The UK government has agreed with the US to pay more for innovative pharmaceuticals. In return, the UK secured zero tariffs on pharmaceuticals and ingredients it exports to the US, for at least three years.
The US had threatened a 100% levy on branded medicines from the UK. As part of the deal, the UK will raise the thresholds used by the National Institute for Health and Care Excellence (Nice) when evaluating the health benefits of new medicines. The National Health Service (NHS) in the UK will pay substantially more for medicines as a result.
The Association of the British Pharmaceutical Industry (ABPI) welcomed the deal as good for industry. The government said it would invest around 25% more in effective treatments, describing it as the first major increase in over 2 decades. The deal will ensure UK patients get cutting-edge medicines sooner and ‘enable and incentivise life sciences companies to continue to invest and innovate right here in the UK,’ said Liz Kendall, the UK science and technology secretary.
The UK will also reduce repayments by companies selling to the NHS. It will place a cap of 15% on the rebates that drug companies must pay when sales of branded medicines exceed defined levels – presently firms must repay 23.5% of sales above the threshold.
In a statement the ABPI said the moves will address an underinvestment in medicines, which as a proportion of health spending in the UK fell from about 14% to 9%. Over the next decade, investment in new medicines will rise from around 0.3% to 0.6% of GDP, noted the industry lobby group.
Some, however, are more critical of the deal. ‘It is unclear what the UK is getting out of this, since we will be paying possibly £3 billion more per year,’ to avoid tariffs on around £6 billion worth of exports, says James Lomas, a health economist at the University of York, UK. ‘We’ve called for more transparency because the costs are staggering.’
The £3 billion figure comes from an Office for Budget Responsibility forecast, although the UK government has said that it expects the bill to be around £1 billion per year by 2029.
The deal follows high-profile investment cancellations and pauses by pharmaceutical firms in the UK. AstraZeneca earlier this year scrapped a £450 million investment in a vaccine facility in Liverpool, and then announced it would pause a planned £20 billion research investment in Cambridge. In September, Merck & Co said it would scrap an expansion of research operations in London, all part of belt-tightening amongst pharmaceuticals. When questioned by the UK government, industry representatives raised complaints about the declining NHS drugs budget and Nice’s cost-effectiveness thresholds.
The agreement will see a major shift in how Nice calculates cost-effectiveness. Typically, a drug should generate one year of perfect health (a quality-adjusted life year, or Qaly) for no more than £20,000 to £30,000 over the cost of current care. The threshold will now rise to between £25,000 and £35,000. In a statement, Nice said that the rise means it will recommend perhaps an additional 3–5 new medicines or indications a year. Nice said it presently recommends around 91% of the medicines it evaluates – about 70 each year.
Others view existing thresholds as already excessive. ‘Over time, approvals have moved closer to the £30,000 than the £20,000 end,’ says Lomas, ‘and there’s all sorts of exceptional schemes where higher thresholds can apply, which are increasingly used.’ Rather than increase this rate, Lomas says empirical evidence suggests that the existing bands are already too high, and suggests there would be a greater improvement in overall population health from spending the money on extending existing NHS services.
In a statement welcoming the new arrangement, the US government said that for too long ‘American patients have been forced to subsidise prescription drugs in other developed countries by paying a significant premium for the same products in ours.’ It said the Trump administration was reviewing pricing practices in many other trading partners. Other countries are now expected to come under pressure to change how much they pay for medicines.
Lomas says that ‘the US is paying too much for drugs, but that doesn’t mean that other countries aren’t paying too much.’ The extra the NHS is going to pay ‘isn’t justified and ultimately isn’t going to benefit US consumers much,’ he adds.
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