America and Britain Forge Tariff-Free Deal on Drugs.

The UK and US have forged a key trade agreement that will keep no tariffs on British drug exports entering the US market.

The Terms of the Accord

Under the terms of the agreement, the UK has agreed to increase expenditure on drugs through the National Health Service (NHS). This move guarantees that import taxes on these key goods will be held at zero for a duration of the next three years.

This deal follows recent threats to hike duties on patented drug imports, with increases discussed up to double the cost.

"This agreement with the UK bolsters the global environment for new treatments and brings long-overdue balance to transatlantic drug exports," a release noted.

Commercial Importance

Pharmaceuticals represent one of the the United Kingdom's most significant exports to the US, which is by far the biggest destination for major companies like GSK and AstraZeneca.

Export figures indicate that in the year to the end of September, the UK shipped pharmaceutical products totaling £11.1bn to the US. This value accounted for 17.4% of total UK exports in that period.

"This guarantee protects work, boosts funding and paves the way for the UK to establish itself as a international leader for medical research," the Business and Trade Secretary commented.

Key UK Commitments

The agreement entails several key changes from the United Kingdom:

• Revised Affordability Limit: The UK will raise the price threshold at which it deems new medicines to be prohibitively costly by 25%.
• Higher Drug Budget: There is a goal to double overall health service expenditure on treatments from 0.3 percent of Gross Domestic Product to 0.6% over the next decade.
• Payback Limit: The amount manufacturers must pay back to the NHS to prevent overspending will be restricted at 15%. In the past, repayments were more than 20%.

Industry Background

The deal follows a long-running row between the drug companies and the British authorities over medicine costs and approval rates.

These tensions were heightened by assertions that US consumers were paying a premium for the same drugs than people in the Britain and the EU.

In recent months, several major drug company projects in the UK have been paused or cancelled, while major funding commitments have been directed toward US facilities.

The Science Minister stated that the NHS had to invest a greater share on treatments, noting that its expenditure on drugs had shrunk as a share of its resources over the past decade.