Patients may not see savings from new Medicare drug programs

The proposed plans to test two models for most favored nation pricing in Medicare may generate significant rebates for the federal government but those rebates are unlikely to reach health plans, pharmacy benefit managers, or Medicare Advantage organizations, according to healthcare attorneys specializing in pharmaceutical pricing.

CMS’ two proposed rules were released in December 2025 and are five-year demonstration projects: the Global Benchmark for Efficient Drug Pricing (GLOBE) and Guarding U.S. Medicare Against Rising Drug Costs (GUARD). GLOBE for Medicare Part B and GUARD for Part D would link Medicare drug rebate calculations to international pricing benchmarks from “economically comparable” countries.

David Farber, a partner in the Washington, D.C., office of the law firm King and Spalding, said the programs as written in the Federal Register would likely have minimal effect on the broader healthcare marketplace. The reason is structural: the rebates flow directly to the government, not through the commercial drug pricing system.

“It doesn’t change the price to the beneficiary at the point of sale. It doesn't change the price that the manufacturer sells to the wholesaler,” Farber explained. “All it does is it tells manufacturers, ‘If your price is not an MFN price, you’re going to have to send a rebate back to the government.”

He explained that there is no provision in GLOBE or GUARD that changes what plans, hospitals or pharmacists pay for prescription drugs, and there is no mechanism for shifting the any savings to patients. “There’s no mandate, like there is in the IRA [Inflation Reduction Act], for it to be offered to the beneficiary at the point of sale,” he said.

How the programs work

MFN pricing isn't a new concept for the administration. During President Donald Trump’s first term, officials proposed using the policy in Medicare Part B through an interim final rule, but courts blocked it for failing to follow proper administrative procedures.

Now, under GUARD and GLOBE, pharmaceutical manufacturers would have to rebate the higher amount when comparing inflation-adjusted baseline prices against MFN pricing from international markets versus current period pricing. The CMS Innovation Center (CMMI) will be testing an MFN price that is determined by examining net prices across 19 countries, adjusting for per capita GDP and purchasing power parity, and then selecting the lowest price.

The programs only affect 25% of claims as part of the demonstration design, making it unlikely manufacturers would lower their wholesale acquisition cost (WAC) for the remaining 75% of the market. Only single-source drugs or biologics would be included in the demonstration programs. In GLOBE, products that exceed the spend threshold of $100 million in Medicare fee-for-service. In GUARD, the spending threshold is $69 million in total covered prescription drug costs. Excluded from GLOBE would be those products for which there is a negotiated price through the Inflation Reduction Act.

GLOBE would operate for five years from Oct. 1, 2026, through Sept. 30, 2031; GUARD would begin Jan. 1, 2027, and run five years through Dec. 31, 2031.

Both aim to leverage the Inflation Reduction Act’s existing rebate infrastructure. The IRA requires drug manufacturers to pay rebates to Medicare if they raise prices on certain drugs faster than inflation for both Part B and Part D drugs.

Once the net price of other countries is determined, they are subjected to this purchasing power parity (PPP) adjustment, which brings that in line with the purchasing power in Japan versus the purchasing power in the United States. PPP is an adjustment for per capita GDP because a $1 in Japan goes further than in the United States, Farber said. MFN prices are then adjusted again based on the lowest country price.

CMS estimates that GLOBE would save $11.9 billion in Medicare Part B net spending during the seven-year model. CMS estimates that GUARD would save $14.1 billion in Part D net spending over the model period.

Concerns and uncertainties

Since his first term, President Trump has been concerned with what he has referred to as “global freeloading,” the idea that other countries pay less for drugs than does the United States. But Rachel Sachs, JD, MPH, a professor of law at Washington University School of Law, said the main reason that other countries pay less is that they’ve taken policy steps to do so.

“Many of them have centralized governmental negotiating bodies. The United States doesn’t yet have an analogous system. The IRA was an important step in that direction, but it’s limited to Medicare and to certain products within Medicare,” Sachs said during a recent webinar conducted by the University of Pennsylvania’s Leonard Davis Institute of Health Economics.

The issue of fairness in drug pricing is a big driver of the most favored nation initiative, Marta Wosinska, Ph.D., senior fellow, Economic Studies, Center on Health Policy at Brookings Institute, said to Penn’s webinar. She said that Trump used the threat of tariffs as a negotiating tool.

Many pharmaceutical companies will likely be exempt from MFN pricing because of recent agreements with the U.S. government. Sixteen pharmaceutical companies have made voluntary agreements with the Trump Administration on drug pricing. These companies have agreed to lower the list price of some drugs and offer them through TrumpRx direct-to-consumer and will get a three-year exemption from any tariffs.

“Some of them are carved out of participation in the mandatory GLOBE and GUARD programs because of the price concessions that they’ve committed to in the agreements with the White House because they would distort the findings of the demonstration project,” said John D. Shakow, also a partner in the Washington, D.C., office of King and Spalding, in an interview.

Sachs said there are a lot of unanswered questions. “These confidential deals are not a preferred way to make public policy,” she said during the Penn webinar. “The deals are confidential. They’re voluntary. You can’t read them and analyze what it is that manufacturers have agreed to. Are they enforceable? If so, how? Who’s most likely to benefit?”

Another uncertainty, Shakow said, of the GLOBE and GUARD programs is how drug prices in other countries will be calculated. “As a government price reporting expert, it troubles me deeply that the definition of how to determine the MFN in each country is very poorly articulated in these proposed rules,” he said during an interview.

Pricing in other counties often is just as complicated as it is in the United States, Shakow said. “This is an enormously complicated question, none of which is delved into in more than just a few sentences in these proposals.”

In Europe specifically, there may be confidential discounts that may not be available to third-party databases being referenced for price calculation, said Jeffrey Casberg, M.S., vice president of clinical pharmacy at IPD Analytics and a Manage Healthcare Executive board member. “True net price in these countries may not be easy to get to,” he said during a recent webinar moderated by MHE’s Managing Editor Peter Wehrwein. “Maybe the savings wouldn’t be as deep as one would expect.”

Shakow said GLOBE and GUARD may face substantial legal questions about whether the CMMI has the authority to impose these requirements. “I would argue that these are a significant overreach and a misuse of CMMI authority that attempts to impose sweeping changes to inflation rebate penalties without statutory or congressional support,” he said.

He indicated that CMMI includes significant judicial review bars that would require sophisticated legal arguments to circumvent; these programs could potentially invoke the Supreme Court’s Major Questions Doctrine or constitutional challenges. The Supreme Court has used the Major Questions Doctrine to reject an agency’s claim of regulatory authority if there wasn’t congressional authorization.

CMS is seeking comment on both the GUARD and GLOBE programs through Feb. 23, 2026.