The United Kingdom and the United States have secured a key trade agreement that will guarantee no tariffs on British pharmaceutical exports going into the American market.
Key Provisions of the Deal
In exchange for the tariff guarantee, the UK has agreed to raise funding on pharmaceuticals through the NHS. This move ensures that tariffs on these key goods will remain at nothing for a duration of 36 months.
This deal is in response to previous threats to significantly raise duties on patented drug imports, with potential rates mentioned reaching 100%.
"This arrangement with the United Kingdom strengthens the international landscape for innovative medicines and establishes much-needed balance to transatlantic drug exports," an announcement noted.
Commercial Impact
Pharmaceuticals represent one of the the United Kingdom's largest export categories to the America, which is easily the primary destination for major companies like GSK and AstraZeneca.
Export figures reveal that in the 12 months leading up to the third quarter, the UK shipped pharmaceutical products worth billions to the US. This value represented 17.4% of all goods exports in that span.
"This guarantee protects jobs, stimulates capital expenditure and facilitates the UK to establish itself as a worldwide center for life sciences," the Business and Trade Secretary stated.
Key British Pledges
The agreement involves several notable changes from the UK:
- Revised Affordability Limit: The UK will increase the affordability limit at which it judges new medicines to be too expensive by a quarter.
- Boosted Medicine Funding: There is a goal to increase total NHS spending on medicines from 0.3 percent of Gross Domestic Product to 0.6% 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, refunds topped 20%.
Industry Background
This agreement comes amid a protracted tension between the drug companies and the UK government over drug pricing and regulatory access.
The disagreement were heightened by claims that American customers were paying significantly more for the equivalent treatments than patients in the UK and Europe.
Over the last 18 months, several major drug company projects in the UK have been delayed or scrapped, while multi-billion-dollar funding commitments have been pledged toward US facilities.
A senior figure stated that the NHS had to increase expenditure on medicines, noting that its spending on drugs had decreased as a share of its overall budget over the previous ten-year period.