence in the UK.”