The Medicare Innovation Center has proposed two drug pricing models intended to reduce the cost of certain prescription drugs by linking Medicare rebates to international prices. The proposal focuses on drugs for which Medicare beneficiaries and the Medicare program pay significantly more than consumers in other countries.
The proposal addresses pricing for certain categories of sole-source drugs and single-source biologics covered under Medicare. According to a 2024 report from the Office of the Assistant Secretary for Planning and Evaluation, drug prices in the United States were 422% higher than prices in other countries.
The Centers for Medicare and Medicaid Innovation is proposing two models that would incorporate international prices into the calculation of inflationary rebates paid by drug manufacturers. The agency estimates that the Medicare Part B model would result in $11.9 billion in savings in Part B net spending over seven years.
The two models are known as GLOBE for Medicare Part B and GUARD for Medicare Part D. Both models would apply to certain separately payable single-source drugs and sole-source biologics covered under Medicare Parts B and D, if finalized.
Under the proposal, the models would test two different approaches for calculating inflationary rebates. One method would calculate rebates using the estimated lowest international price, based on commercially available data sources.
The second method would rely on average international prices determined from information voluntarily submitted by manufacturers. All manufacturers producing the selected drugs would be required to participate in the models.
The Innovation Center has established a 60-day public comment period for feedback on the proposed models. If implemented, the models would operate for five years, from October 2026 through September 2031. CMS would then use an additional two plan years to calculate retrospective rebates owed by manufacturers.
According to CMS, the models would reduce beneficiary co-insurance for the selected drugs and biologics while increasing payments to providers proportionately. Participation would be limited geographically, with approximately one-quarter of Medicare beneficiaries living in designated areas included in the models.
Health and Human Services Secretary Robert F. Kennedy, Jr. linked the proposal to broader administration efforts to address prescription drug pricing. “As HHS Secretary, I am focused on making health care affordable – starting with the price Americans pay for prescription drugs,” Kennedy said. He also referenced a May 12 directive from President Trump calling for an all-of-government response to differences between U.S. drug prices and those paid in other countries, stating that CMS is responding through the proposed Part B and Part D models that tie drug prices and rebates to international costs.
CMS has reported that spending under Medicare Part B is highly concentrated. In 2021, the agency found that the top 20 drugs accounted for more than half of total Medicare Part B fee-for-service drug spending, with the top 10 drugs representing 40%. CMS also found that two-thirds of total Medicare Part B spending is associated with rebateable drugs. In 2024, the agency reported that spending was concentrated in oncology, immunology, skin substitutes, ophthalmology, endocrinology, and rheumatology.
CMS Administrator Mehmet Oz, M.D., said the proposed GLOBE model is intended to reduce costs for patients and taxpayers without slowing medical innovation and described the proposal as part of CMS’s efforts to make health care more affordable.
The Medicare Innovation Center has proposed new international price-based drug rebate models aimed at reducing prescription drug spending in the U.S. The initiative under Medicare Innovation would link Medicare drug payments to prices paid in other high-income countries.
Under the proposal, drug manufacturers would be required to provide rebates if U.S. prices exceed international benchmarks. The Medicare Innovation Center believes this approach could improve affordability while maintaining patient access to essential medications.
How the Medicare Innovation Drug Rebate Model Would Work
Under the proposal, the Medicare Innovation Center would test a payment model that compares U.S. drug prices with those paid in selected international markets. If Medicare pays more than the international reference price, manufacturers would be required to issue rebates to Medicare under the Medicare Innovation framework.
The model is designed to encourage drug makers to lower launch and list prices while preserving beneficiary access. According to the Medicare Innovation Center, the initiative supports Medicare Innovation’s goal of balancing cost control with continued pharmaceutical research and development.
