Executive Summary 

• The recently announced “agreement on pharmaceutical pricing” between the United States and the United Kingdom (U.K.) resolves an outstanding policy item of 2025; in exchange for tariff relief from the United States, the U.K. will work to address drug pricing parity between the two countries. 
• The effort to address pharmaceutical pricing parity has two main components: increasing by 25 percent the net price the United Kingdom pays for new medicines, and reducing to 15 percent of excess revenue industry repayment rates under the Voluntary Scheme for Branded Medicines Pricing, Access, and Growth.  
• The details of this agreement demonstrate a fundamental flaw in the U.K.’s single-payer health care system: The U.K. government only saw fit to increase the availability of resources for necessary pharmaceutical purchases and expanded treatment options when another government – rather than its own citizens or industries – demanded it. 

Introduction 

The recently announced “agreement on pharmaceutical pricing” between the United States and United Kingdom (U.K.) has solved one outstanding pharmaceutical pricing agenda item from 2025. Built upon the foundation of the May 2025 Economic Prosperity Deal (EPD) between the United States and the U.K., this agreement covers the then-punted topic of drug pricing parity between the two countries.  

While the agreement is particularly focused on tariffs and trade policy, the U.K. has often been cited as an example of the president’s desire to bring down the cost of drugs in the United States. Thus, understanding the pharmaceutical portion of the EPD is of particular interest, because health care policy is being used as a proxy in what is really a trade deal.  

Failure to reach an agreement with the United States could have been a death knell for the U.K. pharmaceutical industry. Life-sciences leaders and the Association of the British Pharmaceutical Industry were already warning that high U.K. rebate rates under the Voluntary Scheme for Branded Medicines Pricing, Access, and Growth (VPAG) – in some cases requiring companies to pay back 23.5–35.6 percent of out-of-budget brand-name drug revenues – were making the country “un-investable.” At the same time, President Trump was publicly insisting that European systems, and the U.K.’s National Health Services (NHS) in particular, need to “pay more” for branded drugs so Americans can pay less. The EPD became the backdrop to a targeted U.S. effort: Use tariff threats and a Section 232 process to drive changes in foreign drug-pricing and investment policy. 

While various parties will extol the supposed benefits of the pricing deal and tout claimed “wins,” the system that allows this tradeoff to occur should give health care policy professionals pause. Fundamentally, the U.K. government leveraged its citizens’ health care system to respond to another government’s trade policy request. In other words, the U.K. government only saw fit to increase the availability of resources for necessary pharmaceutical purchases and expanded treatment options when another government – rather than its citizens or industry leaders – demanded it. 

Considerations of the EPD Pharmaceutical Package 

Financial Considerations  

In the United States, the U.S. Trade Representative (USTR), the Department of Commerce, and the Department of Health and Human Services announced an “agreement in principle on pharmaceutical pricing” with the U.K. The U.K. government rolled out its version of the “landmark U.K.-U.S. pharmaceuticals deal.”  

On the U.S. side, the key concession is straightforward: U.K.-origin pharmaceuticals, pharmaceutical ingredients, and medical technology are exempted from existing and future tariffs under Section 232, and U.S. authorities commit not to target U.K. pharmaceutical pricing practices in any Section 301 investigation for the duration of President Trump’s term. The U.K. also becomes, at least for an initial three-year period, the only country with a guaranteed 0 percent tariff rate on medicines entering the U.S. market. 

This is not trivial. The U.K. exported nearly $7 billion of pharmaceutical products to the United States in 2024; the U.K. government itself cites “at least £5 billion a year” in current exports covered by the deal, and private-sector estimates put the value of safeguarded exports nearer £11.1 billion over the past year. If the previously announced 100 percent tariff on branded drugs had been applied fully to those flows, the theoretical exposure could have run into the low tens of billions of pounds over a three-year window. The pharma chapter of the EPD removes that uncertainty for U.K. manufacturers and, more importantly, carves them out of the overall U.S. tariff strategy that still applies to other countries. 

In return, the U.K. promises a substantial domestic shift in pharmaceutical coverage and payment. The U.K. will increase the net price it pays for new medicines by 25 percent, the first increase in over 20 years. That commitment is operationalized through two main levers: 

• The National Institute for Health and Care Excellence (NICE) will raise its standard cost-effectiveness threshold from £20,000–£30,000 per Quality-Adjusted Life Year (QALY) to £25,000–£35,000 per QALY, making it easier for higher-priced drugs to clear the “value for money” bar.  
• The government will endorse a recalibration of NICE’s health-gain yardstick based on new public opinion data; the recalibration is expected to make many medicines appear more cost-effective. 

Furthermore, the U.K. government has agreed to reduce repayment rates under VPAG; the published summary commits the U.K. to bringing the VPAG payback rate down to 15 percent in 2026 and keeping it at or below that level for the life of the scheme (which runs until 2028).  

U.K. ministers tout provisions that purportedly offer opportunities for growth and access: a roughly 25 percent increase in government spending on innovative medicines, taking pharmaceuticals’ share of the NHS budget from around 9.5 percent to roughly 12 percent over time, and potentially adding £2–3 billion a year to the drugs budget once the changes are fully accounted. In exchange, they point to billions in new or revived life-sciences investments – including large commitments from Moderna, Bristol Myers Squibb and BioNTech, with Bristol Myers Squibb alone promising more than $500 million over five years. U.K. officials argue that faster NICE approvals should translate into earlier access to therapies for U.K. patients.  

Policy Considerations 

The ultimate policy outcomes of this accord are less clear. In the United States, the administration is selling the agreement as a template: get allies to raise what their public systems pay for innovative drugs, under the banner of “burden sharing,” using Section 232 tariff threats and MFN-style policies as leverage. That may lower the political temperature around domestic drug costs – if Americans believe Europe is no longer “free-riding” – but it does little to reform underlying U.S. pricing dynamics. 

For the U.K., the deal offers short-term relief on tariffs and investment anxiety in exchange for a commitment to devote more of the health budget to medicines. Whether that proves fiscally sustainable will depend on how much the promised innovation actually reduces downstream hospital and social-care costs, and how tightly Treasury insists those higher drug bills be offset within existing departmental envelopes. 

The net result is that the EPD’s pharmaceutical portion looks less like a conventional trade liberalization chapter and more like a convoluted industrial policy pricing compact. It shores up U.K. export and investment prospects and removes a destabilizing tariff threat, but at the cost of embedding U.S. pressure on foreign drug-pricing into a bilateral framework. For analysts watching the intersection of trade and health policy, the next question is obvious: Will these policy machinations lead to demonstrable or durable policy or financing changes? 

A Demonstrable Reason To Avoid Single-payer Health Care Systems 

The U.K. portion of the pharmaceuticals deal is a useful case study in how single-payer systems can be quietly repurposed to serve political priorities that have little to do with health. In the EPD framework, the NHS drugs budget and NICE’s cost-effectiveness machinery were not treated as technocratic tools for maximizing population health. They were treated as adjustable dials in a broader economic bargain: The U.K. effectively agreed to loosen domestic pricing constraints and pay more for branded medicines to avert U.S. tariffs and secure life-sciences investment. That is a rational choice from the perspective of trade and industrial strategy, but it exposes how easily a single national purchaser can be steered by pressures originating outside the health sphere. 

Because the NHS is both the dominant payer and a central line-item in the Treasury’s spending calculus, changes to its drug-pricing rules become an attractive currency in cross-cutting negotiations. Raising NICE’s QALY threshold or cutting clawback rates under schemes such as VPAG is not just about improving patient access; it is also a way to send a signal to foreign investors and trading partners that the U.K. is “open for business.” The EPD pharma chapter makes that logic explicit.. These trade policy decisions might end up still defensible on health grounds, but the timing and packaging make clear that trade leverage and industrial policy were the real drivers. 

This is where the efficiency critique of single-payer systems comes into focus. In theory, a monopsonistic purchaser should be able to buy more health per pound by exerting discipline on prices and prioritizing high-value interventions. In practice, when that purchaser is also a political actor juggling trade relationships, regional employment and fiscal rules, allocation decisions drift away from pure health maximization. A commitment to raise drug spending by, say, 25 percent as part of a trade deal may not be accompanied by commensurate increases for primary care, diagnostics, or social care, even if those sectors yield more QALYs per pound. The result is an internally imbalanced system: more generous pricing for certain branded therapies, financed by tighter constraints elsewhere in the health budget. 

Conclusion 

The United Kingdom experience illustrates how single-payer governance magnifies the impact of political shocks. When one set of central institutions controls both the reimbursement rules and the overall health envelope, a decision made at the trade table can rewire incentives across the entire system overnight. Patients, clinicians, and even health officials have limited ability to insulate core health priorities from those tradeoffs. The same ministries that negotiate tariffs and investment packages also sign off on NICE remit changes and rebate schemes. That is not unique to the U.K., but the EPD pharma deal makes it unusually visible: A national health service’s pricing architecture became a bargaining chip in a wider economic compact, underscoring how vulnerable single-payer systems are to pressures that originate far outside the realm of health policy.