Fast facts
- Deal: US–UK 0% tariff agreement on pharmaceuticals for three years
- Tariff impact: UK-produced drugs, ingredients & medical devices exempt from Section 232 tariffs
News|Articles|December 1, 2025
US and UK Agree to Zero Tariffs on Pharmaceuticals
Author(s)Nicholas Saraceno, Editor
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Key Takeaways
- The US-UK agreement suspends tariffs on pharmaceuticals and medical technology for three years, with the UK increasing payments by 25%.
- NICE's value appraisal framework will undergo significant changes due to the agreement, impacting the cost-effectiveness evaluation of new drugs.
The agreement includes exemptions for UK-produced drugs and medical devices from Section 232 tariffs, but mandates a significant change to the UK's NICE value appraisal framework.
As of this morning, the United States and United Kingdom have reached a deal in principle to start enforcing 0% levies on both pharmaceuticals and medical tech for three years, according to Reuters.1
The office of the of United States Trade Representative (USTR)—who unveiled a release2 announcing the news—noted that per the new agreement, the UK would raise the new amount that it pays by 25%, while having any meds produced in the UK, drug ingredients, and med tech being exempt from Section 232 sectoral tariffs. It will also “refrain from targeting UK pharmaceutical pricing practices in any future Section 301 investigation for the duration of President Trump’s term.”
“… For too long, American patients have been forced to subsidize prescription drugs and biologics in other developed countries by paying a significant premium for the same products in ours,” said Ambassador Jamieson Greer. “Today, the United States and the United Kingdom announce this negotiated outcome pricing for innovative pharmaceuticals, which will help drive investment and innovation in both countries. The Trump Administration is reviewing the pharmaceutical pricing practices of many other US trading partners and hopes that they will follow suit with constructive negotiations.”
NICE value framework expected to undergo significant change
Sources close to the deal indicated to Reuters1 that the newly announced agreement would require a significant change to the value appraisal framework at NICE, which is the UK government body that’s responsible for determining whether new drugs are cost-effective for the National Health Service. NICE's current standard consists of the "quality-adjusted life year" (QALY), and it caps the acceptable cost of a treatment at $39,789 for each healthy year it provides a patient.
“Today’s agreement is a major win for American workers and our innovation economy. We are strengthening supply chains, creating high-quality jobs, and reinforcing America as the world’s premier hub for life-sciences investment,” commented Howard Lutnick, US Secretary of Commerce. “This deal doesn’t just deepen our economic partnership with the United Kingdom—it ensures that the breakthroughs of tomorrow will be built, tested, and produced on American soil.”
Executive orders alter drug pricing and tariff policy
Back in May, President Trump enacted an executive order (EO) that essentially proclaimed that pharma companies—many of which being based in the UK and across the globe—need to treat the United States as a most-favored nation (MFN) as it pertains to drug pricing. The EO notes that US drug prices need to be less than or equal to the drug’s lowest price in other nations, as a way of establishing fairness.
This includes extending MFN pricing to Medicaid; guaranteeing MFN pricing for newly-launched drugs; returning increased revenues abroad to American patients and taxpayers; and providing for direct purchasing at MFN pricing.
Trump also revealed that the federal government would enacting a 100% tariff on any branded or patented drugs that are entering the country unless businesses construct plants in the US.4
Earlier tariff reductions set stage for pharma trade breakthrough
Regarding US-UK agreements, the sector might recall that back in June, at the Group of Seven (G7) Summit, US President Donald Trump and British Prime Minister Keir Starmer had signed a deal4 that lowered various tariffs on imports coming from Britain.
However, that particular agreement focuses on British aerospace materials and automobiles; US tariffs on these products would be removed, signifying that the UK would be exempt from the 10% tariffs Trump wanted to enact on other nations. By the end of June, the tariffs on vehicles would decrease from 27.5% to 10%, on a quota of up to 100,000 annually.
Tariffs on pharmaceuticals were not mentioned at that time.
References
1. Shalal A, Fick M, Smout A. US Announces Zero Tariff Pharmaceutical Deal With Britain. Reuters. December 1, 2025. Accessed December 1, 2025.
2. US Government Announces Agreement in Principle With the United Kingdom on Pharmaceutical Pricing. Office of the United States Trade Representative. December 1, 2025. Accessed December 1, 2025.
3. Saraceno N. Trump Announces 100% Tariff on Branded Drugs Unless Pharma Builds US Plants. Pharmaceutical Commerce. September 26, 2025. Accessed December 1, 2025.
4. Saraceno N. United States, United Kingdom Reach Tariff-Lowering Deal. Pharmaceutical Commerce. June 17, 2025. Accessed December 1, 2025.
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