The government is poised to agree a major pharmaceuticals deal with Washington, which will mean zero import tariffs on pharmaceutical products into the US and lead to an increase in NHS medicines spending.
The deal follows months of protracted negotiations between the government and the Trump administration, amid intense criticism and pulled UK investments from multinational drugs companies.
Under the agreement, expected to be announced over the coming days, the government is understood to have agreed to lower an industry sales rebate rate on NHS drug prices and to also improve the NHS’s cost-effectiveness measure for drugs, according to industry sources.
The so-called “quality-adjusted life year” (qualy) tracks the cost of a treatment for every healthy year it delivers for a patient, and its upper threshold is £30,000 per year. The measure is used by the National Institute for Health and Care Excellence (Nice) when deciding whether to recommend a new drug. The threshold is set to be increased by about 25 per cent.
The government will commit to increasing the percentage of the NHS budget that it spends on medicines, the sources said.
• Big pharma set to pull investment unless NHS spends more on drugs
The negotiations have been led by Varun Chandra, the prime minister’s chief business adviser, and Lord Vallance, the science minister and former GSK executive.
The Trump administration is seeking to align the cost of medicines in the US closer to other developed economies, including the UK, where they are cheaper, in the face of tariff threats.
Alongside the bilateral government negotiations, the pharma industry Washington and Westminster have been speaking to the pharma industry.
• NHS failure to pay more for drugs ‘is killing patients’
The deal could potentially lead to an improvement in relations between industry and the government which has been highly critical of the commercial environment in the UK.
The US ambassador stepped up warnings last month when he said that pharmaceutical companies will close facilities in the UK unless changes to drug prices are made quickly.
AstraZeneca, Britain’s biggest drugs company, was among a group of multinationals which in September paused or scrapped investments in the UK. Eli Lilly suspended part of a planned investment in a biotech innovation hub in London, Merck, known as MSD in Europe, ended a £1 billion London research centre investment and AstraZeneca paused a £200 million expansion of its headquarters in Cambridge.
AstraZeneca was also among the first of multinationals to agree a separate direct agreement drug pricing deal with the Trump administration.
The industry has become exasperated by the high cost of the NHS drugs pricing scheme, called the voluntary scheme for branded medicines, pricing, access and growth (Vpag).
It is designed to cap NHS drug expenditure while also encouraging the industry to innovate.
Talks over reforming the scheme between the Association of the British Pharmaceutical Industry and the health department had ended in August after Wes Streeting, the health secretary, gave an ultimatum to accept the government’s “generous proposal”.
Following the industry backlash, Vallance told MPs in September that the UK needed to increase its spending on NHS medicines, and the Vpag negotiations became part of the broader tariff negotiations between the government and US.