Ministers are reviewing a controversial medicine tax that pharmaceutical companies say makes Britain ‘uninvestable’ as part of a wider US trade deal, The Mail on Sunday understands.
Donald Trump’s transatlantic trade pact last week slashed tariffs on British cars, steel and aluminium, but left the pharmaceutical sector in limbo. Drugs firms, including AstraZeneca and GSK, still don’t know what, if any, tariffs they may have to pay.
The President threatened to slap a 25 per cent tariff on UK pharmaceuticals entering the US, which last year totalled £6.6 billion.
But last week’s deal promised the sector ‘significantly preferential treatment’, with ministers vowing ‘to improve the overall environment for pharmaceutical companies operating in the UK’.
Industry sources say this refers to a drug-pricing scheme that already puts investment in the UK at risk. Under it, drugmakers discount the price of medicine sold in bulk to the NHS in England.
The aim is to stop the health service busting its £20 billion-a-year drugs budget by imposing a cap. Any revenues above that limit are paid back by the drugs companies to the NHS in the form of a rebate.
Medicine tax: Donald Trump threatened to slap a 25 per cent tariff on UK pharmaceuticals entering the US
But the rebate has soared as inflation rocketed and expensive new drugs became available. Drug companies now pay back almost a quarter of their UK sales to the Government – far more than the 15 per cent estimated – meaning they make a lower return on their investment in research and development.
The average rebate is 5.7 per cent in France, 7 per cent in Germany and 9 per cent in Ireland.
Drugmakers say repayment rates are ‘not viable’ and put investment in the UK at risk – just as the Government earmarks life sciences as one of eight sectors key to kickstarting growth.
The Association of the British Pharmaceutical Industry (ABPI) said: The medicine levy ‘makes the UK uninvestable.’
The trade body’s members include US drugs giants such as Pfizer, Bristol Myers Squibb, Amgen, Johnson & Johnson, Merck and Biogen, which also operate in the UK and would stand to benefit from lower rebates.
Health Secretary Wes Streeting is reviewing the rebate, which is likely to be wrapped in with ongoing US tariff talks, sources add.
The UK spends a smaller share of its overall healthcare costs on medicines than any comparable country, according to the ABPI.
Just 9 per cent of healthcare spending goes on drugs, compared with 17 per cent in Germany and Italy and 15 per cent in France.
It is still unclear what type of special treatment British pharma firms would receive from Trump.
Mark Dayan at the Nuffield Trust health think-tank said details were still ‘very vague’.
ABPI boss Richard Torbett said a free trade deal with the US was ‘critical’ for patients to have access to the medicines and vaccines they need, adding: ‘US tariffs on UK pharmaceuticals run counter to that goal and should be avoided. We will also continue our discussions with the UK Government to ensure Britain’s life science sector can return to international competitiveness to enhance UK attractiveness as a destination for investment.’
A Government spokeswoman said the US trade deal ‘presents rich opportunities for collaboration on pharmaceuticals, life sciences and advanced technologies’. The review of medicine pricing is due to be complete next month, she added.
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