UK and US agree on landmark pharma pricing tariff deal
The UK and US have agreed to keep tariffs on UK pharmaceutical shipments into the US at zero.
The agreement states that the UK will pay more for medicines through the NHS, in exchange for an agreement that US import taxes on UK-produced pharmaceuticals will remain at zero for three years. This will be the first time in over 20 years that the amount the NHS pays for medicines will increase.
The US government had previously announced that it could raise tariffs on branded drug imports by as much as 100%. Branded drugs are one of the UK’s biggest exports to the US. Figures from the Department for Business and Trade showed that in the 12 months ending in September 2025, the UK exported £11.1bn worth of medicines to the US, making up 17.4% of all goods exports in that period.
The terms of the new US-UK pharmaceutical deal state that the UK will increase the price threshold at which it deems medicines to be too expensive by 25%. It will also increase overall NHS spending on medicines, aiming to increase spending from 0.3% of GDP to 0.6% of GDP over the next decade. The amount drug companies must pay back to the NHS to ensure it does not overspend will be capped at 15%, a drop from 20% last year.
In return, UK exports of pharmaceuticals will be exempt from any US tariff increases for the next three years.
Drug costs currently account for around 10% of the NHS health budget and it is currently unclear what the agreement with the US will cost the NHS.
The UK government stated that it was the only country in the world to have achieved a tariff rate of zero for pharmaceutical shipments. European officials previously hoped that their pharmaceutical exports would be protected by previously-agreed terms that capped tariffs on most goods at 15%.
The agreement follows pressure on the UK government after several large pharma investments in the UK were cancelled or paused in the last 18 months. Firms appear to be shifting their attention to the US: while British pharmaceutical company GSK announced a $30bn (£22bn) investment in US research and manufacturing over the next five years, US pharmaceutical company Merck (known as MSD outside the US) recently scrapped its planned £1bn UK operations investment. Additionally, AstraZeneca paused its planned £200m investment in a Cambridge research facility and announced a plan to invest $50bn into US research and manufacturing.
Bristol Myers Squibb, a US pharmaceutical company, stated that it now anticipated being able to invest more than $500m in the UK over the next five years, across research, development and manufacturing. Chief executive Chris Boerner said: “This agreement is a sign of progress and one that creates an environment conducive to our continued presence in the UK.”
William Bain, head of trade policy at the British Chambers of Commerce, added: “This deal will promote exports, boost investment and enhance UK competitiveness as a production and innovation base for world-leading medicines and treatments.”
