Three new drug pricing models for manufacturer rebates: Key implications

The Center for Medicare and Medicaid Innovation (CMMI)[1] recently released information about three new models aimed at testing alternative calculations for manufacturer rebates, to ensure net drug prices are closer to those in economically comparable countries.

In December 2025, CMMI released two separate notices of proposed rulemaking for the Global Benchmark for Efficient Drug Pricing (GLOBE) Model and the Guarding US Medicare Against Rising Drug Costs (GUARD) Model, and a Request for Applications for applicable manufacturers for its Generating Cost Reductions for US Medicaid (GENEROUS) Model. Both the GLOBE and GUARD Models are proposed rules and may therefore differ from what is ultimately finalized.

Public comments on the GLOBE and GUARD proposed rules are due on February 23, 2026. The pre-implementation application period for the GENEROUS Model opened on November 10, 2025 and closes on March 31, 2026, although that model began implementation on a rolling basis on January 1, 2026.

We summarize the three models and their implications below.

Medicare: Applying the GLOBE and GUARD Models

If the GLOBE and GUARD rules are finalized as proposed, both models will become mandatory. They will change how the Medicare inflation rebate – established in the Inflation Reduction Act – is calculated for selected drug classes.

The models will be implemented in randomly selected geographic locations, both models encompassing one quarter of Medicare Parts B and D beneficiaries. The remainder of the Medicare Parts B and D beneficiaries will act as control groups.

Model participants will be manufacturers of drugs covered by Medicare Part B (GLOBE) and Medicare Part D (GUARD) that are not otherwise excluded.

With respect to the rebates, the manufacturer would be charged a rebate relative to international prices in certain developed countries, calculated in two distinct ways. One calculation will use one or more external international drug pricing data sources (e.g., IQVIA’s MIDAS; Global Data Pharmaceutical Prices, or POLI; and Eversana’s NAVLIN Price & Access Data) to calculate the lowest list price in the set of reference countries. The second calculation would use manufacturer-reported international prices, net rebates, and price concessions to calculate an average net price across the reference countries.[2]

The default international benchmark would be the greater of the two prices from both approaches. The benchmark is compared to the net price in Medicare to determine whether a penalty applies. If the benchmark is lower, a penalty applies, and it is incremental to the inflation penalty. In both models, the benchmark is established just prior to the first year a drug enters the model and is maintained at that level throughout the duration of the pilot program.[3]

Reference countries are the same in both models and include Australia, Austria, Belgium, Canada, Czech Republic, Denmark, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden, Switzerland, and the United Kingdom.

GLOBE (Part B)

What is the GLOBE Model?

On December 19, 2025, CMMI released the GLOBE Model proposed rule for a mandatory pilot. This model would “assess a rebate for certain drugs payable under Medicare Part B if the prices exceed those paid in economically comparable countries.”

Drugs included in the model

The GLOBE Model includes Part B drugs in select therapeutic areas defined in the following USP Medicare Model Guidelines categories: Antigout Agents, Antineoplastics, Blood Products and Modifiers, Central Nervous System Agents, Immunological Agents, Metabolic Bone Disease Agents, or Ophthalmic Agents. A drug would enter the program if approved after the start date, as long as it is in at least one of the selected categories and qualifies based on the spending threshold.

Drugs are excluded if there is less than $100 million in spending in a 12-month period prior to January 1, 2027, which will be adjusted for inflation in subsequent years. The model would exclude Medicare Drug Price Negotiation drugs with an established Maximum Fair Price (MFP) and drugs with generic or biosimilar competition.

The model applies only to beneficiaries enrolled in Medicare Part B fee-for-service (FFS) as their primary payor and who meet certain additional criteria. Once a beneficiary is selected for participation, they remain in the model even if they change zip codes; however, a beneficiary will no longer qualify if they enroll in a non-Medicare FFS plan.

How would the reference price be calculated?

The Centers for Medicare and Medicaid Services (CMS) would establish the international reference price with two data sources to conduct quarterly price comparisons:

• CMS would calculate the lowest country-level, weighted average price for each reference country, adjusted by the country-specific purchasing power parity (PPP)[4][5]
  
  
• The manufacturer may submit the net price for each drug, exclusive of any discounts, rebates, or price concessions, to calculate a weighted average net price, adjusted for PPP[6]

To set the GLOBE Model benchmark, CMS would select the greater of the two prices in a calendar quarter, then add six percent of the average sales price (ASP).[7] Manufacturers would pay a GLOBE rebate for an applicable calendar quarter if the per-unit GLOBE Model rebate amount is the greater of (1) the difference between the Part B specified amount (typically ASP plus six percent) and the per-unit GLOBE Model benchmark amount or (2) the difference between the Part B specified amount and the inflation-adjusted payment amount (baseline ASP plus six percent, plus the allowable Consumer Price Index (CPI-U) increase).

Cost savings for beneficiaries

This model would lower the beneficiary coinsurance amount to reflect the lower benchmark price and adjust payment to the healthcare provider (drug purchaser) to ensure they are being properly reimbursed.

Timeline

The model would run from October 2026 through September 2031, with payment adjustments and evaluation through September 2033.

GUARD (Part D)

What is the GUARD Model?

On December 19, 2025, CMMI released the GUARD Model proposed rule. This model would “assess a rebate for certain drugs payable under Medicare Part D if the prices exceed those paid in economically comparable countries.” The model would develop a manufacturer rebate calculation benchmark that is derived from international pricing information (either obtained from the manufacturer or available to CMS) instead of the current domestic rebate calculation benchmark.

Drugs included in the model

The GUARD Model includes all Part D drugs in select therapeutic areas defined in the following USP Medicare Model Guidelines categories: 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 categories will not change throughout the model evaluation period. A drug will be classified under the USP category based on criteria related to US Food and Drug Administration (FDA)-approved indications, active ingredients, or National Drug Code (NDC)-9 or RxNorm indicators. A drug may have multiple categories.

Once selected, a drug retains its original category of selection. A newly approved drug will enter the program if it is one of the USP categories affected. If a drug associated with a New Drug Application (NDA) or Biologics License Application (BLA) is selected, all NDCs associated with that BLA or NDA are included.

Starting in 2027, drugs with less than $69 million in spending in the prior year, adjusted for inflation in subsequent years, will be excluded. The model also excludes Medicare Drug Price Negotiation drugs with an established Maximum Fair Price (MFP) and drugs with generic or biosimilar competition. Drug units that are subject to 340B discounts are also excluded.

The model applies only to beneficiaries in a Prescription Drug Plan (PDP) or a Medicare Advantage Prescription Drug Plan (MA-PD), not an employer group waiver plan. Once a beneficiary is selected for participation, they remain in the model even if they change zip codes.

How would the reference price be calculated?

CMS would establish the reference price by comparing two approaches:

• CMS would calculate the lowest country-level, weighted average price for each reference country, adjusted by the country-specific PPP[8]
  
  
• The manufacturer would be able to submit the net price for each drug, exclusive of any discounts, rebates, or price concessions, to calculate a weighted average net price, adjusted for PPP[9]

To set the GUARD model benchmark, CMS would select the greater of the two prices (multiplied by a small adjustment factor).[10]

Manufacturers would pay a GUARD rebate if the Medicare net price (including all direct and indirect remuneration rebates and required discounts) is greater than the GUARD model benchmark.

When this occurs, the manufacturer pays an incremental GUARD rebate equal to the difference between the inflation penalty and the GUARD rebate, provided that amount is non-negative. The manufacturer will receive their first GUARD model rebate report two years after the first performance period, or 2029.

Cost savings for beneficiaries

Beneficiaries would only see a reduction in their out-of-pocket costs if a manufacturer decided to drop their list price or a plan changed their cost-sharing structure.

Timeline

The model would be implemented through a five-year test period from January 2027 through December 2033. Evaluation, invoicing, and reconciliation payments would run through December 2035.

Medicaid: The GENEROUS Model

On November 14, 2025, CMS released a Request for Applications for its GENEROUS model, which seeks to bring most-favored-nation (MFN) pricing to covered outpatient drugs that are currently part of the Medicaid Drug Rebate Program (MDRP).

Drugs included in the model

States can choose which drugs they want to be part of the GENEROUS Model in their state; rather than negotiate individually, they may be able to secure better terms through the model.

Under the GENEROUS Model, participating drug manufacturers would provide supplemental rebates, in addition to the rebates now required to be paid by drug manufacturers under the MDRP.

Participation in GENEROUS is voluntary for both the manufacturers and the states. If an entity chooses to participate, they would agree to participate for at least one year, with potential annual renewals for the remaining four years in the pilot (for a total of five years).

How would the reference price be calculated?

The current price determination for the MDRP is set in statute. For brand-name drugs, the unit rebate amount (URA) is 23.1 percent of the Average Manufacturer Price (AMP) – or the difference between the AMP and "best price"[11] (whichever is greater) – plus an additional rebate for list price increases in excess of consumer inflation.

The MFN price that is used by the model is based on the second-lowest net international price among the UK, France, Germany, Italy, Canada, and Japan (the remaining G-7 countries), along with Denmark and Switzerland, adjusted by GDP per capita using a PPP method.[12] Participating biopharmaceutical companies will be asked to report their international prices in the reference countries.

The GENEROUS Model would calculate a Guaranteed Net Unit Price (GNUP) based on the MFN price benchmark. Both the URA and the GNUP would be subtracted from the list price (Wholesale Acquisition Cost or WAC). Therefore, if a manufacturer were to participate, there would be savings if the MFN benchmark price were lower than the supplemental rebate currently offered.

In exchange for MFN pricing, state Medicaid programs would agree to institute “uniform coverage terms,” such as aligned prescription drug lists, prior authorization rules, and other utilization management requirements across both FFS and managed care organization entities. States would be barred from pursuing other supplemental rebates from manufacturers for drugs that are included in this model.

Cost savings for beneficiaries

Beneficiary cost sharing in Medicaid is not dependent on the drug’s price. This model is not expected to save money for beneficiaries.

Timeline

The model pre-implementation application period opened on November 10, 2025 and ends March 31, 2026. The model will be implemented on a rolling basis starting on January 1, 2026, and will be in place for five years (through December 31, 2030).

For more information

For additional information regarding the three models and how they may impact your specific company portfolio, or if you require assistance in submission of comments, please contact the authors or any member of DLA Piper’s Healthcare Regulatory team.

 

^{[1] CMMI was created in 2010 by Congress, as a part of the Affordable Care Act, to identify ways to improve healthcare quality and reduce costs in Medicare, Medicaid, and CHIP. The primary avenue by which CMMI achieves its goals is through new healthcare payment and service delivery models. Examples of previous CMMI projects include: the Home Health Value-Based Purchasing model and the Medicare Care Choices model. While CMMI welcomes input from industry and providers on ideas for new or existing models, CMMI develops the models itself.}

^{[2] This information is voluntarily submitted by the manufacturer. If a manufacturer does not submit its international prices, the international benchmark is the lowest observed list price calculated from the internal data sources.}

^{[3] CMS notes they can reduce the benchmark if a lower price is found in a new data source.}

^{[4] The PPP adjustment would be calculated by dividing the US real gross domestic product (GDP) per capita by the country’s real GDP per capita.}

^{[5] Any prices that are less than five percent of the US price would be eliminated from the country reference price.}

^{[6] Manufacturers choosing to submit a net price would be required to execute a data agreement at least 90 calendar days prior to submission and the data must be submitted no later than six months into the evaluation period.}

^{[7] With a threshold percentage adjustment of two to five percent.}

^{[8] The PPP adjustment would be calculated by dividing the US real GDP per capita by the country’s real GDP per capita.}

^{[9] Manufacturers choosing to submit a net price would be required to execute a data agreement at least 90 calendar days prior to submission and the data must be submitted no later than six months into the evaluation period.}

^{[10] The manufacturer must continue to submit net prices for the alternative net price benchmark to be maintained.}

^{[11] Best price is defined as the lowest available price to any wholesaler, retailer, or provider in the United States (excluding certain government program such as VA health care benefits).}

^{[12] This list would remain stable over the five-year model test period.}