WASHINGTON — In a significant step toward reshaping transatlantic trade dynamics, the United States and the United Kingdom announced on Monday an agreement in principle aimed at addressing longstanding disparities in pharmaceutical pricing. The pact, unveiled as a key component of the broader US-UK Economic Prosperity Deal, commits the UK to paying higher prices for innovative medicines while securing exemptions from looming US tariffs on British drug exports. Officials from both nations hailed the move as a victory for innovation and patient access, though critics warned it could strain public health budgets on both sides of the Atlantic.
The joint statement, released by the Office of the US Trade Representative (USTR), the Department of Commerce, and the Department of Health and Human Services (HHS), emphasized the agreement’s role in correcting “long-standing imbalances in US–UK pharmaceutical trade.” Under the deal, President Donald Trump and Prime Minister Keir Starmer directed their teams to enhance the “overall environment” for pharmaceutical companies operating across borders, fostering greater investment and research collaboration. This comes amid Trump’s aggressive push to repatriate manufacturing and reduce what he has repeatedly called the “unfair subsidization” of global drug costs by American consumers.
US Trade Representative Jamieson Greer, confirmed to his post in February 2025 after serving as chief of staff to former USTR Robert Lighthizer, issued a pointed statement underscoring the inequities at play. “American patients have been forced to subsidize prescription drugs and biologics in other developed countries by paying a significant premium,” Greer said, framing the agreement as a corrective measure that “will help drive investment and innovation in both countries.” His comments reflect a core pillar of the Trump administration’s trade agenda, which has long highlighted that US spending accounts for roughly 45% of the global pharmaceutical market despite the country representing only 4% of the world’s population.
At the heart of the agreement are concrete commitments from the UK to bolster its spending on new medicines. London will increase the net price it pays for innovative drugs by 25%, reversing a decade-long decline in National Health Service (NHS) expenditures on life-saving treatments. This adjustment is projected to add approximately £3 billion annually to NHS drug costs by 2035. Additionally, the UK has pledged to cap repayment rates under its Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) at 15% starting in 2026—down from the current 22.9% for newer medicines in 2025—preventing portfolio-wide rebates from eroding the higher prices.
In return, the US has granted the UK unprecedented exemptions from Section 232 national security tariffs and future Section 301 investigations targeting pharmaceutical pricing practices, effective through the remainder of Trump’s term. This zero-tariff status safeguards a vital export sector worth billions to Britain’s economy. Pharmaceuticals have historically been largely duty-free under World Trade Organization rules since 1994, but the Trump administration has used tariff threats as leverage to renegotiate terms.
Commerce Secretary Howard Lutnick, the former CEO of Cantor Fitzgerald who assumed his cabinet role in February 2025, described the accord as “a major win for American workers and our innovation economy.” Speaking from Washington, Lutnick highlighted how the deal would “strengthen supply chains, create high-quality jobs, and reinforce America as the world’s premier hub for life-sciences investment.”
The pharmaceutical pricing agreement builds on the foundational US-UK Economic Prosperity Deal (EPD), announced on May 8, 2025—eighty years to the day after Victory in Europe Day—as a framework for reciprocal trade and economic security. That initial pact stemmed from a February 2025 summit between Trump and Starmer and was designed to mitigate the impact of sweeping US tariffs imposed under the International Emergency Economic Powers Act, including a baseline 10% levy on most imports. Negotiations accelerated through the spring and summer, culminating in expansions into technology and agriculture that secured £150 billion in pledged US investments in the UK.
For the UK, the deal represents a delicate balancing act. Starmer’s government, under pressure from a resurgent Reform UK party led by Nigel Farage, has positioned the EPD as proof that Brexit enables faster, more flexible bilateral agreements than were possible inside the European Union. A government statement called the pharmaceutical component a “milestone” that would accelerate access to breakthrough cancer therapies and rare-disease drugs by reforming the valuation framework used by the National Institute for Health and Care Excellence (NICE). The NHS currently spends just 0.3% of GDP on innovative medicines—half the European average—and plans to double that share over the next decade.
Industry leaders expressed cautious optimism. The Association of the British Pharmaceutical Industry noted that the pact would enhance patient access and attract global investment, potentially reversing recent decisions such as AstraZeneca’s paused London laboratory and Eli Lilly’s public criticism of UK pricing as “the worst in Europe.” Bristol Myers Squibb CEO Chris Boerner announced plans for up to $500 million in new UK investments over five years, citing the improved environment created by the agreement.
Yet the deal has drawn sharp criticism. In the UK, Labour backbenchers and NHS campaigners decried the added £3 billion annual cost as a “cave-in” to Trump that will divert funds from doctors, nurses, and generic medicines. In the United States, progressive lawmakers and consumer groups questioned whether the agreement will actually lower domestic drug prices or simply protect corporate revenues while leaving uninsured patients facing the same high costs.
The timing of the announcement underscores the EPD’s evolution from a tariff shield into a broader strategic alliance. With Trump pressing forward on his second-term agenda and Starmer navigating post-Brexit realities, this pharmaceutical agreement signals a new phase of “America First” diplomacy—one in which drug pricing, not just steel or cars, has become a central lever in the special relationship.
