NHS faces paying more for US drugs to avoid future Trump tariffs

Yahoo

6 hours ago

Britain faces paying more for US drugs as part of a deal to avoid future tariffs from Donald Trump.
The NHS will review drug pricing to take into account the 'concerns of the president', according to documents released after a trade agreement was signed earlier this year.
White House sources said it expected the NHS to pay higher prices for American drugs in an attempt to boost the interests of corporate America.
A Westminster source said: 'There's an understanding that we would look at the drug pricing issue in the concerns of the president.'
The disclosure is likely to increase concerns about American interference in the British health service, which has long been regarded as a flashpoint in trade talks.
It comes after Rachel Reeves announced a record £29 billion investment in the NHS in last week's spending review. The Chancellor's plans will drive spending on the health service up towards 50 per cent of all taxpayer expenditure by the mid-2030s, according to economists at the Resolution Foundation.
The Telegraph has also learnt that under the terms of the trade deal with America, the UK has agreed to take fewer Chinese drugs, in a clause similar to the 'veto' given to Mr Trump over Chinese investment in Britain.
The White House has asked the UK for assurances that steel and pharmaceutical products exported to the US do not originate in China, amid fears the deal could be used to 'circumvent' Mr Trump's punishing tariffs on Beijing.
Mr Trump is enraged by how much more America pays for drugs compared with other countries and considers it to be the same issue as he has raised on defence spending.
Just as the US president has heaped pressure on European nations to increase the GDP share they allocate to defence, he thinks they should spend more on drug development.
An industry source said: 'The way we've been thinking about it and many in the administration have been thinking about it, it's more like the model in Nato, where countries contribute some share of their GDP.'
Britain and the US 'intend to promptly negotiate significantly preferential treatment outcomes on pharmaceuticals and pharmaceutical ingredients', the trade deal reads.
Pharmaceutical companies are also pushing for reductions in the revenue sales rebates they pay to the NHS under the voluntary scheme for branded medicines pricing, access and growth (VPAG) – a mechanism that the UK uses to make sure the NHS does not overpay.
Last week, Albert Bourla, Pfizer's chief executive, said non-US countries were 'free-riding' and called for a US government-led push to make other nations increase their proportionate spend on innovative medicines.
He said White House officials were discussing drug prices in trade negotiations with other countries. 'We represent in UK 0.3pc of their GDP per capita. That's how much they spend on medicine. So yes, they can increase prices,' Mr Bourla said.
Industry sources said there was no indication yet on what the White House would consider to be a fair level of spending.
Whatever the benchmark, Britain will face one of the biggest step-ups. UK expenditure on new innovative medicines is just 0.28pc of its GDP, roughly a third of America's proportionate spending of 0.78pc of its GDP.
Even among other G7 nations, the UK is an anomaly. Germany spends 0.4pc of its GDP while Italy spends 0.5pc.
Most large pharmaceutical companies generate between half and three quarters of their profits in the US, despite the fact that America typically makes up less than a fifth of their sales. This is because drug prices outside of the US can cost as little as 30pc of what Americans pay.
Yet, pharmaceutical companies rely on higher US prices to fund drug research and development, which the rest of the world benefits from.
A month ago, Mr Trump signed an executive order titled 'Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients', which hit out at 'global freeloading' on drug pricing.
It stated that 'Americans should not be forced to subsidise low-cost prescription drugs and biologics in other developed countries, and face overcharges for the same products in the United States' and ordered his commerce secretary to 'consider all necessary action regarding the export of pharmaceutical drugs or precursor material that may be fuelling the global price discrimination'.
Trung Huynh, the head of pharma analysis at UBS, said: 'The crux of this issue is Trump thinks that the US is subsidising the rest of the world with drug prices.
'The president has said he wants to equalise pricing between the US and ex-US. And the way he wants to do it is not necessarily to bring down US prices all the way to where ex-US prices are, but he wants to use trade and tariffs as a pressure point to get countries to increase their prices.
'If he can offset some of the price by increasing prices higher ex-US, then the prices in America don't have to go down so much.'
Mr Huynh added: 'It's going to be very hard for him to do. Because [in the UK deal] it hinges on the NHS, which we know has got zero money.'
Under VPAG, pharmaceutical companies hand back at least 23pc of their revenue from sales of branded medicines back to the NHS, worth £3bn in the past financial year.
The industry is pushing for this clawback to be cut to 10pc, which would mean the NHS would have to spend around 1.54bn more on the same medicines on an annual basis.
The Government has already committed to reviewing the scheme, a decision which is understood to pre-date US trade negotiations.
A government spokesman said: 'This Government is clear that we will only ever sign trade agreements that align with the UK's national interests and to suggest otherwise would be misleading.
'The UK has well-established and effective mechanisms for managing the costs of medicines and has clear processes in place to mitigate risks to supply.'