The United Kingdom and the United States have secured a key bilateral deal that will maintain zero tariffs on British drug products being sold in the US market.
Agreement Details of the Pact
In exchange for the tariff guarantee, the UK has agreed to boost spending on medicines through the NHS. This move ensures that tariffs on these key exports will be held at zero for a period of three years.
This agreement comes after previous warnings to dramatically increase duties on branded drug products, with figures floated up to 100%.
"This arrangement between the Britain reinforces the international landscape for cutting-edge drugs and introduces much-needed fairness to U.S.–U.K. drug exports," a statement declared.
Trade Significance
Drugs constitute one of the the United Kingdom's biggest export categories to the US, which is by far the biggest buyer for leading UK drugmakers.
Statistics indicate that in the 12 months prior to September, the UK shipped medicines worth £11.1bn to the US. This figure represented a significant portion of total UK exports in that span.
"This agreement secures jobs, increases capital expenditure and sets the stage for the UK to become a global hub for life sciences," the Business and Trade Secretary stated.
Detailed NHS Changes
The deal involves several key changes from the UK:
- Higher Cost Ceiling: The UK will raise the affordability limit at which it judges new treatments to be unaffordable by 25%.
- Higher Drug Budget: There is a target to double overall NHS spending on medicines from 0.3 percent of Gross Domestic Product to 0.6% over the next decade.
- Refund Ceiling: The percentage pharmaceutical firms must refund to the NHS to stay within budget will be capped at 15%. In the past, refunds topped 20%.
Broader Context
This agreement takes place against a ongoing tension between the sector and the ministers over drug pricing and approval rates.
The disagreement were heightened by claims that American customers were charged a premium for the equivalent treatments than people in the UK and Europe.
In recent months, several large drug company projects in the UK have been delayed or abandoned, while multi-billion-dollar investments have been pledged toward US facilities.
One official acknowledged that the NHS had to spend more on drugs, noting that its expenditure on drugs had shrunk as a percentage of its total funding over the past decade.
