London and Washington have found a compromise that would not place US tariffs on British medicines — but only after the UK agreed to pay more for cutting-edge drugs.
Britain and the United States announced on Monday that they had sealed a deal eliminating tariffs on UK pharmaceutical products sent to the US.
In return for this concession from Washington, the UK will reduce the rebates drugmakers pay to Britain's National Health Service (NHS).
Under the current scheme, pharma companies pay back a portion of revenues to the NHS from sales of branded medicines, a set-up designed to prevent overspending.
According to a statement from the United States Trade Representative (USTR), the UK will now reduce the rebate to a maximum of 15% in 2026, from the current level of about 23%. The UK will increase the net price it pays for new medicines by 25%, added the statement.
The move comes after US President Donald Trump threatened tariffs of up to 100% on branded or patented drugs shipped to the US, unless companies considered building an American factory or production facility.
The prospect, floated in September, unsettled major manufacturers. Pharmaceuticals remain one of the UK’s strongest export sectors, including drugmakers AstraZeneca and GSK.
As part of the new agreement, the US said that it will "refrain from targeting UK pharmaceutical pricing practices" in any future investigations into the sector “for the duration of President Trump’s term”.
Big Pharma’s gripes with the UK
The US has long argued that American patients pay far more for new medicines than people in the UK, largely because of the NHS' strict pricing system.
In Britain, a government body called NICE (National Institute for Health and Care Excellence) helps decide whether the NHS should pay for a new medicine by comparing its price with the health benefit it delivers.
If a treatment costs more than a certain level for the extra "healthy life" it gives a patient, the NHS is unlikely to fund it. Critics of the UK system argue that this benchmark also stifles innovation and demand for newer and better medicines.
In a statement on Monday, the UK government said that the "milestone deal" with the US secures Britain's "medicines access and supply for tens of thousands of NHS patients", adding that "groundbreaking new treatments" would reach the "NHS front-line quicker".
Earlier this year, several major pharmaceutical firms announced significant new investments in the United States while delaying or revising their UK projects, citing what they described as Britain's challenging regulatory and commercial environment.
According to a recent report by Association of the British Pharmaceutical Industry (ABPI), the UK’s approach to drug pricing and reimbursement has prompted a fall in foreign investment in British pharma.
AstraZeneca announced in September 2025 that it was pausing a planned £200 million (€227mn) investment in its Cambridge research site — a move it said was prompted by the challenging conditions in Britain.
Meanwhile, GSK committed to a substantial US investment package — $30 billion (€25.8bn) over five years.
The new pharma deal comes six months after UK Prime Minister Keir Starmer sealed an agreement with Trump limiting tariffs to 10% on most exports.
