The Medicare Innovation Center has proposed two drug pricing models that would lower the cost of certain drugs to reflect international prices, which are often significantly lower than what U.S. consumers pay for the same products.
At issue is the disproportionate price Medicare beneficiaries, and the Medicare program itself, pay for certain categories of sole source drugs and single source biologics. According to a 2024 report by the Office of the Assistant Secretary for Planning and Evaluation, U.S. drug prices were 422% higher than other countries.
The Centers for Medicare and Medicaid Innovation is proposing two programs that base Medicare drug rebates on international prices. The agency estimates that just the Part B model will save $11.9 billion in Part B net spending over seven years.
The two models—GLOBE for Medicare Part B and GUARD for Medicare Part D—will factor in international prices into the inflationary rebates drug manufacturers must pay to the program for certain single-source drugs and sole-source biologics that are separately payable under Medicare Parts B and D, if CMS finalizes the rule.
The proposed rules would test two methods for calculating Part B and Part D inflationary rebates. The first would calculate the rebates based on the estimated lowest international price from commercially available data sources; the second would use voluntarily submitted manufacturer information to determine the average international price.
All drug manufacturers that produce the selected drugs would be mandated to participate in the program. There is a 60-day comment period on the models.
The Innovation Center models would reduce beneficiary co-insurance on the selected drugs and biologics and increase the amount paid to providers proportionately. The models will run for five years, from Oct. 2026 to Sept. 2031. CMS will take an additional two plan years so that it can appropriately calculate the retrospective rebates.
Roughly a quarter of Medicare beneficiaries who live in a defined geographic area will participate in the program.
“As HHS Secretary, I am focused on making health care affordable – starting with the price Americans pay for prescription drugs,” Health Secretary Robert F. Kennedy, Jr, said in a statement. “On May 12, President Trump ordered an all-of-government response to the unfair gap between U.S. drug prices and what other nations pay. CMS is answering that call with two new models under Parts B and D that tie drug prices and rebates to costs in comparable countries. Americans deserve access to low-cost medicines on the same terms as other developed nations.
CMS has found that, “In 2021, the top 20 drugs accounted for over half of total Medicare Part B [fee-for-service] drug spending, with the top 10 representing 40 percent.” Two-thirds of total Medicare spending is on rebateable Medicare Part B drugs, the agency found.
Spending was concentrated in oncology, immunology, skin substitutes, ophthalmology, endocrinology, and rheumatology in 2024, according to CMS.
“For too long, the patients who use Medicare Part B and the taxpayers who fund it have been paying far more than people from comparable countries for the exact same drugs,” CMS Administrator Mehmet Oz, M.D., said in a press release. “The proposed GLOBE Model will reduce costs and improve quality of care without slowing down medical innovation. At CMS, we’re not just talking about making life more affordable. We’re delivering results.”
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