Milestone US-UK drug tariff and pricing deal announced

US Commitments

Under the new deal, which is part of the UK-US Economic Prosperity Deal, the United States has agreed to the following:

• The UK will receive a preferential tariff rate of 0% for all UK pharmaceutical exports to the U.S. for at least 3 years.
• The U.S. will provide preferential terms for the UK's medical technology exports, meaning no additional new U.S. tariffs on UK medtech, which will remain at the current 10% rate.
• The U.S. agreed to exempt UK-origin pharmaceuticals, pharmaceutical ingredients, and medical technology from U.S. Section 232 tariffs.
• The U.S. agreed to refrain from targeting UK pharmaceutical pricing practices in any future Section 301 investigation for the duration of President Trump's term.

UK Commitments

In return, the United Kingdom has agreed to the following:

• The UK government will increase National Health Service (NHS) spending on innovative, life-saving medicines through two changes to the way that NICE evaluates medicines: (1) a change to the baseline cost effectiveness threshold used in health technology appraisals, and (2) the introduction of a new value set for judging health states.
• The change to the cost effectiveness threshold will be a 25 percent increase to the baseline range from £20,000-30,000 per quality-adjusted life year (QALY) to £25,000-35,000 per year. NICE anticipates that this change will be in place in April 2026 and it will apply to new NICE technology appraisals and those currently in progress, but it will not apply retrospectively to appraisals already completed.
• The new value set for health-related quality of life, to be used alongside the current EQ-5D-5L tool, is in development and implementation into NICE’s methods will be consulted on in Spring 2026.
• Additionally, the UK government will ensure that higher prices for new medicines “are not materially eroded” by the rebates payable under the VPAG scheme. Under VPAG pharmaceutical companies are required to pay back a portion of branded medicine sales made to the UK NHS. The rebate repayment rate payable by companies under VPAG for newer drugs will decrease from the current base rate of 22.9% in 2025 to a capped rate of 15% in 2026 and remain at or below that level for the remainder of the scheme until the end of 2028.

US vs. UK Framing: MFN and Industry Advancement

This deal comes approximately two months after Trump announced the first results of his most-favored-nation (MFN) drug pricing policy, emphasized U.S. Centers for Medicare & Medicaid Services (CMS) Deputy Administrator Chris Klomp, who characterized the deal as a win for lowering drug prices for Americans. More recently, the administration has also announced its voluntary GENEROUS Model, designed to incentivize manufacturers to offer MFN pricing to state Medicaid programs. Our alert on this model is available here.

Meanwhile, in its announcement, the UK government highlighted that the deal “sees the UK become the only country in the world to secure a zero percent tariff on pharmaceuticals to the US – protecting UK-based manufacturing and cementing [its] place as a world leader for life sciences investment.”

Conclusion

We will continue to monitor for developments on US-UK drug tariff and pricing policy as well as other updates on the application of tariffs as between these two countries and MFN pricing in the United States more generally. As always, it is important that you carefully review these developments to identify all issues relevant to your organization. If you have any questions about what these developments may mean in practice, please contact any of the authors of this update or the Hogan Lovells lawyer with whom you regularly work.

Authored by Melissa Bianchi, Jane Summerfield, Alice Valder Curran, Beth Roberts, Brian Carey, Samantha Marshall