The UK and US have agreed to a major bilateral deal that will ensure zero duties on British medicine products entering the US market.
Key Provisions of the Deal
In exchange for the tariff guarantee, the UK has committed to boost funding on medicines through the National Health Service (NHS). This commitment guarantees that tariffs on these vital exports will be held at nothing for a period of the next three years.
This agreement comes after recent statements to significantly raise tariffs on patented pharmaceutical imports, with figures discussed up to 100%.
"This deal with the United Kingdom reinforces the global environment for new treatments and establishes long-overdue equity to U.S.–U.K. pharmaceutical trade," a release said.
Economic Significance
Drugs are one of the UK's most significant exports to the America, which is easily the largest destination for leading companies like GSK and AstraZeneca.
Trade data indicate that in the one-year period prior to last September, the UK shipped pharmaceutical products totaling £11.1bn to the US. This amount accounted for 17.4% of all goods exports in that span.
"This deal secures work, boosts funding and facilitates the UK to emerge as a worldwide center for biotech and pharma," a government official remarked.
Detailed British Pledges
The agreement entails several key commitments from the UK:
- Revised Affordability Limit: The UK will raise the cost ceiling at which it deems new medicines to be too expensive by a quarter.
- Higher Drug Budget: There is a goal to increase total health service expenditure on medicines from 0.3% of GDP to 0.6% over the coming ten years.
- Refund Ceiling: The percentage drug companies must return to the NHS to stay within budget will be restricted at 15%. Previously, refunds were more than 20%.
Industry Background
This agreement comes amid a protracted row between the drug companies and the ministers over spending levels and NHS adoption.
These tensions were heightened by claims that American customers were charged a premium for the same drugs than consumers in the Britain and the EU.
Over the last 18 months, several large drug company projects in the UK have been delayed or cancelled, while multi-billion-dollar expansions have been pledged toward US facilities.
One official stated that the NHS had to spend more on medicines, noting that its expenditure on drugs had decreased as a share of its resources over the previous ten-year period.
