The British government is preparing to sign a major pharmaceutical deal with Washington that will scrap import tariffs on drugs imported into the US and commit Britain to higher spending on NHS drugs.
The deal, expected to be announced within days, follows months of tense negotiations with the Trump administration and a wave of warnings and investment withdrawals from multinational drugmakers frustrated by Britain’s commercial environment.
According to industry sources, the agreement will see the government reduce the industry discount rate for branded medicines sold to the NHS and increase the threshold used when assessing the value of medicines by the NHS. The quality-adjusted life year (QALY), which assesses the cost of treatments relative to the years of health they provide, will see the cap rise by around 25 per cent from the current £30,000 a year.
The government has also agreed to increase the proportion of the overall NHS budget devoted to medicines, a long-standing demand from global pharmaceutical companies.
The negotiations were led by Varun Chandra, the prime minister’s senior economic adviser, and Lord Vallance, the science minister and former GSK executive. The Trump administration is trying to narrow the gap between high drug prices in the United States and lower prices in countries like Britain by using tariff threats to push for change.
In addition to the government talks, pharmaceutical industry leaders in both London and Washington were involved in discussions aimed at easing tensions and restoring investment confidence.
Relations between the sector and the UK government have soured sharply this year as drugmakers protested against the high costs of the NHS’s voluntary Branded Medicines Pricing, Access and Growth (VPAG) scheme. The aim of the program is to curb spending on NHS medicines while encouraging innovation. But industry leaders argue that discount levels in the UK have made the country uncompetitive.
The situation escalated in September when several pharmaceutical giants stopped or canceled major investments in the UK. AstraZeneca has suspended a £200 million expansion of its Cambridge headquarters, while Eli Lilly has shelved part of its planned London biotech center. Merck/MSD pulled out of a £1bn London research and development center and several manufacturers signaled that British facilities could be closed unless pricing reforms were agreed quickly.
The US ambassador warned last month that global pharmaceutical companies would “vote with their feet” if the UK did not act. AstraZeneca was one of the first companies to reach a separate pricing agreement directly with the Trump administration.
Formal talks between the Association of the British Pharmaceutical Industry (ABPI) and the Department of Health collapsed in August after Health Minister Wes Streeting issued an ultimatum to accept what he called a “generous proposal”. Following the backlash, Vallance told MPs in September that the UK needed to increase spending on NHS drugs – a signal that helped bring the VPAG dispute into wider tariff negotiations with Washington.
Industry insiders say the new agreement could ease tensions, boost investment and provide a firmer foundation for drug development in the UK – although the long-term impact on NHS budgets remains to be seen.
