The UK has agreed to pay 25% more for new medicines by 2035 as part of a US-UK drug pricing deal that will cost an estimated additional £3bn a year.
The transatlantic agreement will also see the health service in England, which currently spends £14.4bn a year on innovative therapies, double the percentage of GDP it allocates to buying such products, from 0.3% to 0.6% over the next decade.
However, ministers have been accused of caving in to US demands to spend billions of pounds a year extra on drugs supplied to the NHS after pressure from Donald Trump.
The Liberal Democrats branded the deal “a Trump shakedown of the NHS”.
Helen Morgan, the party’s health spokesperson, said: “Trump demanded these pay rises to put Americans first and our government rolled over. Patients stuck on crammed hospital corridors or unable to get an ambulance won’t forget it.”
NHS leaders backed the government’s assessment that the “landmark” agreement will prove worthwhile because it will lead to tens of thousands of patients receiving groundbreaking new drugs.
But they also warned that the NHS receives too little funding to absorb the costs involved and that budgets for care, services and treatment must not be raided.
“It is not yet clear how it will be paid for. There is absolutely no slack in current published NHS spending plans for this major commitment and that is a real worry from trust leaders,” said Daniel Elkeles, the chief executive of hospitals group NHS Providers.
Dr Andrew Hill, an expert on the drugs industry at the University of Liverpool, said the deal would see the NHS paying more money for the same amount of treatments. “Wes Streeting, the health secretary, has agreed to give drug companies 25% more for the same drugs we were already buying. NHS funding is limited, so if we have to pay higher drug prices, this means less money for doctors, nurses, ambulances [and] simple procedures which can save lives cheaply, using low-cost generic drugs,” he said.
Ministers said the “milestone” deal would also help boost the pharmaceutical industry in the UK, which has recently paused or scrapped several major planned investments in protest at the government’s approach to drug pricing.
They also hailed the fact that the £6.6bn a year of UK-made drugs exported to the US will now escape, at least for the next three years, the hugely punitive 100% tariffs Trump had threatened on medicines made outside America. He has pledged to lower the cost of drugs in America, which are the highest in the world, and force countries to pay more for US-made medicines.
The deal will also see the National Institute for Health and Care Excellence (Nice) increase the amount it is happy for the NHS to spend on potentially life-extending drugs, from £20,000 to £30,000 a year for every year of life gained to £25,000 to £35,000 – the first increase in the watchdog’s quality-adjusted life year formula since it was set up in 1999.
The change should allow Nice to approve between three and five more drugs a year, on top of the 70 it usually deems good value for money. They are likely to include newly developed treatments for cancer and rare conditions that currently exceed spending thresholds.
Whitehall sources disputed the Liberal Democrats’ claim that ministers had rolled over in the face of US pressure.
“Unlike when the Lib Dems rolled over to Andrew Lansley [over the NHS reorganisation in 2010-12], we have protected the NHS. This will not be paid for out of budgets for NHS services,” an aide to Streeting said.
Sources claimed that the NHS had received hundreds of millions of pounds in the comprehensive spending review earlier this year to cover the costs of the deal in its early years, meaning the service would not have to cut spending elsewhere to pay for innovative medicines.
They conceded, however, that the costs will rise in the years ahead and the issue of who pays would need to be settled during the next spending review.
“The deal is an important step towards ensuring patients can access innovative medicines needed to improve wider NHS health outcomes,” said Richard Torbett, the chief executive of the Association of the British Pharmaceutical Industry.
Most pharmaceuticals have been exempt from trade tariffs under World Trade Organization rules since 1994, but Trump turned a blind eye to the agreement earlier this year as part of a bid to repatriate drug manufacturing and innovation to the US from countries such as Ireland, which he said had stolen the US pharma sector.
The deal will also bring changes to a longstanding drugs-purchasing agreement with the NHS, which industry leaders have argued is uncompetitive, discourages investment and needs reform.
The deal comes six months after the original tariff deal struck by Starmer and Trump, which promised “preferential treatment” for UK pharma.
Pressure on the UK for NHS procurement reform has intensified in recent months, with drugmakers including Merck and AstraZeneca pausing or cancelling investment in the UK, citing the economic climate and lack of support for the life sciences industry.
Last month the US ambassador to the UK, Warren Stephens, said further businesses would axe future investments if “there are not changes made and fast”.
At the heart of the new UK-US deal is an agreement to lower a so-called “rebate” under the medicines payment arrangements between drug companies and the NHS.
Under the current scheme, drug companies are required to pay the NHS between 23.5% and 35.6% of revenue from sales of branded medicines, if the amount the public health service uses is higher than an agreed rate.
This will be reduced to 15% under a new rebate in the existing voluntary scheme for branded medicines pricing and access.
This guarantees a continued suppressed price for branded drugs should demand exceed the annual cap.
Similar schemes exist in other European countries, but the average rates are far lower, ranging from 9% for Ireland and 7% for Germany.
Negotiations have been led by Varun Chandra, the prime minister’s chief business adviser, and Patrick Vallance, the science minister and former head of research and development at GSK.
