Starmer must act now to protect NHS from Trump pharma tariffs
Starmer must make a deal to avoid Trump’s pharma tariffs or risk a major hit to the NHS and the UK’s leading pharmaceutical industry, write Ben Ramanauskas and Sean Phillips
Last week, President Trump warned of “a major tariff”: up to 25 per cent on pharmaceutical products entering the United States. Currently, there is an exemption for pharmaceuticals on the baseline 10 per cent tariffs for goods coming into the US, but the President said that will change “very shortly”.
Were such tariffs to materialise, the impact on one of the UK’s most successful industries – key to the government’s plans to boost growth – will be hugely significant, increasing costs for the NHS and with the potential for significant disruption to the development and supply of medicines, both for patients in the UK and around the world.
What would tariffs mean for UK pharma?
Pharmaceuticals are one of the UK’s most successful industries, supporting hundreds of thousands of high quality jobs, with the sector’s research and development activities leading to breakthroughs which have dramatically improved our lives – including the development of vaccines to reduce hospitalisation and death from Covid-19.
Any tariffs imposed by the US will increase costs for pharmaceutical companies based or operating in the UK who export to the US, meaning that they may have to shift current manufacturing operations. This will result in them having fewer resources to invest into developing the latest drugs to fight cancers or Alzheimer’s.
The modern pharmaceutical industry is the very epitome of globalisation. There are complex supply chains at work with manufacturing for a single product required in multiple locations. As such, any increased friction to the system including from tariffs will inevitably increase costs for producers which will be passed onto the purchaser. In the UK context this will mean that the NHS will have to pay even more for medicines – which is already the second highest area of expenditure (only behind its workforce). At a time when many NHS organisations are having to make significant efficiency savings to balance the books, the risk is a reduction of services and an even greater burden being placed on the taxpayer.
Risk of medicine shortages
More alarmingly, there is a very real danger that tariffs will lead to further medicine shortages, posing a real risk to patient safety. This is particularly the case for generic and biosimilar medicines which encompass the vast majority of pharmaceutical products used by the health service today.
But it is not just patients in the UK who will suffer. Patients around the world – including in the US – will be impacted. After all, tariffs are essentially taxes, passed onto consumers. In the US context, this may mean hard-pressed American families see their insurance premiums spike, meaning more of their income is spent on medical bills. It will be particularly challenging for those countries less able to intervene in order to shield their healthcare system and citizens from a sudden increase in pharmaceutical prices and ensure that they are able to acquire the medications they need.
Finally, the tariffs are unlikely to bring about the change the Trump administration wants to see. Given the complex nature of pharmaceutical supply chains, it would simply not be cost-effective or practical to reshore the majority of manufacturing jobs in the industry to the United States.
The UK must act urgently
This is an incredibly serious situation and so requires urgent and immediate action from the UK government.
The Prime Minister and business secretary should be doing everything within their power to achieve a tariff exemption for the UK pharmaceutical sector. This should either be as part of a more comprehensive deal or as a specific carve-out.
It is also an opportunity to remind the US government of its WTO commitments, not to levy tariffs on pharmaceutical products from any country due to the adverse impact this would have on patients.
It is vital that recommendations for the forthcoming Life Sciences Sector Plan and 10 Year Plan for Health cohere with clear leadership across government. This approach must consider the development, supply and access for medicines in the round, ensuring there is adequate focus on ‘branded’ as well as ‘off-patent’ medicines.
To reduce the risk that Trump’s pharmaceutical tariffs could pose to UK Plc, urgent action is required from the government.
Ben Ramanauskas is senior fellow in economics at Policy Exchange; Dr Sean Phillips is head of health and social care at Policy Exchange