US deal poses UK pharma market risks, expert warns

Catherine Drew of Pinsent Masons welcomed the news that the UK government has agreed to increase the amount of money the state spends on new treatments for use on the NHS, in return for securing a US tariff rate of 0% for all UK pharmaceutical exports, in a deal that applies for at least three years. However, she said it is important that manufacturers of generic and biosimilar medicines should not be “squeezed” at the expense of that uplift.

The arrangement, which builds on the US-UK economic prosperity deal struck in May, was heralded by the UK government, which said it is “the only country in the world to secure a zero percent tariff on pharmaceuticals to the US”. Under the deal, UK medtech exports will also not face any additional US tariffs.

From 1 October 2025, a 100% tariff has been applied by the US on the import of pharmaceutical products, except for companies building drug manufacturing plants in the US. A lower tariff rate of 15% applies to products shipped to the US from Japan and the EU under the terms of agreements the US reached with those trading partners.

The UK-US agreement on tariffs was welcomed by both the Association of the British Pharmaceutical Industry (ABPI), which highlighted that the UK exported £6.6 billion worth of medicinal and pharmaceutical products to the US in 2024, and Medicines UK. However, the ABPI, which predominantly represents the interests of manufacturers of original branded pharmaceutical products, and Medicines UK, which represents the interests of manufacturers of generic and biosimilar medicines developed with reference to originator products, have differing perspectives on the recalibration of the UK’s pricing and reimbursement mechanisms for innovative new treatments that the deal provides for.

Under its agreement with the US, the UK government has pledged to invest around 25% more in “innovative, safe, and effective treatments”. In England, this will be given effect through changes to the way the National Institute for Health and Care Excellence (NICE) evaluates medicines.

NICE is responsible for determining whether new treatments should be used on the NHS. A central focus of its evaluation is on whether products are cost-effective. To inform that evaluation, NICE applies a ‘quality-adjusted life-years’ (QALYs) metric, which essentially attaches a financial value to the assessment of the health outcomes the product can deliver.

Under the UK-US deal, the baseline QALY threshold under which NICE considers new treatments to be cost-effective when assessed against current available treatments will be uplifted, from £20,000-£30,000 to £25,000-£35,000. Where the QALY value is considered to exceed this threshold, NICE is less likely to recommend a new product for use on the NHS – greater justification is required for it to do so.

The change to the baseline QALY threshold will be accompanied by further reforms to the current pricing and reimbursement mechanism in place in the UK. First, the government said “a new value set for valuing health-related quality of life” will be applied, following consultation, while the ABPI further confirmed that the deal also places a 15% cap on the rebates branded medicines suppliers are required to pay to the NHS when the total NHS bill for those products exceeds the growth rates provided for under the voluntary scheme for branded medicines pricing, access and growth (VPAG). Manufacturers are currently required to repay 23.5% of their NHS sales revenues when the cap is exceeded.

Richard Torbett, ABPI chief executive, said the UK’s commitments under the agreement “begin to address industry concerns on NHS access to medicines, and the UK’s record-high and unpredictable payment rate” and represent “an important step towards ensuring patients can access innovative medicines needed to improve wider NHS health outcomes”. He added that the while some details of the deal have still to be clarified, it should also “put the UK in a stronger position to attract and retain global life science investment and advanced medicinal research”.

However, MedicinesUK chief executive Mark Samuels said that in investing more in new medicines, the UK government must “not overlook older, essential products”. He said: “Off-patent generics and biosimilars already deliver 85% of NHS prescriptions at less than 30% of the spend – saving money while improving patient access”. He said improving health outcomes in the UK will require greater use of generic and biosimilar products in future.

Catherine Drew of Pinsent Masons said: “Industry has long lobbied for changes to UK pharmaceutical pricing and reimbursement, arguing that the system has become increasingly uncompetitive when compared to other countries. This deal is great news for manufacturers of new innovative medicines and is good news for patients wanting access to those products, but the success of the UK pharmaceutical and healthcare ecosystem depends upon more than simply access to innovative medicines.”

“The pharmaceutical industry comprises both originator and generic and biosimilar products. To be the most effective and efficient, the interests of both types of entities must be protected – it cannot be the case that more money is found for new innovative medicines but that generic manufacturers continue to be squeezed. The logical output of such an approach will be that generic manufacturers will exit the UK market and the cost of branded products to the NHS, in the absence of effective competition, becomes unaffordable,” she said.