The UK-US drug pricing deal: A welcome step, but not the finish line for UK competitiveness

For much of the past year, the UK’s medicines pricing debate has cast a long shadow over the life sciences sector. The deadlock over NHS rebates – and the uncertainty surrounding the successor to VPAG – has created unease among global pharmaceutical companies already navigating an increasingly competitive international landscape. At the same time, geopolitical pressures, including the prospect of US tariffs and growing calls for pricing harmonisation, have complicated investment decisions for firms with complex multinational supply chains.

Against this backdrop, the recent UK–US agreement has been welcomed as a critical step forward. The deal, costed by the UK government at around £1 billion, brings with it three central changes: zero tariffs on medicines, an increase to the NICE cost-effectiveness threshold, and adjustments to the UK’s pricing and reimbursement framework. Each of these measures matters in different ways, not because they resolve all challenges, but because they help to restore clarity and momentum after a prolonged period of policy uncertainty.

Ending ambiguity matters – even for companies not directly affected

Critics of the new deal have noted that several large companies were already insulated from tariff exposure due to pre-negotiated arrangements – but this misses the broader point. Even where tariffs were unlikely to materialise, their possibility was enough to slow decision-making. Pharmaceutical supply chains are intricate and highly product-specific; manufacturing one component in the wrong geography can significantly alter cost structures. The removal of tariff ambiguity across the board provides a more stable environment for investment planning – particularly for mid-sized companies that lack the infrastructure to reconfigure operations at speed.

Clarity also helps decisions around capital expenditure. We have heard consistently from industry that companies were delaying projects until they could fully understand the direction of travel. The new agreement gives firms a baseline from which to model long-term UK activity, though it is clear they will want to see more in the months ahead.

Pricing reform: Welcome progress, but work remains

Changes to the NHS repayment system under VPAG will reduce the previously unsustainable level of rebates. This is undoubtedly positive, but the question everyone is now asking is whether it goes far enough. At this stage, we have seen no clear modelling of potential changes to prescribing behaviour, particularly for high-cost drugs. Nor is there yet sufficient detail on how the new framework will interact with broader ambitions to make the UK a more attractive first-launch market.

The increase to the NICE threshold is symbolically important, signalling that the UK recognises the need to better reflect innovation in value assessment. Yet, pricing remains the single biggest determinant of whether companies choose to prioritise the UK for launch. Several global players have already signalled that, while the deal is welcome, it does not fully resolve their concerns. In my view, further movement on pricing, alongside deeper R&D incentives, would unlock significantly greater investment.

The UK’s competitive strengths remain formidable

Despite the turbulence of the past year, it is important not to lose sight of the UK’s enduring advantages. The country remains one of the world’s most attractive destinations for pharmaceutical R&D. It offers a world-leading academic and clinical research base, a highly skilled, internationally mobile workforce, a coherent ecosystem of SMEs, biotechs, and global players – and a single national health system that enables large-scale real-world evidence generation. Recent government investment in AI datacentres further strengthens this foundation, creating the digital infrastructure needed to accelerate drug discovery, improve clinical trial design, and scale data-driven innovation across the sector.

These fundamentals matter, at Forvis Mazars, for example, we are not seeing companies make knee-jerk decisions to exit the UK. On the contrary, we continue to support clients exploring expansions, joint ventures, and manufacturing investment. The sector’s confidence has been shaken, but not broken.

Having said this, it’s important to acknowledge that momentum has shifted, and policymakers should not assume the UK’s position is guaranteed. Global pharma investment has tilted towards the US and parts of Europe, with several forces driving this including deep capital pools and faster scale-up pathways in the US, the Inflation Reduction Act’s enormous pull for advanced manufacturing, and more generous R&D incentives across several EU countries.

While I do not expect uniform global drug pricing any time soon – the diversity of regulatory and reimbursement systems makes that highly unlikely – the direction of travel is clear. Global competition for clinical trials, launch sequencing, and advanced therapies is intensifying.

The UK must therefore avoid complacency. Companies making decisions today are weighing where they can secure predictable pricing, strong incentives, and a regulatory pathway that is both stable and fast.

What policymakers should prioritise next

To retain and strengthen the UK’s position as a global life sciences leader, three priorities stand out:

A long-term, stable pricing framework: The current deal is a start, but the industry needs a multi-cycle view of NHS pricing that supports sustainable innovation while protecting public finances. Predictability is as important as the headline rate.
Enhanced R&D and manufacturing incentives: For many early-stage and specialist firms, R&D tax credits are the difference between progressing to the next clinical milestone or stalling. Increased incentives would especially benefit companies backed by private equity, which must manage tight cash-flow constraints during capital-intensive clinical phases.
Regulatory cooperation and international alignment: Full mutual recognition between regulators is unlikely, but partial alignment – particularly for advanced manufacturing and clinical data requirements – would significantly reduce friction and accelerate patient access. The UK should continue to lead on innovative regulatory models, building on its pandemic-era progress.

A positive path forward

The UK-US deal does not resolve every challenge – no single agreement could. But it marks a meaningful step toward restoring confidence and allowing industry to plan with greater certainty. The UK’s life sciences sector remains one of the nation’s strongest economic assets. Its talent, infrastructure, and research excellence are second to none.

The UK now has an opportunity, and I would argue an obligation, to turn this moment of renewed clarity into sustained competitiveness. By setting a stable pricing trajectory, strengthening R&D incentives, and deepening international regulatory cooperation, the UK can remain a premier destination for discovery, manufacturing, and clinical innovation.

Global competition is intensifying, but the UK is far from out of the race. With the right policy choices, it can lead from the front.