The United Kingdom and the United States have secured a key commercial pact that will preserve zero tariffs on British pharmaceutical shipments going into the American market.
The Terms of the Accord
Under the terms of the agreement, the UK has agreed to increase funding on medicines through the public health system. This move secures that tariffs on these vital exports will stay at zero for a period of 36 months.
This development is in response to recent statements to dramatically increase import taxes on branded pharmaceutical products, with increases discussed as high as double the cost.
"This agreement with the United Kingdom reinforces the worldwide climate for innovative medicines and brings much-needed fairness to transatlantic drug exports," a statement noted.
Trade Importance
Pharmaceuticals represent one of the the United Kingdom's biggest export categories to the America, which is easily the largest market for large companies like GSK and AstraZeneca.
Trade data show that in the year leading up to the third quarter, the UK sold drugs valued at £11.1bn to the US. This figure made up a significant portion of total UK exports in that span.
"This guarantee secures employment, stimulates investment and sets the stage for the UK to emerge as a worldwide center for medical research," the Business and Trade Secretary stated.
Specific UK Commitments
The agreement involves several specific changes from the British government:
- Price Threshold Increase: The UK will increase the price threshold at which it deems new medicines to be too expensive by a quarter.
- Higher Drug Budget: There is a goal to raise overall NHS spending on medicines from 0.3 percent of Gross Domestic Product to 0.6 percent over the coming ten years.
- Payback Limit: The amount pharmaceutical firms must refund to the NHS to control costs will be limited at 15%. In the past, rebates exceeded 20%.
Industry Background
The deal comes amid a protracted tension between the drug companies and the UK government over medicine costs and approval rates.
These tensions were heightened by claims that US consumers were charged a premium for the identical medicines than people in the other developed nations.
In recent months, several major pharmaceutical investments in the UK have been halted or cancelled, while substantial expansions have been announced toward projects in the United States.
A senior figure acknowledged that the NHS must spend more on treatments, noting that its spending on drugs had declined as a share of its resources over the last ten years.
