The UK and US have finalized a key bilateral deal that will preserve no tariffs on British drug shipments going into the US market.
The Terms of the Accord
Under the terms of the agreement, the UK has agreed to raise expenditure on drugs through the NHS. This commitment secures that import taxes on these vital products will be held at nothing for a period of the next three years.
This deal follows recent statements to significantly raise duties on patented pharmaceutical products, with figures floated up to 100%.
"This arrangement with the United Kingdom strengthens the international landscape for new treatments and introduces much-needed balance to U.S.–U.K. drug exports," a statement noted.
Commercial Significance
Drugs represent one of the UK's biggest exports to the US, which is by far the primary destination for large British pharmaceutical firms.
Trade data indicate that in the year to the end of September, the UK sold pharmaceutical products totaling £11.1bn to the US. This figure represented 17.4% of British export trade in that period.
"This guarantee secures jobs, boosts funding and facilitates the UK to establish itself as a global hub for biotech and pharma," the Business and Trade Secretary commented.
Specific UK Commitments
The agreement involves several notable pledges from the British government:
- Price Threshold Increase: The UK will lift the price threshold at which it deems new therapies to be too expensive by a quarter.
- Higher Drug Budget: There is a target to increase total public funding on drugs from 0.3 percent of GDP to 0.6 percent over the next decade.
- Rebate Cap: The percentage drug companies must refund to the NHS to prevent overspending will be capped at 15%. Previously, rebates were more than 20%.
Broader Context
The deal takes place against a long-running tension between the drug companies and the ministers over drug pricing and NHS adoption.
The disagreement were exacerbated by claims that American consumers were charged significantly more for the equivalent treatments than consumers in the UK and Europe.
Over the last 18 months, several large pharmaceutical investments in the UK have been halted or cancelled, while major investments have been directed toward projects in the United States.
The Science Minister stated that the NHS must increase expenditure on drugs, noting that its budget allocation on drugs had decreased as a proportion of its total funding over the last ten years.
