This Time, With Comment

The Medicare regulation published in the Federal Register on Friday adds a new part 513 to title 42 of the Code of Federal Regulations. Part 513 has been used before. In November 2020 it held the Most Favored Nation Model, an earlier attempt to tie what Medicare pays for drugs given in doctors’ offices and hospital clinics to prices abroad. A federal judge blocked that model before it started, and in a rule published at the end of 2021 the Centers for Medicare & Medicaid Services withdrew it and removed part 513. The new occupant, the Global Benchmark for Efficient Drug Pricing (GLOBE) Model, takes effect on 30 November. It has been through the step the first one skipped.

The rule is issued under section 1115A of the Social Security Act, the provision that created the CMS Innovation Center and lets it “test” new ways of paying for care. GLOBE is a mandatory model, but those obliged to take part are drug companies, not doctors or hospitals. Its mechanism is a rebate. Under the Inflation Reduction Act of 2022, manufacturers already owe Medicare a rebate when the price of a Part B drug rises faster than inflation. GLOBE adds a second yardstick for some drugs: a foreign price.

For each drug, CMS takes prices in 19 countries, from Australia and Canada to Japan, Switzerland and the United Kingdom. It scales each one up by the ratio of American income per head to that country’s, never down, and takes the lowest result. A manufacturer may also submit its own net prices abroad, and the higher of the two benchmarks applies, plus a margin of 2 or 5 percent and Medicare’s usual add-on. Where Medicare’s payment rate is above that line, the manufacturer pays back the difference on each unit, less any inflation rebate it already owes. On CMS’s figures the foreign benchmarks averaged 68 percent below the 2024 American sales prices of the drugs likely to be covered.

The rebate applies only to patients in randomly chosen ZIP code areas containing about 25 percent of people in traditional Medicare Part B, and only to high-spending drugs in seven classes, including cancer, immune system and eye drugs. Patients in those areas pay less: in CMS’s illustration, 94 percent of the drugs would carry coinsurance of between 2 and 12 percent rather than the standard 20. The model starts on 1 January 2027, with an opening quarter in which manufacturers may report foreign prices. Five performance years run from 1 April 2027 to 31 March 2032, with rebates collected until March 2034.

What the statute keeps from the courts

Section 1115A carries its own shield. Subsection (d)(2) says there shall be no administrative or judicial review of “the selection of models for testing,” of “the selection of organizations, sites, or participants,” or of “the elements, parameters, scope, and duration of such models.” The rule invokes it repeatedly. Which drugs are in, which patients are in and the size of each rebate are each declared not subject to appeal; the rebate is “solely determined by CMS.” Where the rule spells out the bar in one place, it adds that the “absence of such language elsewhere does not mean other parts of the GLOBE Model are not precluded from administrative and judicial review.”

The same bar did not save the earlier model. The Most Favored Nation rule was published on 27 November 2020 as an interim final rule, effective that day, with comments taken afterwards. CMS said the pandemic gave it good cause to skip advance notice. Four lawsuits followed. On 28 December Judge Vince Chhabria in San Francisco issued a nationwide preliminary injunction “based on the government’s failure to complete the notice and comment procedures required by the Administrative Procedure Act.” The limits in section 1115A(d)(2), he wrote, “do not apply to the plaintiffs’ notice and comment claim because this claim is not inextricably intertwined with the substantive statutory claims.” He called the government’s stated reasons for skipping comment “contrived.” The government did not appeal. The model never started, and CMS rescinded it, citing the injunction and the fact “that multiple courts found procedural issues.”

This time, with comment

GLOBE took the long way. It was proposed on 23 December 2025, with comments due by 23 February. CMS counts 157 unique comments among 20,168 pieces of correspondence. Answering a commenter, the final rule says that at all points in the process “CMS has complied with the requirements of the Administrative Procedure Act.” The claim that won in 2020, that comment was skipped, is not available. The objections commenters raised go to substance, and the statute’s list of unreviewable matters includes a model’s “elements, parameters, scope, and duration.” How far that bar reaches has not been tested on this model.

Commenters argued that a rebate charged to manufacturers is not a “payment and service delivery model” at all but a “fine or sanction” or a tax; that CMS was using a power to test to impose “de facto price controls” Congress had not explicitly authorised; that because the drug market is national, a test in a quarter of the country would operate as a “functionally mandatory, nationwide program”; and, citing FCC v. Consumers’ Research, that section 1115A does not allow “sweeping Most Favored Nation (MFN)-style rebates.” CMS rejected each one. It acknowledged that GLOBE “represents a novel application” of its authority, but said the rebates are payments because, like the existing inflation rebates, they reduce Medicare’s net cost of drugs, that the statute expressly lets it limit a test to “certain geographic areas,” and that GLOBE “would not implement sweeping MFN-style pricing.”

A smaller test

The comment period also changed the model. The final rule moves the first performance year back six months, from 1 October 2026, and excludes drugs approved only for rare diseases, cell and gene therapies and plasma-derived products. The proposal estimated savings of $11.9 billion over seven years. The final rule estimates $440 million, and says the targeted drugs will amount to “under 1 percent” of the relevant Part B drug spending.

The final estimate also assumes that some companies will not be in the model at all. Under GENEROUS, a voluntary Medicaid model, drug companies sign agreements with CMS to offer discounts. The rule says CMS intends to use its section 1115A waiver power to excuse manufacturers in GENEROUS from GLOBE’s mandatory participation. On the 2024 drug list, CMS estimates 19 manufacturers would be in GLOBE; with the waivers, “the number of remaining manufacturers of GLOBE Model drugs would be four.” The waivers would be granted, the rule says, under the authority to test GENEROUS, “a voluntary model that is not subject to notice and comment rulemaking.” The model went through the procedure its predecessor skipped, and who must take part in it will be settled by agreements that do not.

Sources

The GLOBE final rule (91 FR 62936, CMS-5545-F) was read in the Federal Register’s full text, in particular the summary, the responses to comments on legal authority, mandatory participation and overlap with other models, the regulatory impact analysis and the text of 42 CFR part 513. The savings estimate and comment deadline of the proposal are from the proposed rule (90 FR 60244). The history of the 2020 model, its good-cause finding, the four lawsuits and the decision not to appeal are as recited in CMS’s August 2021 proposed rule and December 2021 final rule withdrawing it; Judge Chhabria’s order of 28 December 2020 in California Life Sciences Association v. CMS (No. 3:20-cv-08603, N.D. Cal.) was read on CourtListener. Section 1115A was read at Cornell’s Legal Information Institute. The 2020 interim final rule itself and Judge Catherine Blake’s Maryland ruling, on which Judge Chhabria relied, were not read. The GENEROUS model’s participation agreements are not public and were not read; which companies have signed them is not stated in the rule.