LONDON — The U.K. has agreed to raise how much its National Health Service spends on new drugs, in a concession made under pressure from the Trump administration in return for tariff-free access to the U.S. market.

“Today’s agreement is a major win for American workers and our innovation economy,” U.S. Commerce Secretary Howard Lutnick said in a statement on Monday. “This deal doesn’t just deepen our economic partnership with the United Kingdom — it ensures that the breakthroughs of tomorrow will be built, tested, and produced on American soil.” 

The deal will see Britain increase the National Institute for Health and Care Excellence (NICE) cost-effectiveness threshold by 25 percent, as POLITICO first reported in October, and slash the cap on revenue the NHS can reclaim from drugmakers to no more than 15 percent. 

The new NICE threshold will be £25,000 to £35,000 per quality adjusted life year gained over and above current treatments. The U.S. said the combined changes would increase the net price the NHS pays for new medicines by 25 percent.

In exchange, the administration will grant an exemption for U.K.-made pharmaceuticals, ingredients and medical technology from U.S. tariffs for the remainder of President Donald Trump’s term. 

U.K. Business and Trade Secretary Peter Kyle said: “This deal guarantees that UK pharmaceutical exports – worth at least £5 billion a year – will enter the US tariff free, protecting jobs, boosting investment and paving the way for the UK to become a global hub for life sciences.

“We will continue to build on the UK-US Economic Prosperity Deal, and the record-breaking investments we secured during the US State Visit, to create jobs and raise living standards as part of our Plan for Change.”

The breakthrough comes after months of back-and-forth between both sides, with the sector not covered in the Economic Prosperity Deal and Washington demanding a “preferential environment” to lift the threat of steep import duties. The administration had threatened to impose up to 100 percent tariffs on drugs. 

In July, the President issued a letter to 17 drugmakers, demanding they offer their drugs to Medicaid at most-favored-nation prices, prices tied to lower prices abroad, and shift manufacturing to U.S. soil. 

Update: This story has been updated following confirmation from the U.S. and U.K. governments.