On Monday, December 1st, the Office of the United States Trade Representative, the Department of Commerce, and the Department of Health and Human Services issued a joint statement announcing a preliminary agreement between the United States and the United Kingdom on drug pricing.
According to the statement, under the Economic Prosperity Agreement (EPD) reached between President Trump and Prime Minister Stamer, both countries have agreed to improve the overall environment for pharmaceutical companies operating in the UK to address the long-standing issue of drug trade imbalance. Additionally, UK pharmaceutical companies will continue to invest in the US, further solidifying America’s leading position in drug research and production.
US Trade Representative Jamieson Greer stated, “For far too long, American patients have been forced to pay higher prices for prescription drugs and biologics from other developed countries, subsidizing the sale of these drugs in the United States.”
“Today, the US and UK announce the negotiation results on drug pricing for innovative drugs, which will help drive investment and innovation in both countries. The Trump administration is reviewing the drug pricing practices of many other US trading partners and hopes they will also follow suit through constructive negotiations,” he added.
This agreement stems from Trump’s longstanding dissatisfaction with drug pricing in the UK, where he has complained that Americans pay much higher prices for drugs compared to consumers in other countries.
The President stated last week that lowering drug prices is the key to achieving more affordable and higher quality healthcare coverage. As per agreements reached with pharmaceutical companies earlier, starting from 2027, prices of 15 high-volume drugs will be reduced by 38% to 85%.
Commerce Secretary Howard Lutnick said, “This agreement not only deepens the economic partnership between the US and the UK but also ensures that future breakthroughs in the medical field will be developed, tested, and produced domestically in the United States.”
Per the terms of the preliminary drug pricing agreement announced on Monday, the UK will reverse the trend of declining expenditure on innovative life-saving drugs by the National Health Service (NHS) over the past decade, committing to a 25% increase in the pricing of new drugs.
The NHS is the UK’s public-funded healthcare system that has long used a complex mechanism called the Voluntary Scheme for Branded Medicines Pricing and Access (VPAG) to limit total drug expenditure.
When total drug expenditure exceeds a certain level, pharmaceutical companies are required to pay the government partially through sales rebates, often demanding substantial discounts or rebates on old drugs (those past their patent period or entire product portfolios) in exchange for the entry of new drugs.
As per the agreement, the UK has pledged to raise the prices of new drugs without making concessions on entire portfolios of drugs under the VPAG or other rebate schemes to avoid substantial erosion for pharmaceutical companies.
This has been a major point of contention for pharmaceutical companies, who argue that the rebates received by the UK are significantly higher compared to other European countries.
The UK has explicitly committed to reducing the proportion of drug prices that must be rebated by companies under the current VPAG plan to 15% by 2026 and maintaining it at 15% or below during the plan’s validity. According to Bloomberg, sources revealed that the current rebate ratio demanded by the UK is 23%.
In exchange, the US has agreed to exempt UK-origin drugs, drug components, and medical technologies from tariffs under Section 232 of the Trade Expansion Act of 1984, and during President Trump’s term, there will be no drug pricing actions against the UK in any future Section 301 investigations under the Trade Expansion Act of 1984. Additionally, the US will work to ensure that UK citizens have access to the latest medicines.
“Americans should not be paying the world’s highest drug prices for medications they have helped fund,” stated US Secretary of Health and Human Services Robert F. Kennedy, Jr. “This agreement with the UK strengthens the global environment for the development of innovative drugs and brings long-awaited balance to pharmaceutical trade between the US and the UK.”
While the core terms of the agreement primarily benefit the UK (such as requiring the NHS to increase spending on new drugs and reduce rebate rates), it also brings substantial benefits to the US.
Several pharmaceutical companies, including AstraZeneca, have reached agreements with the White House to lower drug prices sold in the US in exchange for tariff relief.