CMS Finalizes New Mandatory Drug Payment Model to Deliver Lower Drug Prices for Beneficiaries in Original Medicare Part B

The Centers for Medicare & Medicaid Services (CMS) is finalizing a groundbreaking drug payment model to address the increasingly expensive cost of drugs in Original Medicare Part B while preserving or enhancing Medicare beneficiaries’ quality of care. Building upon the Trump Administration’s ongoing efforts to reduce drug costs for Americans, the Global Benchmark for Efficient Drug Pricing (GLOBE) Model will test whether a new rebate formula for certain drugs in the Medicare Part B Drug Inflation Rebate Program reduces costs for Original Medicare beneficiaries and the Medicare program while preserving quality of care.

“Medicare Part B patients and American taxpayers have paid significantly more for prescription medications than people in comparable countries,” said CMS Administrator Dr. Mehmet Oz. “At CMS, we’re focused on more than promises to make healthcare more affordable — we’re taking action to pilot a new approach to lower costs and strengthen the quality of care while preserving medical innovation.”

Americans pay more than four times as much for brand-name prescription drugs as people in other developed countries, and Original Medicare Part B drug spending is growing faster than other drug spending in the United States. According to the Office of the Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services, drug spending in Original Medicare Part B grew nearly four times as fast as drug spending across all payers (Medicare, Medicaid, commercial) between 2008 and 2021.

The GLOBE Model uses an alternative method for calculating Medicare Part B drug inflation rebate amounts for certain separately payable Medicare Part B drugs and biological products, which are medications typically administered by clinicians in health care settings. The model tests an alternative approach to the Original Medicare Part B drug inflation rebate calculation for selected drugs using international drug pricing information to identify a benchmark that reflects prices paid in a set of economically comparable countries.

GLOBE excludes biosimilars and their reference biologicals once a biosimilar enters the market in the United States. The model will also exclude orphan-only drugs, plasma-derived products, and certain cell and gene therapies, a change from the proposed rule made in response to public comments.

The GLOBE Model will operate for five years, beginning Jan. 1, 2027, and ending Mar. 31, 2032, with pharmaceutical manufacturer rebate invoicing and reconciliation continuing until Mar. 31, 2034. The model will apply to Medicare beneficiaries who reside in a randomly selected subset of geographic areas, encompassing approximately 25% of total Medicare beneficiaries who have Original Medicare as their primary coverage. Selected beneficiaries who will be impacted by the model may begin to see reduced out of pocket costs beginning April 1, 2027.