An OVID Health article by Ollie George
Yesterday the UK Government announced a landmark UK-US pharmaceutical trade deal designed to safeguard medicines access and reinforce the UK’s position as a life sciences superpower.
The deal delivers headline commitments that have been widely welcomed by industry:
· Zero tariffs on pharmaceutical exports
· A reduced VPAG repayment rate
· Updated NICE cost-effectiveness thresholds
Together, these measures represent meaningful progress towards strengthening the UK life sciences sector and improving patient access to innovative treatments.
The Bigger Picture
In this analysis I explore how the deal positions the UK in the context of the Government’s Life Sciences Sector Plan, which sets an ambition for the UK to be:
· The leading life sciences economy in Europe by 2030
· The third life sciences economy globally by 2035, behind the US and China
The Sector Plan rightly cites commercialisation and adoption of pharmaceuticals as an area of weakness in its self-diagnosis of the current challenges facing the sector. The measures announced yesterday make a significant step towards addressing some of these barriers.
Zero Tariffs on Pharmaceuticals
The UK has secured a 0% tariff on pharmaceutical exports to the US for at least three years, protecting UK manufacturing and reinforcing the UK’s position in the global life sciences sector. This makes the UK the first country to achieve zero tariffs on pharmaceutical exports to the US, creating a unique advantage over EU competitors, whose exports remain subject to tariffs of up to 15% under the US–EU trade framework agreed in July 2025. Meanwhile, the UK still benefits from zero tariffs for pharmaceutical exports into the EU, positioning it well to access both regions. Following the UK deal, expect further negotiations with other European countries as they look to negotiate similar deals.
VPAG Repayment Rates
The repayment rate for newer medicines under the VPAG scheme will be capped at 15% for 2026–2028, down from 23.5%. While this reduction is welcomed, it falls short of the single-digit rate industry had hoped for. By comparison, similar schemes in Europe average much lower, for example 9% in Ireland and 7% in Germany. This underscores the importance of upcoming ABPI-Government negotiations to design a more sustainable model from 2029 onwards.
NICE Cost-Effectiveness Thresholds
From April 2026, NICE thresholds will rise from £20,000-£30,000 to £25,000-£35,000 per QALY. This is the first update since the inception of the thresholds and it’s expected to enable approval of 3–5 additional medicines or indications per year, according to NICE, improving patient access.
While the change doesn’t reach the £40,000–£50,000 level called for by industry, it moves the UK closer to international averages. The ABPI estimate that the international average for similar countries to the UK that use either explicit or implicit thresholds is around £33,400.
Although the NICE thresholds have been updated for standard technology appraisals, the thresholds for the highly specialised technology remain unchanged.
Increased Investment in Medicines
The UK will double investment in new medicines from 0.3% to 0.6% of GDP over the next decade, a positive signal to industry to commit to investing in new innovations. Increasing investment to 0.6% of GDP would surpass European neighbours Spain (0.53%) and Italy (0.46%) but the UK would still trail behind the US (0.78%).
Questions remain over who will fund the additional spending, estimated to be £3bn a year. Will additional resource be granted from HM Treasury or will it come from existing and already stretched NHS budgets? Regardless, the commitment signals a strong intent to support innovation.
What’s Next?
This agreement represents a strong step towards the UK’s vision for life sciences, but the long-term success will hinge on the post-2029 scheme and continued collaboration between Government and industry.
For patients, the changes promise improved access to breakthrough treatments. For industry, they offer a more competitive environment, but work remains to ensure the UK achieves its global ambitions.
Article originally published on LinkedIn on 2nd December
