UK Strikes 3-Year Zero-Tariff Deal With US On Pharmaceutical Exports

The UK and the US have finalized an agreement ensuring that British-made pharmaceuticals will continue entering the American market without tariffs for the next three years, the BBC reported Monday.

Under the deal, the UK agreed to higher NHS medicine payments in exchange for a binding guarantee that US import taxes on British drugs will stay at zero. It marks the first time in over two decades that NHS drug costs are set to rise.

The agreement follows President Donald Trump’s warnings that he could impose tariffs of up to 100% on branded medicines; one of Britain’s most valuable exports to the US.

Business and Trade Secretary Peter Kyle said the arrangement “guarantees that UK pharmaceutical exports, worth at least £5bn a year, will enter the US tariff free, protecting jobs, boosting investment and paving the way for the UK to become a global hub for life sciences.”

In the 12 months to September, the UK exported £11.1 billion in medicines to the US, accounting for 17.4% of all British goods sold to America, according to UK government figures.

Pharmaceuticals were originally excluded from the earlier round of tariffs announced by President Trump, but he repeatedly raised the prospect of targeting drug imports, citing concerns about US dependence on foreign suppliers and the higher prices paid by American consumers.

As part of Monday’s terms, the UK will lift the cost threshold used to judge when new medicines are too expensive by 25%. NHS drug spending is also set to increase gradually — rising from 0.3% to 0.6% of GDP over the next decade.

Drugmakers’ required repayments to the NHS, introduced to prevent overspending, will be capped at 15%, down from the over-20% level seen last year. In return, British medicine exports receive tariff protection for three years.

Announcing the deal, US Health Secretary Robert Kennedy Jr. said Americans “should not pay the world’s highest drug costs for medicines they helped fund,” adding that the agreement “strengthens the global environment for innovative medicines and brings long-overdue balance to US–UK pharmaceutical trade.”

White House spokesman Kush Desai called the agreement “a historic step towards ensuring that other developed countries finally pay their fair share.”

Tensions around the issue had been rising inside the UK as well, amid disputes between the government and pharmaceutical firms over pricing and approval delays. British Health Secretary Wes Streeting said earlier this year he would not allow companies to “rip off” the UK after negotiations stalled.

However, Science Minister Sir Patrick Vallance later acknowledged that NHS drug spending had fallen as a share of the health budget over the past decade and needed to rise.

NICE, the NHS advisory body, said the revised framework could result in three to five additional medicines being approved each year. Currently, it reviews around 70 annually and approves roughly 90%.

The ultimate cost to the NHS remains unclear; drugs account for about 10% of its budget. Sally Gainsbury of the Nuffield Trust warned the deal could add £3 billion in expenses, calling it “bad news” given intense financial pressures, and argued that the Treasury would need to fully fund any increases.

The UK government emphasized that it is the only country to secure a zero-percent tariff rate for pharmaceutical goods. EU officials previously believed their exports would be shielded by earlier agreements capping most tariffs at 15%.

The deal comes after a string of halted or cancelled pharma investments in the UK. GSK announced in September it would spend $30 billion in the US instead, while Merck (known as MSD in Europe) scrapped a £1 billion expansion in Britain. AstraZeneca also paused a £200 million Cambridge project and later committed $50 billion to US-based research and manufacturing.

William Bain of the British Chambers of Commerce praised the announcement, calling it “a real win” that will strengthen exports, draw investment and bolster the UK as a center for pharmaceutical innovation.

Bristol Myers Squibb said it now expects to invest over $500 million in UK research, development and manufacturing over the next five years. Chief executive Chris Boerner said the arrangement “creates an environment conducive to our continued presence in the UK.”

The White House launched a formal investigation into pharmaceutical imports in April, assessing their national security impact. In September, President Trump posted on Truth Social that he might impose 100% tariffs on branded drugs, though the administration held off as talks progressed.