UK pharma gets a festive boost with US tariff-free deal

As kids woke to naughty elves on their shelves on 1 December, ministers also provided UK-based pharmaceutical companies a shot-in-the-arm behind door #1 of their advent calendars.

The UK government announced on Monday, 1 December 2025, that it was overhauling the way in which the NHS acquires UK branded medicines known as the 'value-for-money' rules. The measures, which essentially sees the UK government increasing investment, and thus prices, by up to 25%, has the significant knock-on effect of not just avoiding the 100% tariffs which the US has threatened to impose but carving the way to a new three-year 0% tariff arrangement on US-imported UK medicines as part of the UK-US Economic Prosperity Deal (the first of its kind with any country). The deal also extends to UK medtech exports, ensuring no additional new tariffs ought to be imposed. The measures also reduce the clawback tax that pharmaceutical companies pay the NHS from 23% to 15%.

Given the recent news of leading pharma companies, publicly pausing or withdrawing their investment plans in the UK, this long-term commitment by both the UK and US governments is hoped to reverse that trend and reinstate the UK as a top destination for investment, R&D and growth.

The UK government has confirmed that their investment, the first major increase in over two decades, should ensure the National Institute for Health and Care Excellence (NICE) can more quickly approve certain medicines even where, historically, they have been declined on cost effectiveness grounds. Consequently, it is hoped NICE can keep pace with the rapid evolution of innovative therapies that are being developed in areas such as oncology and neurology.

In response to the announcement, the US government has confirmed that the UK has secured mitigations under the US’ ‘Most Favoured Nation’ (MFN) drug pricing policy. This has resulted in certain industry bosses, like Bristol Myers Squibb Board Chair and CEO, Chris Boerner, confirming that they anticipate investing in UK R&D and manufacturing over the next five years.

Rob Newman, a DLA Piper UK corporate partner specialising in the Life Sciences sector, commented: “this milestone deal is just the tonic for the UK life sciences industry. Whilst many organisations have sought to soften the various macroeconomic and political blips which seem to regularly impact ordinary course trading, having a long-term tariffs position confirmed by the White House offers a welcome period of stability to allow UK pharma and medtech businesses to reconsider and hopefully turbo-charge their investment strategies. The UK Government's concessions, both in terms of pricing and the clawback tax, demonstrate their commitment to their 10 Year Health Plan and underpins the sector as being a key driver for UK growth. But, as with any good ecosystem, hopefully the real winner of these measures in the long run are NHS patients, who historically have been unable to access these novel medicines on a relatively simplistic pricing equation. I look forward to supporting our UK-based life sciences clients and welcome any conversations which drive investment into our thriving life sciences community.”

Kirsten Axelsen, a US Senior Policy Advisor at DLA Piper specialising on drug pricing and access for multinational life sciences firms commented: “Multinational biopharmaceutical companies invest in markets where there is a reimbursement opportunity or where drug development and manufacturing can be accomplished safely at a lower cost. Investment in the biopharmaceutical industry has waned in Europe, which was a leader in drug development and manufacturing only 10 years ago, now supplanted by China, which is becoming a leader in R&D for innovative medicines. This agreement, relieving the UK of tariffs on exported pharmaceuticals to the US, can help to preserve incentives to invest in clinical trials and drug manufacturing in the UK. For the first time, in recognition of the need to adequately pay for the value of biopharmaceutical treatments, US biopharmaceutical trade policy is connected to drug value assessment and reimbursement. Currently, due to restrictive pricing and reimbursement methods, patients in the UK don’t get access to roughly half of the medications approved in the EU, or they have to wait more than a year for access in the national health system after a medicine is approved. Changing the value assessment and pricing approach, may not only support the biopharmaceutical manufacturing industry in the UK, but can also help to increase access to care.”

DLA Piper is a global law firm with significant US and UK life sciences practices. We regularly advise companies on their ambitious growth strategies (organic and inorganic), supply chain sustainability and due diligence (including pricing and tariffs), regulatory compliance, clinical trials and contentious matters.