The U.K. can officially declare itself free of tariffs on drug exports to the U.S. after its government signed off on the landmark U.S.- U.K. pharmaceutical partnership that first came to be in December.
In exchange for the tariff reprieve, the U.K. will boost the net price its National Health Service (NHS) pays for novel treatments by 25%. The arrangement lasts at least three years and makes the U.K. the first in the world to secure 0% tariffs on U.S. pharma exports, U.K. officials said in a Thursday press release.
“First announced in December, the partnership protects a UK pharmaceutical industry that added £28.5 billion to the UK economy in 2025, employs over 50,000 people in highly skilled, well-paid jobs, and exported almost £21 billion in pharmaceutical products worldwide last year,” the government explained.
The 25% price hike folded into the deal shakes out through a higher cost-effectiveness threshold for medicines evaluated by the National Institute for Health and Care Excellence (NICE).
NICE’s cost-effectiveness threshold is used to evaluate whether drugs offer good value for the NHS’s money by balancing costs with the quality-adjusted life years (QALYs) provided by novel medicines. For the last two decades, the threshold has been set to a cost-effectiveness range of £20,000 to £30,000 per QALY gained.
As of March 31, the new threshold increases that range to £25,000 to £35,000 per QALY.
A large part of the overall plan for the U.S.-U.K. deal looks to position the U.K. as a more attractive environment for biopharma investment, with the NICE threshold offering “stronger incentives” for drugmakers to launch their innovative treatments in the U.K.
In another boon for “the stability and predictability that life sciences companies need to invest and grow in the U.K.,” the country is capping rebates on branded medicines sold to the NHS at a maximum of 15% until the end of the current rebate scheme, which expires at the end of 2028.
Previously, the rebate rate in 2025 was 22.9%.
The U.K. has pledged to double its spending on new medicines over the next ten years, rising its spend from a 0.3% proportion of the country’s GDP to 0.6%. This commitment “sends a clear signal to global investors that the UK is a serious, long-term partner for the life sciences industry,” U.K. officials emphasized in the release.
After many global pharma heavyweights paused or pulled their investments in the U.K. last year, companies have so far responded to the newly signed arrangement with tempered enthusiasm.
As quoted in the U.K.’s announcement, Bristol Myers Squibb CEO Chris Boerner called the deal a “step toward properly recognising the value of innovative medicines so patients in the UK can access them sooner,” further pledging to work with the U.K. and U.S. governments to support the initiative.
AbbVie’s chief commercial officer Jeff Stewart also sees the agreement as a “first step,” noting that “rapid implementation of the partnership is now needed to deliver meaningful results for patients and the sector.” A GSK spokesperson called the move an “important foundation for the UK’s global competitiveness in life sciences and for future investment in the country.”
Last September alone saw Lilly pausing a planned Lilly Gateway Labs site, Sanofi freezing its U.K. R&D investments and Merck scrapping a 1 billion pound sterling R&D location in London while pulling research operations out of Britain. At the time, Lilly’s CEO David Ricks told The Financial Times that Britain was “probably the worst country in Europe” for drug prices and “not an attractive environment for investment.”
Now, Ricks is singing a slightly more positive tune.
“This UK / US arrangement on pharmaceuticals is an encouraging move; the positive trend in the UK warrants our attention and Lilly will revisit our investment plans there as the environment improves,” he commented in the U.K.’s release.
Earlier this week, Lilly’s head of Lilly’s international operations Patrik Jonsson told FT that he feels “optimistic” about an agreement that would see the U.K. paying more for medicines. In regards to the U.S.-U.K. deal, Jonsson said that Lilly would need to see a “well-defined action plan with interventions and timelines,” he told the newspaper.
Meanwhile in the U.S., 100% import tariffs loom for companies that have not complied with President Trump’s Most Favored Nation (MFN) drug pricing mandates, Bloomberg reported on Thursday, citing people familiar with the plan.
