The UK and US have concluded a significant bilateral deal that will maintain zero duties on UK drug products being sold in the US market.
The Terms of the Deal
As part of the deal, the UK has agreed to increase spending on pharmaceuticals through the National Health Service (NHS). This pledge secures that duties on these key products will remain at zero for a timeframe of the next three years.
This deal comes after previous warnings to significantly raise import taxes on branded drug products, with increases discussed reaching double the cost.
"This arrangement between the UK reinforces the international landscape for cutting-edge drugs and introduces much-needed equity to transatlantic medicine commerce," a statement noted.
Trade Impact
Drugs constitute one of the UK's largest goods shipped to the America, which is by far the largest buyer for large companies like GSK and AstraZeneca.
Trade data show that in the year leading up to last September, the UK sold medicines valued at billions to the US. This amount made up 17.4% of British export trade in that span.
"This deal protects employment, increases investment and sets the stage for the UK to become a global hub for life sciences," the Business and Trade Secretary stated.
Key NHS Changes
The pact involves several key changes from the United Kingdom:
- Revised Affordability Limit: The UK will raise the price threshold at which it judges new therapies to be too expensive by a quarter.
- Higher Drug Budget: There is a goal to raise total health service expenditure on drugs from 0.3 percent of Gross Domestic Product to 0.6 percent over the following ten-year period.
- Refund Ceiling: The percentage manufacturers must return to the NHS to stay within budget will be restricted at 15%. Last year, repayments were more than 20%.
Industry Background
The pact comes amid a protracted dispute between the drug companies and the UK government over spending levels and NHS adoption.
This friction were exacerbated by claims that American customers were paying several times more for the same drugs than patients in the Britain and the EU.
In recent months, several significant drug company projects in the UK have been paused or scrapped, while major expansions have been pledged toward American operations.
One official publicly accepted that the NHS had to increase expenditure on treatments, noting that its budget allocation on drugs had decreased as a proportion of its total funding over the last ten years.
