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The projected savings from a highly touted Trump administration plan to lower Medicare drug costs may be drastically reduced — by as much as 80% — thanks to secretive deals cut with more than two dozen pharmaceutical companies, according to a new analysis. This revelation has sent shockwaves through the healthcare policy community, as the administration’s cornerstone "most-favored nation" (MFN) pricing model was once projected to save the federal government and taxpayers a staggering $26 billion over its initial years of implementation. Instead, the new data suggests that the actual impact on the federal deficit and patient out-of-pocket costs will be a mere fraction of that amount, raising urgent questions about the transparency of the administration’s negotiations with the pharmaceutical industry.
At the heart of this controversy is an ambitious, yet highly contentious, approach known as international reference pricing. Under this model, the prices Medicare pays for high-cost prescription drugs would be tied to the prices paid by 19 other wealthy, industrialized nations—countries where government-negotiated prices are often significantly lower than those in the United States. The White House has long maintained that this effort would serve as the ultimate equalizer, mitigating the long-standing problem of increasingly unaffordable prescription drugs by ensuring that American seniors are no longer "subsidizing" the rest of the world’s research and development costs.
To facilitate this massive shift in the pharmaceutical landscape, the administration is moving forward with two distinct pilot programs: the Global Benchmark for Efficient Drug Pricing (GLOBE) model for Medicare Part B, and the Guarding U.S. Medicare Against Rising Drug Costs (GUARD) model for Medicare Part D. These programs are designed to require drug manufacturers to pay additional rebates to the government if their domestic prices exceed the lowest international price found among the 19-country benchmark. While the specific regulatory text for these models is expected to be released in the coming weeks, the preliminary analysis of the "side deals" suggests the programs may be "hollowed out" before they even launch.
The Erosion of the $26 Billion Promise
The initial $26 billion savings estimate was predicated on a broad, aggressive application of the most-favored nation principle across a wide array of the most expensive drugs covered under Medicare. Medicare Part B, which covers physician-administered drugs such as oncology treatments and biologics, and Medicare Part D, which covers retail pharmacy prescriptions, have historically been among the fastest-growing areas of federal spending. By benchmarking these costs against nations like Canada, France, Germany, and Japan, the administration hoped to force a radical reset of the American drug market.
However, the new analysis reveals that the administration has entered into confidential agreements with over 24 major pharmaceutical firms. These agreements reportedly include significant "carve-outs," exemptions for certain drug classes, and adjusted "base price" calculations that effectively insulate many of the most profitable medications from the full impact of the MFN model. According to industry insiders and policy analysts familiar with the negotiations, these concessions were made to prevent a wave of litigation that could have tied up the GLOBE and GUARD models in the court system for years.
The result is a projected fiscal collapse of the policy’s effectiveness. If the 80% reduction in savings holds true, the federal government would see only about $5.2 billion in savings, rather than the $26 billion promised to voters. For patients, this means the anticipated drop in coinsurance and premiums may never materialize, or may be so negligible as to be unnoticeable at the pharmacy counter.
Understanding the GLOBE and GUARD Models
The GLOBE and GUARD models represent a significant departure from the way the U.S. government has historically interacted with the pharmaceutical industry. Since the passage of the Medicare Modernization Act of 2003, the "non-interference clause" has prohibited the Secretary of Health and Human Services from negotiating drug prices directly. The Trump administration has attempted to bypass this restriction by using the authority of the Center for Medicare and Medicaid Innovation (CMMI), which allows for the testing of new payment and service delivery models.
The GLOBE model (Medicare Part B) targets drugs administered in hospitals and clinics. These are often the most expensive drugs on the market, including specialized immunotherapy for cancer and treatments for rare genetic disorders. Under GLOBE, the reimbursement rate for these drugs—currently based on the Average Sales Price (ASP) plus a 6% markup—would transition toward the international benchmark.
The GUARD model (Medicare Part D) focuses on the self-administered drugs that millions of seniors take daily for chronic conditions like diabetes, heart disease, and asthma. GUARD aims to implement a "top-up" rebate system where manufacturers must pay the difference if their U.S. list price exceeds the global average of the 19-nation cohort.
The 19 nations used for the benchmark typically include high-income OECD members such as Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Sweden, Switzerland, and the United Kingdom. Critics of the plan, particularly from the pharmaceutical industry trade group PhRMA, argue that this benchmarking imports "socialized medicine" and "price controls" into the American free market, potentially stifling the innovation required to find cures for Alzheimer’s or future pandemic threats.
The Role of Secretive Industry Deals
The most startling aspect of the recent analysis is the revelation of "secretive deals" that have undermined the very programs the administration publicly champions. These deals are believed to be the product of intense lobbying and closed-door negotiations between the Department of Health and Human Services (HHS) and pharmaceutical executives.
One major concession reportedly involves the "phase-in" period for the MFN pricing. While the original plan called for a rapid transition to international prices, the new agreements allow for a much slower "glide path," giving companies years to adjust their pricing structures or move their intellectual property to different jurisdictions. Furthermore, certain "orphan drugs"—those intended for rare diseases—have reportedly been granted near-total immunity from the MFN benchmarks under the guise of protecting innovation for small patient populations.
Analysts suggest that these deals were a tactical choice by the administration to secure "voluntary" participation from the industry. By offering these concessions, the administration hoped to avoid the fate of its 2020 attempt at an MFN executive order, which was blocked by federal judges who ruled that the government had bypassed the necessary notice-and-comment rulemaking procedures. However, by softening the blow to the pharmaceutical industry, the administration has arguably sacrificed the primary objective of the policy: significant cost reduction for the American public.
Expert Perspectives and Economic Impact
The economic implications of an 80% reduction in savings are profound. "If these numbers are accurate, the MFN policy has been transformed from a transformative economic shift into a symbolic political gesture," says Dr. Aris Persidis, a healthcare economist and veteran observer of drug pricing trends. "The $26 billion figure was a powerful talking point. A $5 billion figure, spread across the entire Medicare population over several years, is essentially a rounding error in the context of the total federal healthcare budget."
Patient advocacy groups are also expressing deep concern. While many initially supported the MFN model as a way to bring U.S. prices in line with the rest of the world, the news of industry carve-outs has led to a sense of betrayal. "Seniors were promised relief from the crushing weight of drug costs," says a spokesperson for a leading senior advocacy organization. "If the administration is cutting backroom deals that prioritize pharmaceutical profits over patient affordability, then the GLOBE and GUARD models are nothing more than a bait-and-switch."
On the other side of the aisle, some conservative economists argue that the reduction in savings is actually a positive development, as it suggests the administration is backing away from "draconian" price controls that could damage the U.S. biotech sector. They argue that the $26 billion in "savings" would have been $26 billion removed from the R&D ecosystem, potentially resulting in fewer new drugs reaching the market in the next decade.
The Road Ahead: Litigation and Legislation
As the full details of the GLOBE and GUARD models emerge, the legal landscape remains fraught. Even with the reported concessions, many pharmaceutical companies are still expected to challenge the administration’s use of CMMI authority to implement what is effectively a national price-setting mechanism. These companies argue that the "pilot" programs are too large in scope to be considered mere experiments and that they require a formal act of Congress.
In Congress, the news of the 80% reduction in savings is likely to fuel calls for more direct legislative action. Proponents of the Inflation Reduction Act’s (IRA) drug price negotiation provisions argue that the MFN model was always a "workaround" and that a more permanent solution involves expanding the government’s power to negotiate prices directly for a larger number of drugs, without the need for international benchmarks or secretive industry deals.
The political stakes could not be higher. With the 2026 midterm elections on the horizon, the administration’s ability to deliver on its promise of lower drug costs will be a central campaign issue. If the GLOBE and GUARD models fail to produce the "historic" savings originally touted, the administration may find itself defending a policy that alienated its industry allies without providing the promised relief to its constituents.
For now, the healthcare industry is waiting for the final rules to be published in the Federal Register. Those documents will reveal the extent to which the "secret deals" have been codified into the regulatory framework. If the analysis is correct, the "most-favored nation" policy may end up being most favorable to the very pharmaceutical companies it was intended to restrain, leaving Medicare and its beneficiaries to wait even longer for true relief from the rising tide of drug prices.
