A recent analysis in The Lancet warns that proposed Medicare pricing reforms under the Trump administration—known as “Most-Favoured-Nation” models—could trigger global pharmaceutical price hikes and launch delays. These policies would link US payments for drugs to rates in other wealthy nations, potentially forcing manufacturers to adjust strategies abroad to offset reduced Medicare reimbursements.
According to the report, the new policy may cause pharmaceutical manufacturers to adjust their pricing strategies, including raising prices or postponing product introductions.
Medicare Pricing Policy
The “Most-Favoured-Nation” pricing policy requires pharmaceutical companies to pay additional rebates when Medicare prices for these drugs exceed the prices charged in comparable high-income nations. Without exemptions, the team estimates that the administration’s models could cut Medicare spending by 16% for medicines provided in hospitals and clinics and 18% for medicines purchased at pharmacies.
Medicare is the US government health-insurance programme covering around 68 million older and disabled people living in the United States. Historically it was barred from negotiating medicine prices directly with manufacturers until the 2022 Inflation Reduction Act authorised it to negotiate prices for a small number of costly medicines. The programme now plays a central role in determining national drug-spending trends.
The Trump administration’s new “Most-Favoured-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, providing a test case for broader implementation.
Impact on Pharmaceutical Markets
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 United States, as manufacturers respond to the new US benchmarks. “The Trump administration’s Most-Favoured-Nation pricing models have the potential to deliver real savings to the US federal government and taxpayers,” said Prof. Thomas Hwang of Brigham and Women’s Hospital and lead author of the study.
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Researchers analysed 195 patented medicines that together account for $87.9 billion of Medicare’s annual spending. They estimated Medicare’s actual (“net”) prices for these medicines and compared these net prices with prices in the 19 reference countries under the proposed rules to estimate how much Medicare could save.
Without any exemptions, the analysts estimate Medicare could save $5.2 billion (16%) under GLOBE and $6.4 billion (18%) under GUARD during the initial phase. Expanding the rules to cover all Medicare beneficiaries could raise these savings to $21 billion and $25.5 billion, respectively, representing a notable impact on the federal budget.
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 US reference price. For roughly 73% of these medicines, the estimated cut would exceed the medicine’s entire annual sales there.
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. The agreements were negotiated behind closed doors and have drawn scrutiny from policy analysts.
These companies account for 131 of the 195 medicines studied (67%). If those medicines were excluded from the pricing rules, the team estimates 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).
Prof. Hwang said, “Policies in the US may impact access to medicines globally. Policymakers should ensure that availability of important medicines is not delayed as a result.” The study’s findings were presented at the Nordic Pharmaceutical Forum Summit, and the research was funded by Arnold Ventures.
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