The United States and Britain announced a deal on Monday in which Britain would avoid potential tariffs on drug exports by agreeing to spend more on certain medicines for its national health service.
For months, President Trump and top officials in his administration have been complaining that wealthy European countries like Britain pay too little for medicines, forcing the United States to shoulder an unfair share of the costs of drugs.
“For too long, American patients have been forced to subsidize prescription drugs and biologics in other developed countries by paying a significant premium for the same products in ours,” Jamieson Greer, the U.S. trade representative, said in a news release announcing the deal.
Under the deal with the United States, Britain would pay 25 percent more for new medicines.
Britain decides whether to pay for new drugs through a complex formula that sets cost thresholds based on how much benefit a drug provides versus its price. These thresholds have been frozen for more than two decades, despite pressures from drugmakers and some patient advocates for them to be raised. But the threat of U.S. tariffs and drugmakers retreating from Britain have spurred a change.
To set Britain’s thresholds, health economists calculate how many years of good health — so-called quality-adjusted life years — a drug can be expected to provide, factoring in side effects and symptoms. Until now, for most drugs, Britain has estimated that medicines should cost 20,000 to 30,000 pounds (about $26,500 to $40,000) for each such healthy year. The body that sets the threshold will typically refuse to recommend that the health service pay for a drug if a pharmaceutical company won’t lower its price below that threshold.
The British government said that increase reflects new thresholds, of £25,000 to £35,000 per healthy year, and a change in the measures used to value the health-related quality of life.
“This vital deal will ensure U.K. patients get the cutting-edge medicines they need sooner, and our world-leading U.K. firms keep developing the treatments that can change lives,” said Liz Kendall, Britain’s secretary of state for science, innovation and technology.
Britain already had a higher threshold for what it was willing to pay for drugs for severe conditions like cancer that have been at the center of debates about high costs. That cutoff was up to £51,000, depending on the severity.
Britain sometimes refuses to cover drugs if a drugmaker refuses to lower its price. For example, last year Britain declined to cover a drug, Enhertu, for people with a type of metastatic breast cancer with low levels of the HER-2 protein, even though the drug has been shown to extend those people’s lives. Advocates for people with breast cancer have said the bar for coverage is too high.
Brand-name drug prices in the United States are three times as high, on average, as those in peer nations. It is difficult to compare the prices the British government pays for drugs with those paid by American employers, insurers and U.S. government health insurance programs, because the final prices after discounts are kept secret.
In Britain, a majority of drug costs are covered by the National Health Service. Some people pay nothing at all for their prescriptions, while others face small out-of-pocket costs of under £10 per prescription. In some cases, as with popular obesity drugs, which are not covered for most overweight people, patients buy the drug at a pharmacy at full price.
In May, Mr. Trump issued an executive order calling on his administration to, among other actions, address any foreign government policies “forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development.”
Mr. Greer suggested that similar deals with other countries could follow. “The Trump administration is reviewing the pharmaceutical pricing practices of many other U.S. trading partners and hopes that they will follow suit with constructive negotiations,” he said.
Trump officials have said they see higher drug prices in Europe as a crucial way to lower prices in the United States, without denting drug company revenues and jeopardizing new treatments.
For months, Mr. Trump has been threatening to impose tariffs on imported medicines, and though he has not followed through on those threats, British officials have sought reassurances that their companies would get preferential treatment as part of a broad trade agreement in May.
The largest, AstraZeneca, a multinational drug company with headquarters in Britain and Sweden, in October secured a three-year reprieve from any pharma tariffs Mr. Trump might impose. Other major drugmakers like Pfizer, Eli Lilly and Novo Nordisk recently secured the same exemption.
Britain’s pharmaceutical manufacturing sector is important to its economy, though it makes only a small share of the world’s overall supply of medicines. The world’s most important hubs for drug production include India, China, the United States and Ireland. Britain makes active ingredients for about 2 percent of medicines sold in the United States, according to U.S. Pharmacopeia, a nonprofit that tracks the drug supply.
Pharmaceutical companies share Mr. Trump’s view that European countries like Britain are paying too little for medicines and the companies stand to profit from the change. The British government has been trying to end a standoff with these companies over how much it is willing to pay for drugs. The British government has spent months in negotiations with drugmakers about pricing, including whether to lower a special rebate that companies pay to the health service for branded medicines to limit government overspend. That rate climbed to about 23 percent. Under the deal announced on Monday, that rate would be lowered to 15 percent next year.
“These commitments begin to address industry concerns on N.H.S. access to medicines, and the U.K.’s record-high and unpredictable payment rate,” Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry, said in a statement. A “great many details” remain to be worked out, he added.
This year, several major companies, including AstraZeneca, Eli Lilly and Merck, have pulled back on investments in Britain, arguing that the country has become a less lucrative place to do business.
In September, Merck, known as MSD in Europe, said that it would abandon plans to build a new lab in London, which was already under construction. Though it was part of a global restructuring, Ben Lucas, the managing director at MSD in Britain and Ireland, told British lawmakers that “the U.K. commercial operating environment needs to be addressed.” Dave Ricks, chief executive of Eli Lilly, told The Financial Times that Britain was “probably the worst country in Europe” for drug prices, from the perspective of pharmaceutical companies.
AstraZeneca has scrapped plans to upgrade a vaccine manufacturing site in Liverpool and a research lab in Cambridge. Instead, the company has emphasized large new investments in the United States, including a new manufacturing plant in Virginia and a $2 billion expansion in Maryland.
One major frustration is the percentage of Britain’s health budget devoted to drugs compared with peer countries. This share has dropped to about 9 percent from 12 percent in 2015, Patrick Vallance, a British government minister, told lawmakers in September. “It has just gone down steadily and that has to be reversed,” he said.
Such a change would allow the government to ensure rapid uptake of the best new medicines and have more equitable access across the country, he said.
Ana Swanson contributed reporting from Washington.
Rebecca Robbins is a Times reporter covering the pharmaceutical industry. She has been reporting on health and medicine since 2015.
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