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The UK and US governments have announced that they have reached an agreement on pharmaceutical pricing and tariffs. Under the arrangement, the tariffs charged by the US government on imports of pharmaceutical products from the UK will remain at zero for three years, in exchange for the UK agreeing to pay higher amounts for innovative medicines and reducing the rebates payable by pharmaceutical companies on newer branded medicines.
The changes to UK pricing of medicines have been welcomed by industry, which has criticised the UK environment for supply of and access to medicines.
Increased NICE Cost-Effectiveness Threshold
The first pillar of the changes to UK domestic pricing regime is that the UK government has agreed that it will ask the National Institute of Health and Care Excellence (NICE), the health technology assessment body for England, to increase the cost-effectiveness threshold NICE uses to determine whether to recommend a medicine for use within the NHS. The effect of a positive NICE recommendation is that NHS commissioners in England are legally required to make funding available to cover use of the medicine as a treatment option for the recommended patient population.
The cost-effectiveness threshold will be increased from the current £20,000 – £30,000 per quality-adjusted life year (QALY) gained, the threshold applied since NICE was established in 1999, to £25,000 – £35,000 per QALY gained, representing a 25% increase at the lower end and 17% increase at the higher end. This will mean more medicines can meet the cost-effectiveness threshold under acceptable discounts. It is anticipated that this change will have the effect of achieving better access to the most innovative medicines for patients in England (as well as Wales and Northern Ireland, which typically adopt NICE guidance).
NICE has confirmed that it will apply the revised cost-effectiveness threshold from April 2026, once it is given the power to do so under new regulations. The statement from NICE suggests that it will apply the new threshold in any assessments still ongoing when it comes into effect in April 2026 and that any ongoing assessments that would see the medicine rejected under the current threshold can be paused until implementation of the new threshold. Questions do however remain regarding how the new threshold can be applied to products that have already been rejected by NICE.
Capped VPAG Repayment Rate on Newer Medicines
The second major change to UK domestic pharmaceutical pricing is a reduction in the rebate payable under the voluntary scheme for controlling the price of medicines within the UK, the 2024 Voluntary Scheme for Branded Medicines, Pricing, Access and Growth (VPAG). The UK government has agreed to cap the rebate payable on 'newer' medicines under VPAG in 2026 and the remaining years of the scheme at 15%. This represents a significant reduction compared to the current rate of 22.9% for 2025, which was arrived at through the formula under VPAG designed to cap the annual rate of growth in the spend on branded medicines at set amounts. The statement issued by the US government indicates that similar reductions will be applied to other rebate schemes (presumably the Statutory Scheme) consistent with the UK government's policy to maintain broad commercial equivalence between the two schemes.
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