UK pharmaceuticals exempt from tariffs in US drug pricing agreement

The United Kingdom and United States have agreed in principle to a pharmaceutical pricing deal, according to a press release from the Office of the U.S. Trade Representative, the Department of Commerce, and the Department of Health and Human Services.

Under the agreement, the U.K. will pay 25% more for innovative medicines through the National Health Service (NHS) in exchange for a guarantee that the U.S. will not impose tariffs for three years on British-made pharmaceutical products. Last year, Britain exported $8.7 billion worth of medicinal and pharmaceutical products to the U.S.

“The United States has agreed to exempt U.K.-origin pharmaceuticals, pharmaceutical ingredients, and medical technology from Section 232 tariffs and will refrain from targeting U.K. pharmaceutical pricing practices in any future Section 301 investigation for the duration of President Trump’s term,” states the announcement.

The U.K. is the first to secure a zero-rate deal with the Trump administration on pharmaceuticals imported to the U.S. Last month, President Trump struck a trade agreement with Switzerland and Liechtenstein which caps pharmaceutical tariffs at 15%. The tariff rate on drugs imported from both countries to the U.S. is in line with Trump’s trade deal in late July with the European Union.

The U.K.-U.S. agreement announced on Monday also lowers the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) rebate rate to 15% in 2026. The VPAG framework, which currently requires companies to repay 23.5% of their NHS sales revenues, has recently been the subject of contentious negotiations between the U.K. government and the Association of the British Pharmaceutical Industry (ABPI).

“The repayment rate for newer medicines in the VPAG scheme will be capped so that it will not exceed 15% for the next three years 2026-2028,” ABPI said in a statement, while noting that the deal calls for “rapid talks” between the trade group and the U.K. government to negotiate a “more sustainable scheme model from 2029 onwards.” 

ABPI said the U.K.-U.S. agreement is a “positive step” for NHS patients and will help to support the competitiveness of the British life sciences industry, which has “struggled to compete for investment and research in recent years.”

In its VPAG Progress Report in March 2025, ABPI said that while British life sciences is one of the highest potential growth sectors, payment rates were making the U.K. “un-investable.”

Monday’s agreement with the U.S. comes as the U.K. faced pressure from pharma companies such as Amgen, AstraZeneca, Bristol Myers Squibb, Gilead, Johnson & Johnson, Merck, and Pfizer, who warned earlier this year about the challenges of investing in Britain.

In September, Merck said it was scrapping a planned $1.3 billion expansion of its U.K. operations, complaining that the British government is paying too little for medicines and is not investing enough in the sector. In January, AstraZeneca scrapped plans to invest $558.3 million in a vaccine manufacturing plant in northern England, citing a reduction in government support.