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UK ministers have promised the US that NHS medicines spending will rise by £1.5bn over the next three years, as the government seeks new powers to increase further the price paid by the health service for drugs.
The deal to secure an exemption on the pharmaceutical import levies threatened by US President Donald Trump includes a promise to lift British medicines spending from 0.3 per cent to 0.35 per cent of GDP — or £1.5bn — by the end of 2028, said people familiar with the agreement.
The pledge is likely to increase pressure for further changes to NHS prices after the UK agreed last week to increase spending on new medicines by 25 per cent and overhaul health service value-for-money rules.
For the first time, the National Institute for Health and Care Excellence (Nice), an arm’s-length body that decides if the NHS will pay for drugs, will increase the price at which it deems a medicine cost-effective.
The change is expected to take effect in the spring, and both industry and government have played down the short-term costs of paying more for newly approved medicines, suggesting it could only cost a few hundred million pounds a year.
But the spending promise to the US is likely to lead to calls for further reductions in the clawback tax paid by pharma companies to the UK government on sales of medicines, which will fall from 23 per cent to 15 per cent under the deal.
Drugmakers are targeting a rate below 10 per cent, as well as pushing ministers to take further steps to ensure British doctors are prescribing approved new drugs.
In a consultation published late on Tuesday, the government said it also wanted to take powers to make further changes to Nice’s cost-effectiveness thresholds through secondary legislation.
“The proposed change would enable ministers to direct Nice to use a specific cost-effectiveness threshold in the development of its guidance and recommendations,” the government said.
The reform would “ensure that there is a clear route for amending the threshold” and was needed to “take into account a broader range of factors, such as industrial policy objectives, economic growth and investment”, it added.
Pharma companies welcomed the move, saying it offered scope for future increases in prices after ministers rejected an attempt to link Nice thresholds to inflation.
Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry, a lobby group, said the reforms provided “clarity to the question of who sets the cost-effectiveness threshold . . . helping the government turn around the UK’s decline as a leading adopter of medicinal innovation”.
Britain at present spends an estimated 0.3 per cent of GDP on new medicines, and the Institute for Fiscal Studies think-tanks predicts that an increase to 0.35 per cent of GDP would require an extra £1.5bn in current prices, or about £1.7bn in 2028-29 prices.
The deal signed by London and Washington also promises that British spending will reach 0.6 per cent of GDP over a decade, equivalent to £9.1bn in today’s terms, or £13.3bn in expected 2035 prices.
The Office for Budget Responsibility, the fiscal watchdog, has said a 25 per cent increase in the overall NHS medicines budget would ultimately cost about £3bn. But government figures said the full impact would not be felt until the next parliament.
The Department of Health and Social Care did not immediately respond to a request for comment.
Industry figures said there was likely to be pressure for further price rises sooner if spending did not rise in line with promises made to the industry and the US.
But the Treasury has not offered the NHS any extra money to fund higher medicines costs, and MPs and health bosses are likely to raise concerns that increased spending will hit patient care by reducing staff numbers, for example.
Sally Gainsbury, senior policy analyst at the Nuffield Trust think-tank, said that using existing health budgets would “result in some unpalatable choices for NHS leaders who are already struggling to balance the books”.