The United States and Britain have finalized a zero-tariff agreement on pharmaceuticals.

Background of the agreement: Trump has repeatedly threatened to raise

Protecting Foreign Trade and Investment under Drug Tariff

Since taking office, President Trump has repeatedly threatened to impose tariffs on imported pharmaceuticals, aiming to shift the burden of higher drug development costs onto major import sources and reduce financial pressure on U.S. healthcare systems and patients. His policy of "lower prices in America, higher prices in Europe" has made the UK, now outside the EU, the first pilot market. As one of Europe's largest exporters of pharmaceuticals to the U.S., the UK's exports to America reached £11.1 billion in the 2024/25 fiscal year, accounting for 17.4% of its total exports to the United States. A potential tariff increase (previously estimated at 10%-25%) would deal a severe blow to the UK pharmaceutical industry. Although the U.S. and UK reached a preliminary trade agreement in May, promising exemptions for British medicines, the deal remains unfinalized.

U.S. pressure has intensified the dispute between the UK government and the pharmaceutical industry, with the focus on drug approvals and NHS medication costs. Over the past two years, several multinational drug companies have suspended or withdrawn investments in the UK due to the NHS's stringent cost-effectiveness assessments, which criticized flaws in the National Institute for Health and Care Excellence (NICE)' s evaluation of innovative drugs and excessive rebate rates for brand-name drugs.

For instance, UK pharmaceutical giant GlaxoSmithKline announced a $30 billion investment in the US over the next five years, while Merck scrapped its £1 billion expansion plan in the UK, and AstraZeneca suspended its £200 million investment in Cambridge.

The UK government faces a dilemma: not reforming would result in tariff penalties, while drug pricing conditions lag behind international standards, and investors may turn to more favorable environments; reforming would mean a significant increase in NHS drug spending.

[Core Terms of the Agreement]

Under the published terms, the UK has committed to:

① By raising the NICE cost-effectiveness threshold (ICER) for new drugs by 25%, an additional 3-5 high-priced innovative drugs—particularly in oncology, rare diseases, ADCs, and GLP-1 drugs—will be approved annually, which would otherwise have been rejectedhttps://www.jxserum.com/hot-product-list/.

②Over the next decade, the NHS's budget cap for drug spending will rise from the current 0.3% of GDP to 0.6%, with an estimated annual additional expenditure of £3-4 billion.

③Under the Voluntary Pricing Arrangement (VPAS), pharmaceutical companies will reduce their rebates from the current 20-25% to 15%, with the agreement extended until 2035.

In exchange, the U.S. has agreed to exempt British pharmaceuticals, raw materials, and medical technologies from Section 232 tariffs, and will refrain from initiating Section 301 investigations into UK drug pricing for at least the remainder of the Trump administration. This makes the UK the only country in the world to currently impose zero tariffs on American pharmaceuticals.

Current Situation of Drug Tariff Agreement between the United States and Major Allies

In August this year, the United States and the European Union reached their first pharmaceutical tariff agreement. Effective September 1, 2025, the U.S. will impose tariffs of up to 2.5% on generic drugs and similar products from the EU, while tariffs on original research drugs will prompt EU pharma companies to accelerate investments and production in the U.S., circumventing tariffs through "Made in America, Sold in America" strategies. Subsequently, agreements between Japan, South Korea, and the U.S. stipulated that if the U.S. imposes additional tariffs on pharmaceuticals, Japan and South Korea would face the lowest applicable rates, though the differential rates between generics and original research drugs were not specified. In November, the U.S. finalized a trade framework with Switzerland and Liechtenstein, clarifying that when Section 232 takes effect, tariffs on pharmaceuticals and semiconductors would be capped at 15%, while Switzerland and Liechtenstein would remove certain non-tariff barriers to U.S. exports.

Source: Medical Insurance Chamber of Commerce compiled the table based on public information

[Impact on the global pharmaceutical industry]

The implementation of the US-UK zero-tariff agreement on pharmaceuticals is seen as a substantial progress in Trump's "America First" trade policy on medicine, with the market expecting capital and production capacity to further concentrate in the US. Judging from the disclosed texts of the US-UK, US-EU, and US-Japan agreements, Washington is reshaping its allies' supply chains through "differentiated low tariffs," offering preferential tax rates on generic drugs and active pharmaceutical ingredients from allies. This differentiated tariff strategy poses relatively higher trade barrier risks for countries like China and India. The market widely fears that the Trump administration may impose punitive tariffs of 10%–25% on related products from China and India in the next step, or may again invoke Section 232 to exert pressure. In the short term, pharmaceutical exports will face significant international competition pressure, but in the long term, it will accelerate the global breakthrough of domestic innovative drug companies.