Two New Drug Demos PROPOSED

On December 23, 2025 (while you were drinking eggnog), CMS published two proposed rules intended to activate the Trump Administration’s stated policy goal of aligning U.S. pharmaceutical pricing with that of other so-called developed countries using “most favored nation” comparisons. The proposed rules—Global Benchmark for Efficient Drug Pricing (“GLOBE”) in the case of Medicare Part B, and Guarding U.S. Medicare Against Rising Drug Costs (“GUARD”) will be managed and fall under the agency’s Innovation Center payment ("CMMI")and service model demonstration and waiver authority.

As proposed, the models would test alternative methods for calculating manufacturer rebates under the Medicare Part B and Part D inflation rebate programs by tying applicable pricing benchmarks for model drugs to international pricing information, among other changes. Comments on the proposed rules are due on February 23, 2026

This article explains:

• a very high-level overview of the proposals,
• potential issues with the proposals, and
• some possible near-term practical considerations associated with their potential implementation.

Please be aware that this proposal is aimed more at drug manufacturers than providers, but if this payment system works in the demonstration, it could eventually have widespread effects.

Overview of Both Proposed Rules

The IRA (Inflation Reduction Act) included two new Medicare rebate programs that require manufacturers to pay rebates to CMS when they raise product prices faster than inflation. For Part B brand drugs, manufacturers must pay inflation rebates to the extent that their average sales prices (“ASPs”) increase faster than inflation. For Part D brand drugs, inflation rebates apply if a drug’s “annual manufacturer price”—essentially a twelve-month average version of the Medicaid average manufacturer price (“AMP”)—increases faster than the rate of inflation. 340B sales will be removed from both Parts B and D.

Generally, the GLOBE and GUARD models would each require manufacturers to pay an incremental rebate amount, rather than tying Medicare allowables to MFN pricing. In addition to the inflation rebate they must pay under existing law, if a Medicare reference price for a specified period exceeds an international benchmark price for the product by an amount greater than the inflation rebate, the manufacturer would also be liable to pay that amount. 

GLOBE and GUARD have these factors in common:

• Both are structured as 5-year demonstrations with an additional 2-year evaluation and financial reconciliation period.
• Both are characterized as “mandatory” for manufacturers whose drugs qualify.
• Both will apply in geographic areas randomized using zip code tabulation areas in a manner designed to include 25% of Medicare beneficiaries. So, this proposed rule does not apply to all places and patients.
• Both apply only to single-source drugs and biologics (including authorized generics and unbranded biologics) in specified therapeutic areas (with differences in the therapeutic areas among the two programs).
• GLOBE exceptions include:
• Products with historically excluded grouped Healthcare Common Procedure Coding System (HCPCS) codes (e.g., within the same billing and payment code as of October 1, 2003, and which are treated as multiple source drugs).
• Products billed with a miscellaneous, not otherwise classified (NOC) code.
• Radiopharmaceutical drugs and biological products.
• Skin substitutes.
• Certain vaccines and monoclonal antibodies.
• Generic drugs (approved under Abbreviated New Drug Applications (ANDAs)).
• Drugs and biological products with average total allowed charges below an applicable threshold.
• CMS is seeking comments on whether to exclude cell and gene therapies (CGTs) and plasma-derived products from the GLOBE Model.
• GUARD exceptions:
• CMS does not propose to incorporate the following exclusions to the GUARD Model, where parallel exclusions are proposed for the GLOBE Model: a Part D rebatable drug for which CMS has not yet established an Annual Manufacturer Price for the first applicable period;
• And a drug or biological product that is no longer a Part D rebatable drug is removed for the applicable period in which it is no longer a Part D rebatable drug. Whatever that means.
• These programs are limited in terms of therapeutic areas.
• For GLOBE, the model will apply to seven USP therapeutic categories, excluding drugs with annual Part B spending below $100 million and drugs subject to CMS-negotiated maximum fair prices, and CMS has identified 62 specific “illustrative” drugs that may be subject to the model based on these criteria. These are the therapeutic areas: antigout agents, antineoplastics, blood products and modifiers, central nervous system agents, immunological agents, metabolic bone disease agents, or ophthalmic agents as specified in the United States Pharmacopeia Drug Classification (USP DC) published for 2025.
• For GUARD, the program will cover 17 USP therapeutic classes, and drugs with annual spending below $69 million and drugs subject to CMS-negotiated maximum fair prices will be excluded. Must fall within at least one of the following therapeutic categories in the USP Medicare Model Guidelines: Analgesics; Anticonvulsants; Antidepressants; Antimigraine Agents; Antineoplastics; Antipsychotics; Antivirals; Bipolar Agents; Blood Glucose Regulators; Cardiovascular Agents; Central Nervous System Agents; Gastrointestinal Agents; Genetic or Enzyme or Protein Disorder: Replacement or Modifiers or Treatment; Immunological Agents; Metabolic Bone Disease Agents; Ophthalmic Agents; and Respiratory Tract/Pulmonary Agents.
• These programs have defined time frames:
• The GLOBE Model would have a five-year performance period, running from October 1, 2026 (Yikes) through September 30, 2031, with rebate invoicing, payment, and reconciliation continuing until September 2033, for a seven-year model period overall.
• The GUARD Model would have a five-year performance period, running from January 1, 2027, through December 31, 2031, with rebate invoicing, payment, and reconciliation continuing until December 31, 2033, for a seven-year model period overall. CMS proposes to evaluate the model’s impact in accordance with the CMMI statutory evaluation framework. Evaluation would include analysis of changes in net Medicare Part D spending and total Medicare spending for beneficiaries residing in model geographic areas, out-of-pocket costs, utilization patterns, and quality of care.
• Notably, neither proposal contains exemptions for drugs for which manufacturers have negotiated Medicaid MFN or direct-to-consumer pricing agreements with the Trump administration.

There are all kinds of stuff about the GDPs and PPPs of qualifying foreign areas, but it's just a bunch of countries. In plain English, the proposed rules identify 19 countries meeting these standards: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden, Switzerland, and the United Kingdom. Further, the international pricing benchmark used for comparison will be the greater amount produced under two possible methods:

• Under Method I, CMS will evaluate publicly available data on drug prices within the specified countries, subject to adjustments, and identify the lowest adjusted country-level price available. The proposed rules identify several potential databases. The limit is a 2% rebate.

• Under Method II, manufacturers may voluntarily elect to submit net pricing data (after manufacturer rebates and other discounts) from the specified countries, and CMS will calculate an average net price based on that data after adjustments. The limit is a 5% rebate.

How Rebates Work

In the case of Medicare Part B/GLOBE, the MFN benchmark will be subtracted from the Medicare ASP-based payment amount for the drug to determine the total GLOBE rebate amount. However, the rebate will be calculated and paid as an incremental rebate, in addition to any Medicare Part B inflation rebate, for the period.

In the case of Medicare Part D/GUARD, the international benchmark amount will be subtracted from the Medicare net price for the drug, which is calculated as the drug’s wholesale acquisition cost, less Part D direct and indirect remuneration, less manufacturer payments under the Medicare Part D manufacturer discount program. Got that? An additional GUARD rebate will be payable on utilization of GUARD model beneficiaries if/to the extent such difference exceeds the inflation rebate that the manufacturer would otherwise pay under existing law. We can't tell whether the GUARD rebate could be payable if the drug is not subject to a Part D inflation rebate or whether it is just a benchmark.

Like the existing inflation rebates, the GLOBE and GUARD rebates would be payable to CMS, rather than to Part D plan sponsors or to Medicare Advantage organizations providing coverage of Part B drugs. However, for the GLOBE model, CMS will implement proportionate coinsurance adjustments for patients, similar to those under the Medicare Part B inflation rebate program. My guess is that these would be posted as they are today.

Limits of Innovation Center Demonstration Authority

CMMI demonstrations are just that--demonstrations of future programs to test their viability for patients and providers. To that end, as described above, CMS has incorporated structural elements and limitations on scope, geography (zip codes), products, etc.

The models might (and probably will) produce legal challenges from industry or individual manufacturers. That prior proposal from the first Trump Administration was never implemented, however, after at least two federal lawsuits.

Issues for Consideration by Manufacturers

Proposed models would go into effect soon even with the rulemaking process. Tentatively, GLOBE would apply beginning in October 2026 based on second-quarter 2026 pricing data, and GUARD would take effect in January 2027 based on annual data. Whether CMMI can gather all this pricing data that quickly remains to be seen.

There are things for manufacturers to ponder:

• Examination of all current and future pricing strategies for affected products.

• Development and submission of comments in response to the proposed rules as they apply to your products and patient population.

• Acquisition of international pricing information to determine how this will impact pricing, margins, and long-term planning.

• Identify the potential risks that the models may entail with respect to existing, or under-negotiation, licensing and commercialization partnerships. The proposed rule may necessitate revamping contract terms, such as termination rights, limits, or the coordination of pricing authority subject to competition rules, or adjusting economic terms in response to material changes. 

Comments on the proposed rules are due on February 23, 2026.