Trump, medicines and the NHS

A combination of Donald Trump, the NHS and medicines have made headlines in recent weeks. What are the latest developments?

Mark: Last month the UK and USA signed an “economic prosperity deal”, which was really an agreement to come to an agreement, in many different areas.

It holds out hope that the UK may get some kind of protection from the tariffs that President Trump has threatened to charge on all imports of pharmaceuticals into the USA from other countries, which were a worry before. But at the same time the USA signalled that it expects the UK to make concessions, in line with Trump’s regular bursts of rage about us not paying the same high prices that Americans face for medicines.

With recent progress on some of the areas set out in the deal, such as car exports, briefings in the press have raised concerns about what this might mean for costs to the NHS in a context where the pharmaceutical industry are already up in arms seeking better terms for payment.

Is it normal for medicines to play such a key role in the USA’s international relations?

Mark: It’s certainly been an on-off priority for the USA for many years, and has been a contentious subject in relevant negotiations with countries like Australia and South Korea. At the root of it is that the US has a political economy where medicine prices are very high and often quite uncontrolled. Most European countries, including the UK, and many other countries such as Australia, have systems where the state-run health care system will try to negotiate down prices of medicines. And if they are too cost-ineffective – i.e. they’re not delivering enough benefits compared to their price – then they won't be approved for use.

But that's not the way it works in America. Pharmaceutical firms face a very different kind of market there than in the rest of the world, and at different times the USA in its trade negotiating has tried to push back against how other countries control prices on medicines.

How does the USA try to loosen other countries’ control on medicine prices? 

Mark: Trump has issued an executive order that tries to force companies to charge the same prices in the USA as they do in all other countries. That's then backed up by various threats against the companies, including the threat of competition law, letting in extra imports, or even banning exports to other countries. Economic modelling and other studies show that if you force companies to charge the same price in different countries, what they'll usually do is raise prices in the cheaper countries. And at least compared to the USA, the UK is absolutely one of those cheaper countries.

For branded medicines, it’s quite plausible that the USA is paying many times more for the same kind of medicine. At the same time, in the initial UK-US agreement reached between the two sides (parts of which have been taken on further recently with the deal on cars and defence equipment), the USA offers that it will do various positive things for the UK, including negotiating preferential tariff rates for any tariffs that it puts on pharmaceuticals. But one of the things the UK has had to sign up in return for that is to “endeavour to improve the overall environment for pharmaceutical companies operating in the United Kingdom”.

Sally, on that wording change about improving the overall environment for pharmaceutical companies operating in the UK, how might that impact on the NHS and health policy more generally?

Sally: What they are almost certainly alluding to there is to effectively allow pharmaceutical companies to make more revenues from sales to the NHS across the UK.

That might be through a mixture of raising prices or perhaps relaxing the VPAG (the Voluntary Scheme for Branded Medicines Pricing, Access and Growth), which is an agreement that shelters the NHS from very large increases in its drug spending through an annual cap that results in a rebate from branded medicines firms to the government if spending growth rises above agreed levels. This is something that the UK has been able to secure in part due to the NHS’s power as a large single purchaser. It’s important to note that in many respects there are advantages from that to the pharmaceutical industry too. But parallel to the trade negotiations with the USA, the Association of British Pharmaceutical Industries has been asking the government to raise the spending growth cap on the VPAG, meaning there is currently a two-pronged pressure on the NHS to pay more for its drugs.

From the point of view of the NHS, if prices increase with no change in the volume or quality of medicines that people are receiving – so no change in the amount of health benefit resulting from the drug spend – it’s hard to see that as anything but a negative for the NHS.

At the bottom of this is the government having two interests. One is obviously maximising the benefits that the public get from the NHS. But it is also very concerned about economic growth. The government is interested in attracting pharmaceutical companies because it sees that as a path to economic growth, but there is a question mark over how the government can balance its desire to do that with improving public health and having a sustainable NHS. If attracting or retaining pharmaceutical company investment in the UK comes at the price of rising costs for the NHS, or – perhaps even worse – the NHS paying for drugs that have a low or questionable cost-effectiveness, you have to wonder if the economic growth is worth it.

The thorny issue of the NHS playing any part in a UK/US trade deal has made headlines before, with the previous UK government in 2020 pushing back quite strongly on suggestions that medicines used in the NHS could come under discussion as part of those trade talks. Mark, is that now changing?

Mark: The previous government had in its trade white paper a principle that the price the NHS paid for medicines would not be on the table. 

The current government has signed up to some language around the way in which the UK is buying medicines. Apart from the issue around improving the operating environment for pharmaceutical companies, it’s also been suggested in that agreement with the USA that it will comply with “supply chain security requirements”, which is commonly understood to have something to do with looking at the amount bought from China and trying to reduce it.

It's not that this government is opening the door to things that the last government ruled out, but we do seem to have seen a weakening in the principle that medicines purchasing should be kept off the table. That's obviously not really in the interests of the NHS, because it's very unlikely that any of these developments are going to lead to the NHS paying less, which means effectively it would be paying more money for the same medicines.

How much of a concern is it?

Mark: It's very difficult to say, but it's hard to see how this is a positive direction of travel. When it comes to what Trump has tried to do unilaterally – that is, putting pressure on companies to charge the same prices in different countries – if that worked then it could have quite a large negative impact on the NHS, because the USA often pays several times as high of a price for a product as the UK. Given that the UK spends many billions of pounds on branded medicines (around £15 billion a year in the UK), that could potentially mean billions in extra spending for the NHS for basically no benefit at all. Even if it only partially happened, it would be a significant concern.

You mentioned Mark that the government has signed up to a change of language. Are you surprised by that?

Mark: There's obviously a much wider trade picture where the current US administration is aggressively putting tariffs on things that cause problems for the UK in a way that previous American governments just didn't do. So there's a new urgency to arrange things with the USA. But if part of the NHS budget is effectively being used to pay for a favourable trade deal with America, that is money not going towards NHS priorities, such as tackling waiting times, shifting care of hospital, improving people's health, extending life expectancy – all the health goals in the UK that we know about.

Sally, you recently wrote that maximising population benefits and equity within the NHS’s budget will require a government that stands firm against certain pressure from the pharmaceutical industry. If the government therefore cooperates with the US on the subject of medicines, are they not standing firm against that pressure?

Sally: If we accept for a minute that the NHS budget is fixed – and cannot be constantly revised upwards – then if it starts to pay more for new and expensive drugs (some of which may have a relatively low benefit to patients) then effectively it has to stop doing something else in order to fund that.

It’s the job of the National Institute for Health and Care Excellence (NICE) to try and balance the interests of patients who might benefit from a new drug – which will typically be very expensive because it’s still in patent – with the interests of the public at large who benefit from what the NHS already does (as well as from other forms of public spending that might be diverted into the NHS if budgets are increased). But the danger with words like “improving the environment for pharmaceutical companies” is that we might see a watering down of some of the protection that NICE brings, as the industry has long lobbied for NICE to lower the bar on the cost-effectiveness standards that it asks new drugs to meet.

Can it also reinforce health inequalities, Sally?

Sally: The evidence there is unclear because, to my knowledge, no one has yet been able to look at the distribution of who (or what groups) are benefiting most from new drugs adopted by the NHS, and who is in effect paying the price by seeing spending diverted from elsewhere in the NHS or other forms of public spending to pay for it.

There is a lot of really interesting work going on in this area, so we might get an answer soon. But what we do know for now is that there is a very marked skew in new drugs coming onto the market, or being presented for authorisation, that are for cancer or that only very marginally increase life expectancy at the end of life. With the possible exception of new obesity drugs, new drugs do not tend to be for the diseases or disorders that drive the inequality gaps we see in life expectancy or healthy life expectancy. We also need to consider how increased spending on expensive and not very cost-effective new drugs displaces public spending that could have gone into other services that more directly address the drivers of health inequalities, such as poor housing and poverty.

What would all this mean for the well-publicised tariffs from Washington that made so many headlines a few months ago?

Mark: The risks of the tariffs that Trump is already imposing still remain. Even if they are not applied to the UK at all, they may disrupt the ability of firms in the USA to manufacture medicine at the costs they do, and they might undermine the generics medicine industry in other countries, particularly in China, because they can't sell them as easily to the USA.

Since my last blog, Trump has reduced some of those tariffs, so it’s slightly less of a worry for now, but it remains a concern because they are a mechanism to disrupt global medicine supplies.

Meanwhile, if the UK doesn’t give enough ground on these other measures, we may face export tariffs on pharmaceutical ourselves, damaging our own industry. That matters: we’re more dependent on the USA for exports than for imports. That means we are really in a bit of a bind because both the tariffs that Trump has imposed, and also some of the negotiations around how the UK might get out of those tariffs, both pose some risks to medicines supply and pricing in the UK.

Your previous work on Brexit has highlighted an elevated and troubling level of medicine shortages in the UK. To what extent do you think these increased costs for drugs might impact on those medicine shortages?

Mark: The price increases mainly under discussion here are mostly for very expensive drugs, so new drugs that are on patent. Those are not generally the ones that have been subject to big shortage issues.

Where the UK has typically run into shortage problems are on the cheaper drugs, so the bulk drugs often purchased from Asia or the EU. For them, the more difficult aspect of the UK-US talks is that it all cuts into the NHS budget and makes it harder still to free up any money. The very vague requirements around looking at the role of China could, however, be a big problem for the kinds of bulk cheap medicines that can often be in short supply in the NHS, because that's where a significant number of them come from.