UK hikes drug prices after pharma exodus

Under a newly disclosed agreement with the US government, the UK is permitting price increases demanded by pharma firms, in defiance of the recommendations of the pricing watchdog National Institute for Health and Care Excellence (NICE). In return, the US will forgo 10% punitive tariffs on British pharma imports for three years.

As a consequence of the deal, the rebate payable by pharma firms to the National Health Service (NHS) will drop from 23.5% to 15% between 2026 and 2028. Previously, the British industry lobby Association of the British Pharmaceutical Industry (ABPI) had criticised restrictive UK pricing rules for delaying access to new medicines and discouraging pharma investments.

All in all, however, this is a false economy — those companies have already redirected their withdrawn investments into the US, thereby allowing other non‑US manufactured products to enter the US tariff‑free under “most‑favoured‑nation” rules.

For British citizens, the agreement means that patented medicines will become roughly 25% more expensive, because NICE’s cost–effectiveness evaluation is being overruled. Under the previous criteria, a drug was considered cost‑effective if it cost less than £20,000–£30,000 per “quality‑adjusted life year”. NICE is now required to raise that threshold by £5,000, ostensibly allowing three to five new innovative medicines to be reimbursed each year. ABPI‑CEO Richard Torbett hailed this as a major boon for patients — and even left open the possibility that Big Pharma might begin reinvesting in the UK.

Previously, to avoid US pharma tariffs, British firm AstraZeneca plc pledged US$50bn for new production facilities in the USA; GlaxoSmithKline (GSK) committed US$30bn. As a result of the previously restrictive UK pricing and reimbursement conditions, several major pharma companies withdrew or paused investments in the country this year: AstraZeneca shelved projects worth roughly £650m, Merck & Co. cancelled developments worth about £1bn, and Eli Lilly and Company retracted promised investments totaling approximately £279m.

In the EU a similar agreement would be inconceivable — not least because cost‑reimbursement is governed centrally under EU‑HTA rules.