On December 1, 2025, the United States and the United Kingdom unveiled a landmark trade agreement that will see zero tariffs imposed on British pharmaceutical exports to the US, in exchange for a substantial shift in how the UK’s National Health Service (NHS) pays for medicines. The deal, hailed by both governments as a breakthrough, follows months of fraught negotiations and mounting pressure from the pharmaceutical industry, investors, and political leaders on both sides of the Atlantic.
According to Sky News, the UK has become the only country in the world to secure a zero percent tariff on pharmaceuticals exported to the US. This move comes after a period of uncertainty, during which the US administration, led by President Donald Trump, repeatedly threatened to slap tariffs as high as 100% on branded drug imports—a threat that loomed over one of the UK’s most lucrative export sectors.
Under the new agreement, the UK government has committed to increasing the baseline threshold used by the National Institute for Health and Care Excellence (NICE) to assess whether medicines are cost-effective. NICE’s threshold will rise by 25%, from £20,000-£30,000 to £25,000-£35,000 per quality-adjusted life year (QALY). This is the first such increase in over two decades, and it means that more new medicines, including breakthrough cancer treatments and therapies for rare diseases, could be approved for NHS use—treatments that previously may have been rejected on purely cost-effectiveness grounds.
The UK government further announced, as reported by BBC News, that the overall amount the NHS spends on medicines will be targeted to rise from 0.3% of GDP to 0.6% over the next ten years. Additionally, the deal caps the amount that drug companies must pay back to the NHS to prevent overspending on branded medicines at 15%, a reduction from over 20% last year. This sales rebate rate has been a point of contention, with pharmaceutical firms arguing that high rebates discourage investment and innovation.
The new arrangement is expected to have a tangible impact on the availability of innovative medicines in the UK. NICE currently assesses around 70 medicines a year and approves about 90% of them. With the raised threshold, NICE anticipates it will approve an additional three to five medicines annually. The Association of the British Pharmaceutical Industry (ABPI) welcomed the move, noting that the threshold had not been increased for more than 20 years and that this change would allow a greater number of patients to benefit from new treatments.
US Trade Representative Jamieson Greer commented, as cited in South China Morning Post, “The United States and the United Kingdom announce this negotiated outcome pricing for innovative pharmaceuticals, which will help drive investment and innovation in both countries.” The US government also stated that the UK will “reverse the decade-long trend of declining NHS expenditures on innovative, life-saving medicines, and increase the net price it pays for new medicines by 25%.”
For the UK, the stakes were high. Pharmaceuticals accounted for £11.1 billion in exports to the US in the 12 months ending September 2025, representing 17.4% of all UK goods exports in that period, according to the Department for Business and Trade. Business and Trade Secretary Peter Kyle described the deal as one that “guarantees that UK pharmaceutical exports—worth at least £5bn a year—will enter the US tariff free, protecting jobs, boosting investment and paving the way for the UK to become a global hub for life sciences.”
The agreement arrives against a backdrop of concern over declining pharmaceutical investment in the UK. In the months leading up to the deal, major US-based firms like Merck (known as MSD in Europe) and AstraZeneca either cancelled or paused planned investments in the UK, citing uncertainty over pricing and market conditions. Meanwhile, British pharmaceutical giant GSK pledged to invest $30 billion (£22 billion) in research and manufacturing in the US over the next five years—a move interpreted by many as a sign that the UK risked losing its competitive edge in life sciences.
William Bain, head of trade policy at the British Chambers of Commerce, praised the agreement: “This deal is a real win. It will promote exports, boost investment, and enhance UK competitiveness as a production and innovation base for world-leading medicines and treatments.” US pharmaceutical company Bristol Myers Squibb also expressed optimism, with CEO Chris Boerner saying, “This agreement is a sign of progress and one that creates an environment conducive to our continued presence in the UK.” The company now anticipates investing over $500 million in the UK over the next five years.
The deal has not been without controversy. Critics in the UK have voiced concerns about the rising cost of medicines for the NHS and the potential impact on already stretched health budgets. Sally Gainsbury of the Nuffield Trust think tank warned that the agreement could lead to an extra £3 billion being spent on drugs—a significant burden, she argued, given competing priorities such as GP services and hospital backlogs. “The extra cost will need to be fully-funded by the Treasury,” she said, suggesting that the government must carefully balance innovation with fiscal responsibility.
Health Secretary Wes Streeting, who previously resisted pressure from pharmaceutical companies to raise prices, acknowledged a shift in stance. Science Minister Sir Patrick Vallance told BBC News that he accepted the NHS needed to spend more on medicines after seeing its spending on drugs shrink as a percentage of its budget over the last decade. However, Vallance also cautioned MPs in October that many drugs available in the UK would see an “inevitable” price increase as a result of the ongoing talks with the US.
From the American perspective, the deal is seen as a step toward what President Trump and other officials have described as “leveling the playing field.” The White House has long argued that US consumers unfairly subsidize lower drug prices in other developed countries. White House spokesman Kush Desai called the agreement a “historic step towards ensuring that other developed countries finally pay their fair share.” US Health Secretary Robert Kennedy Jr added, “Americans should not pay the world’s highest drug costs for medicines they helped fund. This agreement with the United Kingdom strengthens the global environment for innovative medicines and brings long-overdue balance to US–UK pharmaceutical trade.”
European officials, meanwhile, have expressed frustration that their own pharmaceutical exports were not granted the same zero-tariff protection as the UK’s, despite earlier negotiations to cap most goods tariffs at 15%. The UK government, for its part, has touted the deal as evidence of its ability to secure preferential terms in post-Brexit trade arrangements.
As the dust settles, the full impact of the US-UK pharmaceutical agreement will unfold over the coming years. While the deal is expected to encourage investment and innovation, it also raises questions about affordability and the allocation of scarce NHS resources. With the NHS set to spend more on new drugs and the UK pharmaceutical industry enjoying a fresh competitive advantage, the world will watch closely to see whether the agreement delivers on its promise of better medicines for patients and a stronger transatlantic partnership.
