| GLOBE is coming down to earth. The Trump administration has tried to make lowering the price of prescription drugs a central part of its health affordability agenda. But its efforts to tie U.S. drug prices to lower prices abroad, a policy known as most-favored-nation (MFN) pricing, have largely been too opaque or limited in scope. The Centers for Medicare and Medicaid Services Wednesday afternoon released its final version of the GLOBE model, which would force drug companies to pay a rebate if the U.S. price of certain Medicare Part B drugs is higher than a benchmark based on prices in other wealthy countries. It’s much smaller than regulators initially proposed. Even that scaled-back version could shrink further. → Case in point: It’s now estimated that the GLOBE model will save just $440 million over seven years, a 96 percent reduction from the initial projected seven-year savings of nearly $12 billion from the proposed version. The $80 million in average annual savings is a drop in the bucket for a program that spends more than $80 billion on drugs every year. (Though not all of that total reaches the threshold for inclusion in the pilot.) The GLOBE model will test international prices for a limited group of drugs in geographic areas that cover about 25 percent of people under traditional Medicare. Let’s go through it. - Just three drugmakers — Biogen, Daiichi Sankyo and Takeda — are covered by the final model, a decrease from the roughly 40 companies estimated in the proposed rule.
- Regulators are also giving companies an off-ramp, exempting them if they opt into the GENEROUS model that imposes MFN pricing in the Medicaid program. However, pharmaceutical industry consultant Brian Reid notes that Takeda may soon be knocked out once Entyvio, its ulcerative colitis and Crohn’s disease medicine, finishes going through Medicare price negotiation.
Participation in GENEROUS could be an “easy trade” for companies that otherwise would face GLOBE’s international price comparisons, Rob Smith, a managing partner at Capital Alpha, wrote in an investor note. However, a spokesperson for Daiichi Sankyo tells me the company is “still evaluating the situation” and declined to comment about whether it would participate in the GENEROUS program. (Biogen did not respond to a similar request.) - The overall drug list is narrower, too: Because of the exemptions CMS is offering, the model in its current form covers only a handful of drugs. CMS dropped several categories from the final model, including drugs with a biosimilar once the biosimilar is on the market, drugs used only for rare diseases, plasma-derived products, and certain cell and gene therapies.
Products representing a smaller portion of the program are also exempt. To qualify for GLOBE, a drug must account for more than $100 million in traditional Medicare Part B spending per year. - There have been 27 companies that have announced MFN deals with the Trump administration, which exempts them from the model and its yet-to-be-finalized counterpart for Medicare Part D called GUARD. The details of those agreements are confidential, so it has been difficult to assess their overall impact on drug prices. It’s also not yet clear how many drugmakers have agreed to participate in GENEROUS — or how many of their products are being offered to state Medicaid programs.
- Yes, but: Companies without exemptions could be added to the model should they release drugs in the U.S. at a higher price than the roughly 19 reference countries over the next five years.
After the final version of the model dropped Wednesday afternoon, CMS Administrator Mehmet Oz said in a statement that the agency is focused on more than promises to make health care more affordable.” “We’re taking action to pilot a new approach to lower costs and strengthen the quality of care while preserving medical innovation.” While the administration claims victory, the pharmaceutical industry is still up in arms — reinvoking claims that the model is illegal, but not yet explicitly previewing any litigation. Consumer groups, meanwhile, are saying, “Told ya so.” “We warned that allowing drug companies to use voluntary deals to escape a mandatory pricing model would weaken GLOBE and reduce savings for patients. They moved forward anyway, and now we’re seeing the result,” said Merith Basey, CEO of Patients For Affordable Drugs, a patient advocacy group. The model’s start date has been pushed back from Thursday until Jan. 1 and will run for five years. The goal is to use prices paid in other wealthy countries to help determine how much drugmakers would owe Medicare when prices rise. Chris Meekins, a managing director at Raymond James and former Department of Health and Human Services official during the first Trump administration, called the final version “defanged.” “We viewed the proposed model as minimally consequential, but this final rule is even more dramatically less consequential for industry,” Meekins wrote in a note to investors, adding that it’s unlikely to have an impact on drugmakers’ finances. “The longer-term significance of the rule may lie less in the dollars at stake under this particular model and more in what it establishes, or fails to establish, about the limits of CMMI authority,” Meekins said, referring to the CMS Innovation Center that’s running the pilot programs. - What drugmakers are saying: The industry is still pushing back against the idea, worried that this could help move similar international reference-pricing policies into action amid concerns about the precedent it could set for how broadly CMMI uses its authority.
The Pharmaceutical Research Manufacturers Association (PhRMA), which represents large drugmakers, insists that imposing MFN pricing in Medicare is “is unlawful, short-sighted and harmful to patients and innovators,” according to Chanse Jones, a spokesperson for the powerful industry group. John F. Crowley, CEO of the Biotechnology Innovation Organization, whose membership includes a majority of small and medium-size biopharma companies, argued that government-set international prices would not address the underlying costs of developing medicines and could threaten investment in drug development. - What academics are saying: Thomas Hwang, a Harvard University physician and researcher who has studied these drug-pricing policies, said the Trump administration’s MFN pricing effort “appears to be on stronger procedural footing” than the attempt President Donald Trump made during his first term. He called the final model a “hollowed-out version” of the proposal, adding that “Medicare beneficiaries and taxpayers will save only a fraction of what was originally proposed.”
In 2020, Trump ordered Medicare to impose MFN pricing on drugs in the program — but it was blocked by the courts on procedural grounds and was ultimately rescinded by the Biden administration. - What CMS is saying: In the final rule, CMS pushed back on claims received in comment letters that the model is illegal or goes beyond CMMI’s scope — arguing in part that Congress expressly empowered the Innovation Center to test new Medicare payment approaches, and that the model’s limited scope distinguishes it from policies courts have struck down as executive overreach.
“We acknowledge that manufacturers may disagree with the GLOBE Model’s rebate methodology and may believe that the rebate obligations are excessive,” the agency writes in the final rule. “However, disagreement with payment policy does not establish a constitutional violation.” But that doesn’t mean that legal offices aren’t sharpening their proverbial pencils — another point of criticism from patient groups. “The administration is likely to end up wasting more taxpayer money fighting the likely lawsuits on this model than it saves for patients,” said Peter Maybarduk, director of Public Citizen’s Access to Medicines program. “Americans need relief from high drug prices, not more secret deals with drug corporations that keep prices high.” With fewer than 100 days before Medicaid’s new work-reporting requirements take effect, five Democratic governors are warning the Trump administration that states don’t have enough time to rebuild and test systems needed for a Jan. 1 rollout. In a letter to Health Secretary Robert F. Kennedy Jr., the governors say that the interim final rule released in June made “significant changes from the direction CMS had communicated to states over the preceding year.” The changes are forcing states to revise eligibility systems, forms, notices and staff training due to the shift in direction, which the Thursday letter describes as “not minor or technical adjustments.” The governors — Oregon’s Tina Kotek, California’s Gavin Newsom, Maine’s Janet Mills, New Mexico’s Michelle Lujan Grisham and Virginia’s Abigail Spanberger — are asking HHS to delay the compliance date “until states’ systems are ready.” “We have all seen the consequences when federal programs are rushed into effect without adequate time to build and test them: eligible people lose benefits, and public confidence suffers,” the governors write. → The governors acknowledge they are part of a 26-state lawsuit challenging how CMS is implementing the work requirements, arguing that it has interpreted the exemption for people who are “medically frail” too narrowly. They also say the request for a delay in implementation “stands on its own and is without prejudice to any state’s pending legal challenges.” CMS has in the past declined to comment on the lawsuit. Although the governors tell HHS that pushing forward the implementation date could protect the department (and states) from litigation, they warn of “remediation costs [that] a failed rollout would generate.” “Lost in daydreams? Enraged by chewing sounds? Psychiatry is taking a closer look,” The Post’s Ariana Eunjung Cha reports. “Christa Pike in critical condition after botched Tennessee execution, lawyers say,” report Mark Berman, Brady Dennis and Katie Mettler at The Post. “MAHA influencers have doubts about their Senate leader,” Nancy Vu reports at the National Journal. “Tens of Billions in Contested Tax Bills Hinge on Two Words,” writes Richard Rubin at the Wall Street Journal. This newsletter is published by WP Intelligence, The Washington Post’s subscription service for professionals that provides business, policy and thought leaders with actionable insights. WP Intelligence operates independently from the Washington Post newsroom. Learn more about WP Intelligence. | 
