What is the UK–US pharmaceuticals deal?

On 1 December 2025, the UK Government announced a UK–US pharmaceuticals trade deal, as part of the broader UK–US Economic Prosperity Deal. Background to the deal can be found in the Commons Library briefing on US trade tariffs.

On 2 April 2026, the government published the text of the “preliminary understanding” of the arrangement between the US and the UK on pharmaceutical pricing.

Under the arrangement, the US Government has agreed that it will not impose tariffs on UK pharmaceutical and medical technology exports for the next three years, until 19 January 2029. The UK Government has committed to increasing its support for the life sciences industry, and to increasing NHS spending on new medicines, from 0.3% of GDP in 2026 to at least 0.6% of GDP by 2036. In addition, by 2036, medicines spending overall should increase from 10% to 12% of of the UK NHS budget.

Status of the arrangement

The text of the arrangement “serves as a public record of the preliminary understanding of December 1, 2025” between the UK and the US. The pharmaceuticals arrangement is not a treaty-based free trade agreement (FTA) under international law. It a flexible soft law instrument, which is not binding in international law, but comprises political commitments. As such, the arrangement is not subject to parliamentary scrutiny under the Constitutional Reform and Governance Act 2010, which covers scrutiny of UK’s international agreements (see section 7.5).

The arrangement’s legal and non-binding nature has been raised in Parliament. The Secretary of State for Business and Trade, Peter Kyle, told the Lords International Agreements Committee on 26 February 2026, that “non-agreements” (agreements that are not a treaty) allow for flexibility in the current circumstances and that the government aims to negotiate them “in a way that keeps [the committee] genuinely informed” (PDF).

The Lords International Agreements Committee wrote to the government on 20 May 2026 asking, among other things:

Why was an arrangement of this scale, which required legislation to implement, concluded as a memorandum of understanding rather than a treaty?

How will Parliament scrutiny be assured if non‑binding instruments, such as the Arrangement, are being used to pursue politically significant policies?

The Commons Library briefing What is a trade deal? UK–US trade talks since 2020 provides background on the different types of UK trade arrangements with the US and their legal status and implications.

US commitments to reduce tariffs

The US Government has agreed that it will not impose tariffs on UK pharmaceutical and medical technology exports for the next three years, from 1 January 2026 until 19 January 2029.

The full text of the arrangement says the US will only make this commitment if “all major United Kingdom pharmaceutical companies” enter into, and comply with, the US Government’s Most Favoured Nation (MFN) policy and tariff agreements. The text does not define which UK companies fall into the scope of this condition.

The US Government’s MFN policy was launched by President Trump via an executive order in May 2025. It aims to make pharmaceutical companies reduce the cost of medicines in the US, where drug prices are typically higher than in other OECD countries. This is achieved by benchmarking medicine prices in the US against those in comparable high-income countries, where prices are typically lower. Under MFN frameworks, companies are expected to align US prices with the lowest price available in a group of comparator countries.

In 2025, two large UK pharmaceutical companies, AstraZeneca and GSK, agreed MFN pricing deals with the US administration.

UK commitments to increase medicines spending

To fulfil its part of the arrangement, the UK made a series of commitments designed to increase overall spending on medicines and support the life sciences industry.

NICE recommendations about new medicines apply in England and Wales, and are typically endorsed by the Department of Health in Northern Ireland. A separate body, the Scottish Medicines Consortium (SMC) makes recommendations about using medicines in the NHS in Scotland; the SMC is not mentioned in the pharmaceuticals agreement.

Changes to how medicines are evaluated by NICE

Under the pharmaceuticals arrangement, the UK Government has changed the cost-effectiveness thresholds used by the National Institute for Health and Care Excellence (NICE) in recommending new medicines for use in the NHS.

NICE recommendations about new medicines apply in England and Wales, and are typically endorsed by the Department of Health in Northern Ireland. A separate body, the Scottish Medicines Consortium (SMC) makes recommendations about using medicines in the NHS in Scotland; the SMC is not mentioned in the pharmaceuticals agreement. The Commons Library briefing Deciding which medicines are used in the NHS provides more information about how NICE evaluates medicines and how cost-effectiveness is assessed.

Following a consultation, the government introduced new regulations to allow ministers to direct NICE to change the cost-effectiveness thresholds for medicines spending. The new thresholds took effect on 2 April 2026, increasing the price point at which a new medicine will be considered to be cost-effective for use in the NHS by around 25%. Under the new arrangement, a medicine will be considered cost-effective if it can generate one additional quality-adjusted life year (QALY, one year in perfect health, or an equivalent health benefit) for between £25,000 and £35,000. This change may enable some new, higher-cost medicines to be judged as representing ‘value for money’ by NICE and thus made available via the NHS.

There will also be a change to how NICE measures health-related quality of life, which is a key part of assessing the cost-effectiveness of medicines. A consultation on the introduction of the new measure will close on 27 May 2026. This change is likely to change the types of medicines that are recommended by NICE.

Reforming the 2024 Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG)

The 2024 Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) is a negotiated agreement between the Department of Health and Social Care, representing the UK Government, Scottish Government, Welsh Government and Northern Ireland Executive, NHS England and the Association of the British Pharmaceutical Industry (ABPI).

Under the VPAG, pharmaceutical companies in the UK pay a rebate to the government when their revenues from medicines sales exceed a cap. It is sometimes referred to as a “clawback mechanism”, and it is designed to reduce NHS spending.

Under the new trade arrangement, the UK Government has agreed that the maximum repayment rate cannot exceed 15% of eligible sales revenue. In addition, a new industry–government working group will redesign the scheme, and a replacement scheme will be in place by 1 January 2029.

The aim is to prevent the VPAG, its replacement, or any other UK action, from offsetting the increases in medicines spending that will result from the changes to NICE evaluations.

Medical products supply chains

The arrangement includes additional commitments that aim to strengthen medical products supply chains. In particular, the arrangement says that the UK and US Governments will:

• work together to help UK companies exporting to the US “meet US national security requirements for medical products”
• establish a Supply Chains Partnership to strengthen medicines supply chains, address medicines shortages and “reduce reliance on non-market economies” for materials needed to produce medicines
• negotiate commitments to align the regulation of medical devices and introduce reciprocal recognition of approvals for medical devices in the UK and US
• explore opportunities to increase regulatory cooperation for other medical products “relevant to public health preparedness and emergency response”.

The Lords International Agreements Committee has asked the government how these commitments will affect UK-based pharmaceutical manufacturers and the UK’s relationship with other countries. The committee also asked what parliamentary oversight will apply to decisions taken within the proposed supply chains partnership arrangement.

The arrangement does not define a non-market economy (NME). There is no international standard definition of the term, nor do the World Trade Organisation (WTO) texts explicitly define it. However, in the context of the WTO anti-dumping law, an NME is a country where market prices are deemed to be determined by decisive government influence and not freely determined by supply and demand in the domestic market. The term is broadly understood to describe countries where the government plays a significant role in directing prices, production and resource allocation, and where state intervention, including large scale subsidies, distorts prices and production decisions to a degree that goes beyond what would be typical in a market economy. The US Trade Representative has designated countries such as Belarus, China, Russia and Vietnam as NMEs for the purpose of setting anti-dumping and countervailing (anti-subsidy) duties (trade measures imposing additional tariffs on goods from those countries). The UK assesses this on a case-by-case basis. The use of the NME designation is contested, including by China (PDF).

How will the arrangement affect the UK?

There is uncertainty about how the pharmaceuticals arrangement will affect patients, the NHS and the UK life sciences industry.

Impact assessment

The government says it has no plans to publish an impact assessment for the deal, or the details of how it has modelled the effects of changes to the NICE cost-effectiveness threshold. It says that information included in the impact assessment is commercially sensitive.

Often, internal assessments, which form part of trade agreement negotiations, are not made public. Government policy is not to comment on the specifics of live trade negotiations. It has been routinely argued that early disclosure of certain information could prejudice the UK’s negotiating position.

The government has said it usually publishes official impact assessments or equivalent economic analyses of free trade agreements once they are agreed. It has implied that an impact assessment covering the final UK-US economic deal (as an FTA) would include the impact of the pharmaceuticals arrangement.

The Nuffield Trust think tank submitted an FOI request to DHSC to request publication of the government’s internal impact assessment. The government refused to release the document and in June 2026, the Nuffield Trust said it has referred the matter to the Information Commissioner’s Office.

During an Estimates Day debate on DHSC spending held on 30 June 2026, the government explained that it would not release the impact assessment:

I recognise the [Health and Social Care] Committee’s request for the impact assessment, but the analysis is scenario-based, contains commercially sensitive assumptions and remains linked to live policy development. Officials should be able to produce confidential advice for Ministers to inform trade and other negotiations, and we will not apologise for maintaining such confidentially where doing so is in the national interest.

Industry investment and new medicines

The trade deal has been welcomed by the pharmaceutical industry. The Association of the British Pharmaceutical Industry says the deal is “good news for NHS patients” and that it will support the competitiveness of the life sciences industry. The ABPI also says that the arrangement is supporting investment in UK life sciences and, in April 2026, the Prime Minister said that a £300 million investment from AstraZeneca was “made possible by the pharmaceutical arrangement we have struck with the United States”.

Patient and professional groups have broadly welcomed changes to the methods used by NICE to evaluate new medicines, saying they could increase access to new medicines via the NHS. NICE says that it currently recommends 91% of the medicines that it evaluates, and estimates that the threshold change will lead to an additional three to five approvals for new medicines, or new uses for existing medicines, each year. On 2 July 2026, the government reported that NICE had approved nine additional medicines since the cost-effectiveness thresholds were changed.

On 30 June 2026, the government said that over £1 billion of industry investment had been secured since the trade arrangement was announced in December 2025. In a letter to the Health and Social Care Committee (PDF) on 14 July 2026, the government also highlighted that pharmaceutical companies had paused or withdrawn investments of almost £2 billion last year; it argued that this trend may have continued if the trade arrangement had not been agreed.

NICE independence and regulation powers

Some bodies have expressed concerns about how the government’s new powers to direct NICE to change its cost-effectiveness thresholds affect the organisation’s independence. This was a theme in responses to the government’s consultation about changing NICE regulations. The Office for Health Economics think tank has warned that NICE should remain independent and free from political pressure.

The Lords Secondary Legislation Scrutiny Committee drew the new NICE regulations to the attention of the House. It said the explanatory memorandum that accompanied the regulations as inadequate, because it did not explain that that the UK–US pharmaceuticals arrangement was the impetus for the change, or provide any information about cost implications.

The Joint Committee on Statutory Instruments also drew attention to the new regulations, saying they made “an unexpected use of the enabling power” in the Health and Social Care Act 2012. The act says that ministerial directions cannot be given about the “substance” of NICE recommendations. The government said it did not consider that setting cost-effectiveness thresholds affected the “substance” of NICE recommendations:

The cost-effectiveness threshold is therefore a matter pertaining to the process by which an assessment is made rather than the substance of a recommendation based on that assessment – the assessment, and the decision as to whether or not to make a recommendation based on that assessment, rests with NICE. Setting the cost-effectiveness threshold in a direction does not, therefore, concern the substance of a recommendation.

The campaign groups Just Treatment and Global Justice Now have written to the government to ask it to revoke the new NICE regulations, arguing that the government has acted unlawfully. The groups say they will launch a judicial review if the government does not provide a satisfactory response to its letter.

How much will the arrangement cost and how will it affect the NHS?

The estimated cost of the pharmaceuticals arrangement for the UK has been disputed, and some commentators have raised concerns about how increased medicines spending will be funded.

Government estimate and costs of new medicines

The UK Government says that the total cost of the arrangement will depend on how many new medicines are recommended by NICE, but it estimates the total cost will be around £1 billion over the current Spending Review period (until 2028/29 for day-to-day spending). The Under-Secretary of State for Heath and Social Care, Preet Kaur Gill MP, reiterated this estimate during the Estimates Day debate on 30 June 2026. In his letter to the Health and Social Care Committee (PDF) in July 2026, the Secretary of State noted that the £1 billion estimate would include the cost of pilot schemes to speed up access to new medicines, and clarified that the 2025 Spending Review settlement had provided for a £29 billion real terms (3%) increase in annual resource budgets for the NHS in England.

The UK commitment to increase spending on new medicines is set out in a series of steps, starting at 0.3% of GDP in 2026, increasing to at least 0.35% of GDP by the end of 2028, and reaching at least 0.6% of GDP by 2036. Using forecasts of future GDP from the Office for Budget Responsibility (OBR), and assuming spending would otherwise remain at 0.3% of GDP, this would require an additional £1.7 billion of spending by the end of 2028 and around £14 billion by 2036. (These figures are calculated using the OBR’s nominal GDP forecasts from the Economic and fiscal outlook March 2026 and its long-term economic determinants June 2025.)

In December 2025, the Financial Times reported that the Institute for Fiscal Studies (IFS) think tank had made similar estimates, suggesting additional costs of around £1.5 billion by 2028 (around £1.7 billion in 2028/29 prices) and £9.1 billion in 2036 (£13.3 billion in expected 2035 prices). The newspaper has queried how these figures square with the government’s £1 billion cost estimate.

Karl Claxton, a professor of health economics at the University of York, is also reported to have disputed the government’s figure. According to the British Medical Journal, he has calculated that combined changes to NICE methods and the VPAG rebate scheme will cost £2.3 billion each year by 2029.

In July 2026, the British Medical Journal (BMJ) published additional analysis from Professor Claxton and other researchers, Samuel Cross and Andrew Hill. Their modelling estimates additional annual costs in the NHS in England of at least £1.3 billion in 2028 and £8.8 billion in 2036, and cumulative costs over the lifetime the arrangement of £44.7 billion. DHSC says it does not recognise this estimated figure. In his letter to the Health and Social Care Committee (PDF), the Secretary of State argued that the BMJ analysis did not account for increases in spending on new medicines that might have happened anyway and that it would be “misleading to attribute all spending above current levels to the Arrangement”.

How will the costs be funded?

The UK Government has explained that the additional costs incurred will be funded from existing NHS budgets, and future funding will be determined at the next Spending Review. The NHS Confederation, the body that represents NHS organisations, has called for more information about how the increase in spending can be funded and an assessment of how NHS services will be affected, given that no new funding will be made available.

Some commentators have also raised concerns about the opportunity costs of the arrangement, arguing that increased spending on medicines will divert funds from other NHS spending. The Nuffield Trust think tank says that the arrangement will result in an increasing share of the NHS budget being “diverted towards treatments that deliver lower health benefits per pound”. It has published a blog post that cites Department of Health and Social Care analysis suggesting that each £15,000 spent on existing NHS services can generate one additional QALY (one year in perfect health). The changes to the NICE cost-effectiveness thresholds will mean that the NHS could fund new medicines that cost more than twice as much to generate the same benefit.

Impact on NHS patients

The July 2026 analysis published in the British Medical Journal also provides estimates of the impact of the trade arrangement on population health. Drawing on existing evidence about the health effects of NHS spending, the researchers estimate that, without additional funding for new medicines, the effects of the deal will result in 229,000 excess deaths by 2036. Conversely, the modelling suggests that investing the additional estimated costs of £44 billion into existing health services could prevent more than 287,000 deaths.

The government’s letter to the Health and Social Care Committee (PDF) says it does not recognise these estimates and that they are based on an assumption that all additional medicines spending will be funded by “cuts to frontline services”. It acknowledges that increased spending will lead to trade-offs, but that “the exact impact will depend on future settlements and future policy decisions”. The government also argues that the analysis did not factor in the potential benefits that access to new medicines will deliver and that, in the absence of the arrangement, patients may have seen reduced access to new medicines.

Value to the UK medicines export industry

Former US ambassador Kim Darroch has described the pharmaceuticals arrangement as “a very good piece of damage limitation”, as the US had initially proposed 100% tariffs, or more, on UK exports of branded drugs in the absence of any deal. The government has said that UK exports of pharmaceutical products to the US were worth over £5 billion in 2024.

Further reading

Commons Library, US trade tariffs

Commons Library, What is a trade deal? UK-US trade talks since 2020

Commons Library, Deciding which medicines are used in the NHS

Commons Library, How are medicines prices set in the UK?

Commons Library, Medicines shortages