Last week, the UK and US signed a zero tariff pharmaceuticals deal, locking in friction free access to the American market for UK drugmakers, but as the dust settles: what will the deal deliver in the long term, and is all as it seems?
What was agreed?
Under the agreement finalised last Monday, all UK-origin pharmaceuticals, active ingredients and specified medical technologies will enter the US at a 0% tariff rate for at least three years, shielding exports worth more than £5bn annually from punitive duties. The Department for Business and Trade billed the deal as a “landmark” accord that safeguards a strategic export sector and provides long awaited certainty after months of tariff threats from Washington.
In return for the tariff concessions, the UK has committed to a significant uplift in NHS spend on new medicines and to easing several long-standing domestic cost containment levers. In a statement, the Department of Health and Social Care said that the government would “invest around 25% more in innovative, safe and effective treatments – the first major increase in over two decades”, adding that this should help ensure the NHS can offer breakthrough therapies that might previously have been rejected on cost grounds. Central to this is a 25% increase in NICE’s core cost-effectiveness thresholds, from roughly £20,000–£30,000 per quality adjusted life year to around £25,000–£35,000, marking the first substantive reset of the bar in more than twenty years.
Impact on funding
Dr Samantha Roberts, CEO, NICE, welcomed the clarity on funding, saying that “in a health service funded by general taxation it is right that government decides on the level of health spend in the UK”, and that the new thresholds are intended to “support the life sciences sector and broader economy” while preserving value for money for patients and taxpayers. NICE expects the higher range to allow three to five additional medicines or indications to be recommended each year, particularly in oncology and rare diseases where incremental QALY gains are high but costs have historically breached the upper threshold.
However, analysts estimate the deal could add around £3bn a year to the NHS drugs bill once fully implemented, with some modelling suggesting the true figure could be higher. Health economists warn that, unless the Treasury genuinely tops up the NHS budget, that extra spend will be carved out of existing services, meaning more cost-effective care – from community services to elective surgery – may be squeezed to fund higher-priced medicines.
VPAG recalibration
Nevertheless, the wins for the industry keep coming. The tariff deal is explicitly linked to reforms of the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG), which has drawn sustained criticism over recent high and volatile repayment rates. As part of the package, the government has pledged to cut the VPAG repayment rate to 15% in 2026 and cap it at or below that level for the remainder of the current scheme, down from the mid-20% range that many companies argued was undermining launch decisions.
Officials have also said that higher net prices for new medicines will not be “materially eroded” by portfolio-wide concessions under VPAG, a shift that will be worked through in technical working groups with industry over the next few years.
Industry reaction
Industry groups have broadly welcomed the deal and the direction of travel on pricing, while warning that execution details will be critical. Richard Torbett, CEO, ABPI, described the commitments as “an important step towards ensuring patients can access innovative medicines needed to improve wider NHS health outcomes”, arguing that they should also strengthen the UK’s hand in attracting and retaining global life sciences investment.
Company-level reaction has echoed that cautious optimism. Mark Samuels, CEO, Medicines UK, said the US tariff deal “brings much-needed clarity after months of stalled negotiations”, before adding “we welcome the 0% tariffs on exports to the United States and the certainty that brings for the next three years”. For pharma executives, the next phase will play out in the VPAG working groups and NICE’s updated methods, where the headline promises on thresholds, clawbacks and trade security will be translated into day-to-day pricing and access decision-making.
