Historic Zero Tariff Pharmaceutical Deal Agreed Between US and UK

The US government and the United Kingdom have announced an agreement in principle regarding pharmaceutical trade, under which UK pharmaceutical exports will be exempt from tariffs. The deal follows threats by the US President to impose significant tariffs on imported branded and patented pharmaceutical products.

Exemption Terms and Onshoring Commitment:

• Tariff Exemption: According to the agreement, UK-origin pharmaceuticals, drug ingredients, and medical technology will be exempted from the administration’s Section 232 sectoral tariffs. This exemption will last for “at least” three years.

• Pricing Pledge: In exchange, the UK will raise the net price its National Health Service (NHS) pays for new treatments by 25%. Furthermore, the US has pledged to refrain from targeting UK pharmaceutical pricing practices in any future Section 301 investigation for the duration of President Trump’s term.

The US Trade Representative’s Office stated that the agreement is driven by the view that American patients have been “forced to subsidize” prescription drugs in other developed countries by paying a significant premium. The deal is expected to drive investment and innovation in both countries while strengthening supply chains in the US.

UK Drug Valuation Framework Overhaul:

Sources close to the deal indicate that the newly announced agreement will require a significant change to the value appraisal framework at NICE—the UK government body responsible for determining whether new drugs are cost-effective for the NHS. NICE’s current standard relies on the “quality-adjusted life year” (QALY) metric, which caps the acceptable cost of a treatment at approximately $39,789 for each healthy year it affords a patient.

Context of MFN Policy and Tariffs:

Previously, President Trump enacted an Executive Order (EO) proclaiming the “Most Favored Nation” (MFN)principle for drug pricing. The EO states that US drug prices should be less than or equal to the drug’s lowest price in other comparable nations. He had also previously threatened a 100% tariff on branded drugs unless companies constructed production plants in the US.

The new agreement with the UK is viewed as a major pharmaceutical trade breakthrough, differing from a previous G7 agreement (June) that focused only on lowering tariffs on British aerospace materials and automobiles.

Soucre: https://www.pharmexec.com/view/us-uk-agree-to-zero-tariffs-pharmaceuticals