The United Kingdom and the United States have finalised a significant trade agreement that will see import taxes on medicines and treatments remain at zero for the next three years. The deal, announced by the UK Government on Monday 1st December 2025, is designed to secure vital pharmaceutical exports and encourage increased investment in the UK's life sciences sector.
Details of the Bilateral Agreement
Under the terms of the pact, a 0% tariff rate will apply to all UK pharmaceutical exports to the US for a minimum of three years. The UK Government has stated this is the lowest rate offered to any country. In return, the NHS has committed to spending more on medicines. The Government has agreed to increase the upper cost-effectiveness threshold for purchasing new medicines by 25%. This change means breakthrough treatments, such as those for cancer and rare diseases, which might previously have been declined, can now be approved for use.
Furthermore, the agreement includes a reduction in the repayment rate on NHS drug prices to 15%, effective from 2026. This rate is the amount pharmaceutical companies pay back to the NHS to prevent overspending on the branded medicines budget.
Addressing Industry Concerns and Political Reaction
The deal follows stark warnings from US officials and pharmaceutical firms. US ambassador Warren Stephens had earlier cautioned that American businesses would axe future UK investments unless changes were made swiftly. This tension was cited as a factor in recent decisions by firms like Merck and AstraZeneca to cancel or pause investments in the UK.
Science and Technology Secretary Liz Kendall stated: “This vital deal will ensure UK patients get the cutting-edge medicines they need sooner, and our world-leading UK firms keep developing the treatments that can change lives.” Business and Trade Secretary Peter Kyle highlighted that the agreement “guarantees that UK pharmaceutical exports – worth at least £5 billion a year – will enter the US tariff-free.”
The Association of the British Pharmaceutical Industry (ABPI) welcomed the move as “an important step towards ensuring patients can access innovative medicines.” ABPI chief executive Richard Torbett added that it should strengthen the UK's position in attracting global life science investment. However, Conservative shadow business secretary Andrew Griffith criticised a lack of governmental detail, questioning how the NHS will fund the higher drug costs and how British patients will genuinely benefit.
Implications for Trade and the NHS
The Trump administration has indicated the deal will lead to further investment by UK drug firms in the US and create more jobs stateside. For the UK, the primary goals are to safeguard a crucial export market and improve domestic access to advanced medical therapies. The agreement seeks to balance trade advantages with the pressing need to resolve longstanding disputes over NHS spending on branded pharmaceuticals, moving to stabilise the environment for international life sciences companies operating in Britain.
