WASHINGTON/LONDON, Dec 1 — The United States and Britain announced a deal on Monday to secure zero tariffs on British pharmaceutical products and medical technology in return for Britain spending more on medicines and overhauling how it values drugs.

Under the agreement, Britain will raise the net price it pays for new U.S. medicines by 25%. In return, UK-made medicines, drug ingredients and medical technology will be exempt from Section 232 sectoral tariffs and any future Section 301 country tariffs.

“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,” United States Trade Representative Jamieson Greer said in a statement.

UK Changes System for Assessing if Drugs Are Cost-Effective

The deal includes a significant change to the value appraisal framework at NICE, the UK body that determines whether new drugs are cost-effective for the NHS.

NICE’s “quality-adjusted life year” threshold, currently 30,000 pounds ($39,789) per year, will rise to 35,000 pounds.

The British government said the change to NICE would let it “keep pace with the commercial and economic environment in which pharmaceutical companies are operating in today.”

The revised framework will apply to all new medicines, not just U.S. drugs, but will not affect prices of existing treatments.

NICE has often rejected coverage of new, expensive drugs through the NHS, for example Eli Lilly’s Alzheimer’s drug and AstraZeneca’s breast cancer treatment Enhertu.

British pharmaceutical industry group ABPI said the deal would help British patients access new medicines and help attract investment from drugmakers.

Shares in UK-based drugmakers GSK and AstraZeneca were broadly unchanged on the agreement. The UK is a very small market for the pharmaceutical industry, making up just 2% of AstraZeneca’s total revenue for instance.

GSK welcomed the deal, saying “these good foundations, offer a real opportunity to secure the UK as an attractive global-leading environment for life sciences that rewards long-term innovation.”

U.S. President Donald Trump has pressed Britain and the rest of Europe to pay more for American medicines, part of his push for U.S. medicine costs to be brought more in line with those paid in other wealthy nations.

The industry has criticised a tough operating environment in Britain and some major firms have cancelled or paused investment in Britain, including AstraZeneca, the largest firm on the London Stock Exchange by market value.

One point of contention between the sector and the government has been the operation of a voluntary pricing scheme which sees firms put a proportion of sales to the NHS back into the health service.

The office of the USTR said Britain had committed that the rebate rate would decrease to 15% in 2026.

Drugmaker Bristol Myers Squibb Chief Executive Chris Boerner said in a statement released by the UK government that Britain’s commitments on investment in innovative medicines under the deal meant “BMS anticipates being able to invest upwards of $500 million over the next 5 years.”

“This agreement is a sign of progress and one that creates an environment conducive to our continued presence in the UK,” he said.

The British Chambers of Commerce welcomed the deal, saying “pharmaceuticals make up a fifth of all UK exports to the U.S. by value, and the UK now has a deal which few others have achieved, giving us a distinct advantage.”

US Looks To Solidify Framework Trade Deals

The breakthrough comes after the two countries agreed in May to seek “significantly preferential treatment outcomes on pharmaceuticals”, with a commitment that Britain tries to improve the environment for pharma firms operating in the country.

It concludes talks on a major unresolved issue after Britain became the first country to secure tariff relief on some other sectors in May.

Ryan Majerus, a partner with the King & Spalding law firm, said the U.S. government was racing to complete as many detailed trade agreements as possible and refine previously agreed framework deals before the Supreme Court rules on a case that challenges the legality of Trump’s sweeping tariffs imposed against nearly every country.

A decision by the highest U.S. court is expected later this year or early next.

The Trump administration has already said it will use other legal authorities, including Section 232 of the 1962 Trade Expansion Act and Section 301 of the Trade Act of 1974 to replace tariffs that might be invalidated under a Supreme Court ruling.

“The more they can lock in countries in deals, the better for them,” Majerus said. “The more definitive these deals are, the harder it is for countries to come and say, ‘We don’t like our deal. We want it ripped up and you don’t have the authority to impose these tariffs'”.

($1 = 0.7540 pounds)

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(Reporting by Maggie Fick and Alistair Smout in London, Andrea Shalal in Washington, additional reporting by Sam Tabahriti in London, Susan Heavey and Caroline Humer in Washington. Editing by Bernadette Baum, Frances Kerry and Louise Heavens)