The UK government is preparing to sign a major pharmaceuticals agreement with Washington that will remove import tariffs on medicines entering the United States 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 comes after a wave of warnings and pulled investments from multinational drug makers frustrated with the UK’s commercial environment.
According to industry sources, the agreement will see the government lower the industry rebate rate applied to branded medicines sold to the NHS and raise the threshold used in the NHS’s drug-value assessments. Under the quality-adjusted life year (QALY) measure — which evaluates the cost of treatments relative to the healthy years they deliver — the upper limit will increase by around 25 per cent from the current £30,000 per year.
The government has also agreed to increase the share of the overall NHS budget allocated to medicines, a longstanding demand of global pharmaceutical companies.
Negotiations have been led by Varun Chandra, the prime minister’s chief business adviser, and Lord Vallance, the science minister and former GSK executive. The Trump administration is seeking to narrow the gap between high US drug prices and lower prices in countries such as the UK, leveraging tariff threats to push for change.
Alongside the government-to-government talks, pharmaceutical industry leaders in both London and Washington have been involved in discussions aimed at easing tensions and restoring investment confidence.
Relations between the sector and the UK government deteriorated sharply this year, as drug makers railed against the high cost of the NHS’s Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG). The scheme is intended to curb NHS medicines spending while encouraging innovation, but industry leaders argue that UK rebate levels have made the country uncompetitive.
The situation escalated in September when several pharmaceutical giants halted or cancelled major UK investments. AstraZeneca paused a £200 million expansion of its Cambridge headquarters, while Eli Lilly suspended part of its planned London biotech hub. Merck/MSD withdrew from a £1 billion London R&D centre, and several manufacturers signalled that UK facilities could shut unless pricing reforms were agreed quickly.
The US ambassador warned last month that global pharma groups would “vote with their feet” unless the UK acted. AstraZeneca was among the first to cut a separate pricing deal directly with the Trump administration.
Formal talks between the Association of the British Pharmaceutical Industry (ABPI) and the Department of Health broke down in August after Health Secretary 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 NHS medicines spending — a signal that helped fold the VPAG dispute into the wider tariff negotiations with Washington.
Industry figures say the new deal could ease tensions, restore investment and provide a more stable footing for drug development in the UK — though the long-term implications for NHS budgets remain to be seen.
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UK and US set to strike zero-tariff pharmaceuticals deal as NHS drug spending rises