New US Medicare pricing policies could reshape global pharmaceutical markets

by Lancet

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A new modeling study published in The Lancet suggests that U.S. Medicare's new "Most-Favored-Nation" pricing policy, which ties what Medicare pays for medicines to prices charged in other high-income countries, could push pharmaceutical manufacturers to raise prices or delay launches. For about three in four medicines studied, the resulting Medicare savings would be worth almost four times that medicine's entire annual sales in the country used to set its price, potentially giving manufacturers a strong incentive to change how they price and launch products outside the U.S.

The policy could cut Medicare's prescription drug spending by $5.2 billion (16%) under GLOBE, which covers medicines given in hospitals and clinics, and $6.4 billion (18%) under GUARD, which covers medicines bought at pharmacies, during its initial phase, which would cover about 25% of the Medicare program. These savings could rise to an estimated $21 billion under GLOBE and $25.5 billion under GUARD if expanded to all Medicare beneficiaries.

But the study estimates that reported confidential deals between manufacturers and the Trump administration could cut the policy's overall Medicare savings: For the initial group of 17 manufacturers with announced agreements, the study's projected savings would be cut by 71%.

Medicare is the U.S. government health insurance program covering around 68 million older and disabled people living in the U.S. It was historically barred from negotiating medicine prices directly with manufacturers until the 2022 Inflation Reduction Act authorized it to negotiate prices for a small number of costly medicines. The Trump administration's new "Most-Favored-Nation" policy goes further, aligning what Medicare pays for brand-name medicines with prices in comparable high-income countries, adjusted for purchasing power. Under the GLOBE and GUARD pricing models, a randomly selected 25% of Medicare beneficiaries would be covered over a five-year period.

Because both pricing models tie what Medicare pays to prices charged in other countries, they could also reshape drug pricing and market strategy outside the U.S. as manufacturers respond to the new U.S. benchmarks.

How the pricing models work

"The Trump administration's Most-Favored-Nation pricing models have the potential to deliver real savings to the U.S. federal government and taxpayers. But if manufacturers can evade participation in these models by striking side deals, most of those savings might not be realized," said Thomas Hwang of Brigham and Women's Hospital and lead author of the study.

"People living in the United States have long paid more for medicines than virtually anywhere else in the world. The Most-Favored-Nation pricing models were meant to address this gap, but their scope is limited by various exemptions and will likely face legal challenges," added study author Aaron Kesselheim of Brigham and Women's Hospital (U.S.).

Researchers analyzed 195 patented medicines that together account for $87.9 billion of Medicare's annual spending ($32.7 billion through GLOBE and $55.2 billion through GUARD). Because manufacturers' actual rebates and discounts are confidential, the researchers estimated Medicare's actual ("net") prices for these medicines.

They then compared these net prices with prices in the 19 reference countries under the proposed rules to estimate how much Medicare could save. The researchers also modeled two changes to the policy: expanding the rules to cover all Medicare beneficiaries instead of the current 25% and excluding manufacturers with confidential deals.

Pressure on overseas pricing

Without any exemptions, the researchers estimate Medicare could save $5.2 billion (16%) under GLOBE and $6.4 billion (18%) under GUARD during the policy's initial phase. Expanding the rules to cover all Medicare beneficiaries could raise these savings to $21 billion and $25.5 billion. Under these payment models, the lowest price used as an international benchmark was found to be 71% lower than what Medicare pays, with South Korea, Norway and Australia as the most common countries referenced by Medicare to set pricing.

The study also suggests that among the 138 medicines with available sales data, the estimated cut to Medicare spending was about 3.8 times bigger than that medicine's total annual sales in the country used to set its U.S. reference price. In addition, for about 73% of these medicines (101 of 138), the estimated cut would exceed the medicine's entire annual sales there.

For most of these medicines, keeping prices low in other countries would cost manufacturers more in lost Medicare revenue than they earn from selling there, creating a strong incentive to raise prices or block them from being visible to Medicare for referencing. Manufacturers could try to do that by developing different formulations, converting existing discounts into confidential rebates or delaying launches.

"Policies in the U.S. may affect access to medicines globally. Policymakers should ensure that availability of important medicines is not delayed as a result," said study author Kerstin Vokinger of ETH Zurich and University of Zurich (Switzerland).

"Referenced countries, from Germany to Japan to Australia, are facing substantial pressure from the U.S. administration and industry to raise prices and spending on medicines," added Hwang. "But this is colliding with the reality that other countries have limited budget room to give."

Side deals erode projected savings

An initial group of 17 pharmaceutical companies struck separate, confidential deals with the Trump administration that reportedly include exemptions from Medicare's GLOBE and GUARD rules. These companies account for 131 of the 195 medicines studied (67%). If those medicines were excluded from the pricing rules, the researchers estimate the potential savings would shrink by 71%, leaving just $3.3 billion (28.7%) in savings ($0.9 billion under GLOBE and $2.4 billion under GUARD).

"The latest round of deals announced on Aug. 31 brings the reported tally to 26 companies. By our updated estimate, exemptions would push savings lost from an estimated 71% in our study to nearly 80%. Because these deals aren't public, it is challenging for policymakers and the public to judge whether Most-Favored-Nation pricing is delivering what was promised," said Hwang.

The authors note some study limitations. The estimates rely on modeled Medicare net prices and on international prices drawn from public databases, which may not reflect other countries' confidential discounts. The medicine list, based on historical Medicare data, may not capture newly approved medicines or future policy changes. Finally, the data presented in this study are estimates and cannot predict how manufacturers or insurers will respond to the new rules in practice, including whether manufacturers will change their launch or pricing plans in reference countries.

Publication details

Most-favoured-nation pricing for prescription drugs in US Medicare: a cohort study, The Lancet (2026). DOI: 10.1016/S0140-6736(26)01555-2

Journal information: The Lancet

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Clinical pharmacology Provided by Lancet Who's behind this story?

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