The United Kingdom and the United States have reached a significant bilateral deal that will maintain zero import taxes on UK drug exports going into the US market.
The Terms of the Accord
In exchange for the tariff guarantee, the UK has pledged to raise spending on medicines through the NHS. This move ensures that tariffs on these vital exports will be held at nothing for a period of three years.
This deal comes after recent warnings to significantly raise duties on patented pharmaceutical products, with potential rates floated reaching double the cost.
"This agreement with the Britain reinforces the international landscape for innovative medicines and introduces long-overdue equity to U.S.–U.K. drug exports," a release said.
Economic Impact
Pharmaceuticals constitute one of the UK's largest goods shipped to the United States, which is easily the largest market for leading companies like GSK and AstraZeneca.
Trade data reveal that in the year leading up to last September, the UK sold drugs valued at over eleven billion pounds to the US. This value represented nearly one-fifth of British export trade in that period.
"This agreement secures employment, stimulates investment and sets the stage for the UK to establish itself as a international leader for medical research," the Business and Trade Secretary commented.
Key British Pledges
The pact entails several specific changes from the British government:
- Price Threshold Increase: The UK will lift the affordability limit at which it judges new therapies to be unaffordable by a quarter.
- Higher Drug Budget: There is a aim to increase total health service expenditure on medicines from 0.3 percent of Gross Domestic Product to 0.6% over the next decade.
- Rebate Cap: The amount drug companies must pay back to the NHS to control costs will be capped at fifteen percent. Last year, repayments exceeded 20%.
Recent Tensions
This agreement comes amid a ongoing tension between the drug companies and the UK government over drug pricing and approval rates.
The disagreement were heightened by claims that US consumers were charged several times more for the equivalent treatments than consumers in the UK and Europe.
In recent months, several major drug company projects in the UK have been delayed or abandoned, while multi-billion-dollar expansions have been announced toward American operations.
One official publicly accepted that the NHS needed to increase expenditure on medicines, noting that its spending on drugs had shrunk as a proportion of its resources over the previous ten-year period.
