Editor’s (re)View: UK is first country to secure zero US import tariff on pharmaceuticals

This week’s big news was the Trump administration’s agreement to exempt U.K.-made pharmaceuticals and pharmaceutical ingredients imported to the U.S. from so-called Section 232 tariffs, while refraining from targeting the U.K.’s drug pricing practices in any future Section 301 investigations for the duration of Trump’s term.

The deal was a major win for the U.K. as it is the first country to secure a zero-rate tariff deal with the Trump administration on pharmaceuticals imported to the U.S. In separate trade deals with the European Union and Switzerland, EU and Swiss pharma companies are subject to 15% import tariffs.

Britain also seems to have escaped Trump’s Most Favored Nation (MFN) drug pricing policy. However, in return, the U.K. will also spend 25% more for new medicines — the first major increase in over 20 years — implemented through changes to the National Institute for Health and Care Excellence (NICE) cost-effectiveness thresholds.

Bristol Myers Squibb CEO Chris Boerner said in a statement that with the British government’s commitments under the deal with the U.S., his pharma company anticipates being able to invest up to $500 million in the U.K. over the next five years.

“This investment will come across multiple areas of the business including research, development, and manufacturing,” according to Boerner, who added that it is a “sign of progress and one that creates an environment conducive to our continued presence in the U.K.”

This week’s agreement with the U.S. comes as the U.K. faced mounting 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. Merck in September scrapped a $1.3 billion expansion of its U.K. operations, saying Britain’s government pays too little for medicines and is not investing enough in the sector.

The Association of the British Pharmaceutical Industry (ABPI), a trade group representing U.K.-based pharma companies, said in a statement this week that the agreement with the Trump administration is a “positive step” for National Health Service (NHS) patients and will help to support the competitiveness of the U.K.’s life sciences industry, which has “struggled to compete for investment and research in recent years.”

The U.K.-U.S. agreement 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 ABPI.

Still, according to the government of British Prime Minister Keir Starmer, major companies such as BioNTech, Bristol Myers Squibb, and Moderna are investing billions of dollars in the U.K. — a “top” destination for investment and growth — with the stated goal of becoming Europe’s leading life sciences economy by 2030.

However, the proof is in the pudding — Yorkshire pudding in this case — as to whether the U.K. sees a significant boost in investment from pharma companies as an outcome of the deal with the U.S. While the agreement provides immediate relief for U.K. pharma exports and addresses some longstanding concerns, international law firm Morgan Lewis says many details remain unresolved.

“The increased NICE threshold and reduced rebate rates should enhance the U.K.’s attractiveness for pharmaceutical investment and innovation, but ongoing pressure on NHS budgets and global market volatility could pose additional challenges,” according to the firm.