U.S. tariffs might drive up drug costs for the NHS in the United Kingdom

3rd April 2025

There are several dimensions to consider when looking at how U.S. tariffs might drive up drug costs for the NHS in the United Kingdom. While it's difficult to predict an exact percentage increase, here is a breakdown of the key factors and potential mechanisms at play.

1. Increased Costs for Imported Ingredients and Finished Products
Many pharmaceutical companies rely on global supply chains. Tariffs imposed by the U.S. on imported raw materials or active ingredients (APIs) can raise production costs. For drugs whose components or even finished products are sourced from—or rely on parts manufactured in—tariff-impacted regions, these increased costs might be passed along the supply chain. Eventually, manufacturers may seek higher prices to protect their margins, a cost that could be transferred to payers such as the NHS.

2. Impact on Generic Drugs and Competitive Markets
Generic drugs, which form the backbone of cost-effective treatments, are particularly price-sensitive. They often depend on complex international supply chains with inputs coming from multiple countries. If tariffs raise the cost of these inputs or discourage competition by making it harder for alternative suppliers to enter the market, the potential exists for significant pressure on generic drug prices. This could lead to higher procurement costs for the NHS over time, even if the immediate percentage increase isn't dramatic.

3. Trade Agreement Provisions and Regulatory Adjustments
Beyond tariffs alone, U.S. trade policies are increasingly linked with negotiations on broader trade agreements. In a potential U.S.-UK trade deal, provisions might be introduced that affect intellectual property rights and regulatory exclusivity for pharmaceuticals. For instance, if such agreements push for longer patent protections or create investor-state dispute settlement (ISDS) mechanisms that deter domestic price controls, there could be a reduction in competitive pressures. Reacting to these constraints, pharmaceutical companies might charge higher prices, further increasing the NHS drugs bill.

4. Negotiation Leverage and the NHS’s Countermeasures
It is important to note that the NHS benefits from centralized procurement and significant bargaining power. Bodies like the National Institute for Health and Care Excellence (NICE) help negotiate and evaluate cost-effectiveness. This collective power could mitigate some of the tariff-related price hikes through bulk-purchasing agreements or by shifting negotiating positions with manufacturers. However, if the underlying production and supply chain costs rise substantially, even strong negotiation leverage might only partially offset the increases. This means the NHS might still face higher prices, albeit perhaps not at the full percentage increase seen in raw production costs.

5. Estimating the Magnitude of Price Increases
While precise predictions are challenging, some analyses suggest that if manufacturers cannot absorb the increased costs from tariffs, drug prices could rise. In scenarios where tariffs add significant input costs, estimates—even if rough—have projected potential price increases ranging from a few percentage points up to 10% or more for certain drugs. These projections depend heavily on several factors, including:

The degree to which tariffs affect key inputs.

How rapidly manufacturers can find alternative suppliers.

The outcomes of trade negotiations between the U.S. and the U.K.

It is also worth noting that if a trade agreement eventually provides carve-outs or protective provisions for healthcare, the net impact on NHS drug prices might be lower.

6. Broader Supply Chain and Market Disruptions
Finally, tariffs can induce broader disruptions rather than just direct cost increases. Global supply chains might experience delays or shortages, adding pressure to already strained markets. Such indirect effects can lead to additional price volatility and uncertainty, which sometimes compels companies to build higher cost buffers into their pricing. For the NHS, dealing with such market uncertainties could mean facing higher prices—not only because of the tariffs themselves but also due to their ripple effects throughout the international pharmaceutical industry.

In summary, while the NHS’s strong negotiating position and centralized procurement can help mitigate some of the price pressure, the interconnected nature of global supply chains means that U.S. tariffs have the potential to drive higher drug prices in the U.K. The full details involve increased costs for raw inputs, the impact on generic markets, potential changes in trade and IP provisions, and broader supply chain disruptions. The overall effect may vary widely depending on how policy negotiations unfold and how quickly manufacturers adapt their supply chains.