U.S. President Donald Trump (left) and British Prime Minister Keir Starmer. EPA=Yonhap News

The Donald Trump administration in the United States announced on the 1st (local time) that an agreement in principle has been reached with the United Kingdom regarding pharmaceutical prices.

In a press release on the same day, the U.S. Trade Representative (USTR) stated, "Under the historic U.S.-UK Economic Prosperity Partnership (EPD), President Trump and British Prime Minister Keir Starmer have agreed to address the long-standing imbalance in pharmaceutical trade between the two countries by improving the overall environment for operations in the UK."

According to the USTR, under the agreement announced today, the UK plans to reverse the trend of declining National Health Service (NHS) spending on innovative and life-saving medicines over the past decade and increase the net price for purchasing new drugs by 25%.

The USTR also stated that the UK has committed to reducing the rebate rate paid by pharmaceutical companies to the NHS to 15% next year, and to maintain it at or below that level thereafter, in accordance with the UK's Voluntary Scheme for Branded Medicines Pricing and Access (VPAG).

Bloomberg News explained that the existing rebate rate is approximately 23%.

The USTR announced, "In return for these commitments, the United States has agreed to exempt UK pharmaceuticals, pharmaceutical raw materials, and medical technologies from Section 232 tariffs under the Trade Expansion Act, and will not target the UK's pharmaceutical pricing practices in Section 301 investigations during President Trump's term."

This means the U.S. will not impose item-specific tariffs on UK pharmaceuticals.

Bloomberg assessed the agreement as "finalizing issues that remained unresolved in the U.S.-UK trade agreement reached early in President Trump's trade war."

In a press release, USTR Representative Jamie Greene said, "For too long, American patients have been forced to subsidize prescription drugs and biologics in other developed countries by paying significant markups for the same products," adding, "The Trump administration is reviewing the pharmaceutical pricing practices of many other trading partners and hopes they will follow suit through constructive negotiations."

U.S. Secretary of Commerce Howard Lutnick stated, "Today's agreement is a major victory for American workers and our innovation economy," and added, "We are strengthening supply chains, creating quality jobs, and solidifying America as a global hub for life sciences investment."

Yonhap News