Could the NHS be the price of a US trade deal?

After President Donald Trump told a press conference in London this week that the NHS could form part of a future trade deal between the UK and the United States, Mark Dayan looks at whether we really have cause for worry.

Blog post

Published: 06/06/2019

Donald Trump caused a collective intake of breath across the UK when he told a press conference that the NHS would be “on the table” in trade talks with the USA. It sparked furious reactions from opposition parties, hurried denials from assorted Tory leadership contenders, and eventually a characteristic self-contradiction from the American president himself.

Selling off the family silver?

Shadow Health Secretary Jonathan Ashworth made his concerns clear, saying that “if our NHS is taken over by US corporations, it will undermine it as a free, universal public service.”

Could it really happen? No. A trade deal would not have the power to stop the NHS being a free, universal service. Trade deals focus on removing barriers to companies accessing markets already available in other countries, and protecting the interests of investors in other countries. They do not redesign the funding of public services. Trade agreements that the USA has already concluded with smaller countries with publicly funded health systems, like Australia, do not contain anything like this.

A less drastic interpretation of this concern is that a trade deal would allow US companies to bid to provide clinical services funded by the NHS, competing with NHS trusts. This looks more plausible, because government procurement of services is frequently covered by trade deals.

But US companies already have these rights. The English NHS has increased the role of competition and private companies over the last 15 years, and that has included laws that guarantee private companies the right to compete for contracts.

Those rights are further backed up by the EU’s Public Procurement Directives as long as the private company has a branch or subsidiary in the EU – and they are unlikely to try treating patients without one.

US companies have taken full advantage. For example, Tennessee-based Acadia Healthcare owns many mental health services in the UK, including the Priory group that has won many contracts from the NHS.

Only 7% of English NHS spending goes to private companies, and this figure hasn’t been rising recently. Still, that is equivalent to around £9 billion each year. The rules do not apply to the Scottish or Welsh health services in the same way, because they do not run their health services on the basis of contracts. But if they ever decided to start outsourcing, EU law – which will stay on the statute books by default after Brexit – would kick in to guarantee companies the same rights.

Locked in to contracting out?

The debate repeats in many ways the controversy over TTIP, the ill-fated trade deal with the USA that the EU tried to negotiate on behalf of the UK and other member states. That saw trade unions in the UK make a more sophisticated argument: “if a future government were to bring parts of the National Health Service back into public ownership… it would be prone to challenge… by American companies that have significant investment in the NHS.”

The logic went that US companies would be able to claim that renationalising the NHS was equivalent to confiscating the assets they owned in the UK, which only had value because they could win health service contracts. The special system of international tribunals, which would have had the right to settle such cases, raised particular concerns.

This is a timely issue in England today, where both the Labour Party and NHS England themselves have been discussing plans to reduce the level of legal rights companies might have to access contracts.

Recent EU trade deals with Canada and Singapore include a “right to regulate”, making clear that legal changes that reduce profits do not necessarily breach the agreement, and can be justified on the grounds of public health. The UK could demand something similar. There is still some dispute as to where the limits of this lie given investment protections in the trade deals: if we wanted to be even more certain, we could ask for specific exemptions for health policy.

“They pay more”

There is a danger that in our search for hidden dangers to the NHS, we are missing the one that could hardly be more obvious. Trump and his government have repeatedly complained that the USA pays too much for medicines in part because European countries pay too little. US Health Secretary Alex Azar was blunt about the suggested solution: “we pay less, they pay more”.

The American pharmaceutical industry agrees. A submission to trade negotiators fulminated against the UK’s “long-standing market access barriers such as rigid health technology assessments, government price controls, insufficient health care budgets, and increasingly punitive and proactive national procurement initiatives.”

Health technology assessments are used by the body responsible, NICE, to work out whether medicines are an efficient enough way to save people’s lives to be a good use of scarce NHS money. There is a risk that changing them at the demands of medicine companies could simply mean we switch funding to drugs that deliver less benefit for the money we spend, leading to worse outcomes.

As for “national procurement initiatives”, NHS and Department of Health initiatives to bargain down medicines prices or recoup costs are a major reason why the UK tends to get the same medicines more cheaply than the USA. Conversely, it is probably the lack of such initiatives in the USA – where national bargaining is actually banned following pharmaceutical lobbying – that accounts for high prices, rather than this being to do with European countries paying less.

Unlike the issue of who pays for health care, pushes for countries to go easier on medicine prices have been a significant feature of recent US trade negotiations. The trade expert Sam Lowe has suggested that there might be a particular incentive to drive home the point with the UK – because its decisions and the bargains it strikes can influence prices worldwide.

Any trade deal with the USA will be a tough negotiation, with goals traded off carefully against one another. If we prioritise imaginary problems over real ones, the NHS risks getting the short end of the bargain.

Suggested citation

Dayan M (2019) “Could the NHS be the price of a US trade deal?”, Nuffield Trust comment.