GLOBE, GUARD, and weighing the “most-favored nation” coal in the drug industry’s stocking
Managing Partner
December 23, 2025
The GLOBE and GUARD mandatory Medicare drug pricing models proposed by CMS on December 19th shift the rebates companies pay CMS from “don’t raise prices faster than inflation” to “don’t raise prices higher than the rest of the developed world, on a GDP/capita-adjusted basis.” This will be damaging to biopharma innovation if implemented broadly.
How damaging? Barring strong and sustained intervention by the US government to actually force other countries to pay more, actual and projected global profits from novel medicines serving older populations will most likely drop. We’ve done the math on a couple drugs to quantify the hit.
We estimate that net US revenue for Vabysmo, Roche’s injectable monoclonal antibody treatment for a variety of ophthalmologic diseases including wet age-related macular degeneration, would fall by 22% if GLOBE were rolled out to all Medicare beneficiaries.
And we estimate that net US revenue of Lilly’s GLP‑1 diabetes treatment Trulicity would drop by ~30% if GUARD applied to all Medicare beneficiaries.
You can see our math in this short slide deck. The hit to biopharma revenues would be substantial. As would the hit to NPVs for products in development. The early impact of the IRA shows us how that ends: fewer new medicines of any type that fall into the policy strike zone (e.g., the 9‑year “pill penalty” discourages early-stage investment in NDA-path drugs for non-orphan diseases of aging, like heart failure and Alzheimer’s).
Right now, GUARD and GLOBE are more narrow, seven-year pilot programs and will only cover 25% of Medicare enrollees, randomly assigned by zip code. But after that, they expand to all enrollees. So the actual hit to Vabysmo US revenues would likely be around 5 – 6% and Trulicity sales would drop by 7 – 8%, but anyone still developing their drug or just launching one should keep in mind that this pilot program will apply to 100% of Medicare in the future if the US doesn’t recognize the harms of MFN.
As written, these price control policies will hit certain categories of drugs (but in the future, there’s no reason to think they won’t be applied to all drugs) that aren’t subject to IRA negotiations, don’t have generic or biosimilar competition, and reach certain sales thresholds (GLOBE, >$100 million; GUARD, >$69 million).
So if you are developing a drug for younger patients (e.g., anyone under 50), the game theory suggests that you should leave your ex-US pricing strategy alone and take the small hit to US Medicare sales caused by GLOBE and GUARD. But don’t celebrate just yet because nothing stops the US government from extending MFN policy to all markets. This was all foreseeable as far back as 2018 when MFN came around the first time and was followed by HR3 and then the IRA.
But if a product falls within the scope of either program (i.e., if it has significant Medicare sales), pharma companies will have to be mindful of the difference between ex-US prices and US prices (again, on a GDP/capita-adjusted basis). Since the majority of the value of most drugs is realized in the US, which tends to approve drugs sooner and cover them more generously, we think the only logical reaction to GLOBE and GUARD is to raise ex-US prices. However, there’s a good chance that this will result in lost profits since we have no evidence that those countries will pay more. If they were going to pay higher prices, we think companies would have sussed that out and would be selling their products at higher prices already.
Other countries have to be made to WANT to pay higher prices and clearly the threat of companies not selling them novel medicines isn’t enough to make them WANT to pay more. So the US government would need to put other terms on the table, like threats to restrict US imports of those countries’ exports unless they increased spending on novel medicines. While there was a signal of that happening when trade talks resulted in the UK agreeing to pay more for medicines, such trade tactics aren’t routine and we would need to believe that such trade pressure would be sustained for decades to come if we are to forecast that other countries will be paying higher prices for the long run – and it is precisely the long run that matters to early-stage R&D funding decisions.
So if, as economic theory would predict, other countries react to higher prices by not covering the drugs for their citizens or restricting access to those drugs, the end result is that companies will generate less revenue and profit overseas. For a development-stage drug that has yet to launch, the only rational decision may be to skip certain markets altogether.
Drug development is already largely incentivized by the US market and GLOBE and GUARD will make that only more true. We’re robbing ourselves of the subsidies to R&D that come from other countries at least pitching in.
It’s like we’re all in a canoe, Americans, Canadians, and Europeans together, rowing away from a waterfall of disease and Americans have been rowing harder by paying more for new medicines. And by requiring that everyone row the same, GLOBE and GUARD will only result in other countries jumping out of the canoe, leaving only Americans to row.
image courtesy of NPLB Senior Fellow Sofia Brites Boss
Of course, we could all just go over the waterfall. Americans can try to pay as little as others (as may be the intent of GLOBE and GUARD) but that will only result in defunding R&D as investors hunt for adequate financial returns in other industries. But going over the waterfall won’t save us money because diseases are expensive. They rob us of productivity and cost us a fortune in hospital bills. And unlikely medicines, disease and hospitals don’t go generic. Even at seemingly high US prices, medicines are a bargain compared to the alternative. And the bottom line is that the US has to pay enough to drive enough investment in biomedical innovation.
Yes it would be ideal if other countries paid their fair share for innovation. Right now, they don’t – as we’ve covered at length. GLOBE and GUARD aren’t going to change that. So instead of pressuring companies with most-favored nation policies that lead to innovation becoming less profitable and ultimately leave patients without critical medicines, the US government must engage in trade negotiations that threaten a country’s exports to get them to spend more on medicines.
The solution to freeriding – whether it’s on defense against global military threats or global disease threats – is trade negotiations. The US should continue to spend what it must to defend Americans while trying to get other countries to do so. But MFN alone, as represented by GLOBE and GUARD, only robs us of other countries’ contribution to incentivizing R&D that improves lives for all Americans.
Meanwhile, if anyone reading this thinks “but what about making drugs more affordable!?”, know that GLOBE and GUARD do little to solve that. The answer to affordability is the same as it’s always been, for everyone to have proper insurance that doesn’t charge them more out of pocket than they can afford for an appropriately prescribed medicine when they need it. Novel medicines only represent 8% of total healthcare spending and absolutely can be made affordable to everyone through insurance reform to lower what plans can charge out of pocket. Eliminating out-of-pocket costs for novel medicines would likely only impact premiums by a few percent.
Policymakers continue to target the prices innovators charge because that’s what the public applauds, and politics tends not to let facts get in the way of votes. We have a reputation problem. Facts alone won’t save us. Anyone with a drug in development should look ahead at the rate the public’s hatred of our industry and misunderstandings of drug pricing is manifesting as price controls and recognize that anything that is possible may indeed come to be unless we act together to fix the problem at its root. Learn more about NPLB’s campaign to improve our industry’s reputation so that we can hopefully someday look forward to dealing with fewer counter-productive policy threats like GLOBE and GUARD.