The UK can now officially declare that pharmaceutical exports to the US are duty-free after the UK government signed the landmark US-UK Pharmaceutical Partnership, which was first launched in December.
The UK will increase the net price the NHS pays for new treatments by 25% in exchange for a tariff holiday. The deal, which will last for at least three years, will make Britain the first country in the world to impose zero percent tariffs on U.S. pharmaceutical exports, British officials said in a press release Thursday.
“The partnership, first announced in December, will protect the UK’s pharmaceutical industry, which added £28.5 billion to the UK economy in 2025, employed more than 50,000 people in highly skilled and well-paid jobs, and exported around £21 billion of medicines around the world last year,” the government explained.
The 25% price rise included in the agreement will be avoided by increasing the cost-effectiveness threshold for medicines as assessed by the National Institute for Healthcare Excellence (NICE).
NICE’s cost-effectiveness thresholds are used to assess whether medicines provide value for money for the NHS by balancing cost against the quality-adjusted life years (QALYs) provided by a new medicine. For the past 20 years, this standard has been set in the cost-effectiveness range of £20,000 to £30,000 per QALY gained.
As of 31 March, the new threshold will increase from £25,000 to £35,000 per QALY.
A big part of the overall plan for the US-UK deal is to position the UK as a more attractive environment for biopharmaceutical investment, with NICE’s standards providing “stronger incentives” for pharmaceutical companies to launch innovative treatments in the UK.
As another benefit of the “stability and predictability that life sciences companies need to invest and grow in the UK”, the country is capping rebates on branded medicines sold to the NHS to a maximum of 15% until the end of the current rebate scheme, which is set to expire at the end of 2028.
Previously, the rebate rate for 2025 was 22.9%.
The UK has pledged to double spending on new medicines over the next 10 years, raising spending as a share of gross domestic product (GDP) from 0.3% to 0.6%. The commitment “sends a clear signal to global investors that the UK is a serious, long-term partner for the life sciences industry,” UK officials said in a statement.
Businesses have so far responded to the newly-signed deal with muted enthusiasm after many global pharmaceutical giants suspended or pulled investment from the UK last year.
As quoted in the UK statement, Bristol-Myers Squibb CEO Chris Berner called the partnership “a step towards properly recognizing the value of innovative medicines so that patients in the UK can access them faster,” and pledged to work with the UK and US governments to support this effort.
Jeff Stewart, AbbVie’s chief commercial officer, also viewed the agreement as a “first step,” noting that “the partnership needs to move quickly now to deliver meaningful results for patients and the industry.” A GSK spokesperson called the move “an important foundation for the UK’s global life sciences competitiveness and future investment in the UK”.
In September last year alone, Lilly suspended its planned Lilly Gateway Labs site, Sanofi froze its UK R&D investment and Merck & Co. closed its £1bn R&D hub in London and pulled its research operations out of the UK. At the time, Lilly CEO David Rix told the Financial Times that the UK was “probably the worst country in Europe” for drug prices and was “not an attractive environment for investment”.
Now, Ricks is singing songs that are a little more positive.
“The UK-US agreement on pharmaceuticals is an encouraging move. The positive trends in the UK deserve our attention. Lilly will reconsider its investment plans in the UK once the environment improves,” he said in a UK release.
Earlier this week, Lilly’s head of international operations Patrick Jonsson told the FT he felt “optimistic” about a deal in which the UK would increase payments for medicines. Johnson told the newspaper that Lilly needed to consider “a clear plan of action with interventions and deadlines” regarding the US-UK deal.
Meanwhile, the U.S. is on the verge of imposing 100% import tariffs on companies that don’t comply with President Trump’s Most Favored Nation (MFN) drug pricing requirements, Bloomberg reported Thursday, citing people familiar with the plan.
