The United Kingdom and the United States are on the brink of concluding an innovative new trade deal. This agreement aims to eliminate tariffs on pharmaceuticals. Now, major pharmaceutical companies such as AstraZeneca and GSK have reinvested multi-billion-dollar sums into the US. This striking development serves to remind us about the difficult climate the industry operates in within the UK.
AstraZeneca’s announcement represents an astonishing $50 billion investment in medicine manufacturing capacity and R&D in the US. In a like manner, GSK recently committed $30 billion to an R&D and manufacturing transition over five years. These investments represent the growing importance of the U.S. market for these companies. Many see the US as their biggest market — so they’re all in.
The UK has been suffering for years from a slow haemorrhage of pharmaceutical investment. Merck recently shelved its proposed £1 billion expansion of its operations in the UK. This decision is part of a larger trend, with ten other large pharmaceutical investments having been paused or cancelled in the last 18 months. In addition to regulatory harmonization, this shift has implications for the future of the pharmaceutical sector in the UK.
Over the last 12 months, the UK has sold an astonishing £11.1 billion worth of medicines to the US. This figure now accounts for 17.4% of all UK goods exported to that country. This trade relationship is extremely important. Both countries are deeply engaged in shaping their respective ecosystems to ensure pharmaceutical companies have every incentive to be successful.
The UK is serious about deepening this relationship. It intends to increase that price limit for new treatments found to be unaffordable by 25%. This switch is part of a broader play to increase NHS spending on drugs. Their aim is to increase that spending from 0.3% of GDP to 0.6%, gradually over the next ten years. Over the past decade, the NHS has successfully cut its spending on drugs as a share of its total spending. Unfortunately, this decline has led to an equally loud outcry for reform.
This latest anticipated trade agreement is supposed to remove threatened tariffs on drugs completely. This amendment will ensure an even friendlier playing field for drugmakers. In June, former President Donald Trump signed a similar deal with the UK. This pact would focus on removing other trade obstacles and reducing duties on nearly all products imported to the US to 10%, setting the stage for a third, more comprehensive agreement.