Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

CMS Finalizes the GLOBE Model: A Most-Favored-Nation Drug Payment Framework for Medicare Part B

Skadden Publication / The Nucleus: Life Sciences Enforcement and Regulatory Updates

Rachel Turow

Executive Summary

  • What’s new: On September 30, 2026, CMS published a final rule establishing the GLOBE Model, a mandatory Medicare Part B drug payment model that implements most-favored-nation pricing, with expanded exemptions that dramatically reduce its reach.
  • Why it matters: Pharmaceutical and biopharmaceutical companies with single source drugs and sole source biological products exceeding $100 million in Part B spending face potential rebate obligations, and the rule is widely expected to face litigation.
  • What to do next: Companies should consider determining whether Part B products fall within GLOBE’s narrowed scope, assessing a GENEROUS/Medicaid pricing strategy, preparing for Method I and Method II benchmark decisions, and monitoring the anticipated litigation.

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On September 30, 2026, the Centers for Medicare and Medicaid Services (CMS) published a final rule establishing the Global Benchmark for Efficient Drug Pricing (GLOBE) Model, a mandatory Medicare Part B drug payment model that implements the Trump administration’s most-favored-nation (MFN) pricing policy for drugs reimbursed under that program. GLOBE sets pricing using an international pricing benchmark derived from a set of 19 economically comparable reference countries.

Critically, the final rule is materially narrower than the December 2025 proposed rule, with expanded exemptions that dramatically reduce its reach. The model begins on January 1, 2027, with the collection of voluntary manufacturer-submitted international net pricing data. Below, we address the key provisions pharmaceutical and biopharmaceutical companies should evaluate.

1. Narrowed Scope − Expanded Exemptions

GLOBE Model drugs are defined as single source drugs and sole source biological products (meaning there is no generic or biosimilar competition) in seven treatment categories spanning gout, cancer and blood products, as well as drugs that affect the central nervous system, the immune system, bone disease and eye disease. GLOBE applies to products with more than $100 million in Original Medicare Part B spending over a 12-month period.

In response to public comments, CMS added three significant new exclusion categories that were not in the proposed rule:

  • Orphan-only drugs: Drugs designated for one or more rare diseases under Section 526 of the FD&C Act whose only approved indication(s) are for such rare diseases.
  • Cell and gene therapy products: Products listed on the FDA’s Approved Cellular and Gene Therapy Products website (e.g., CAR-T therapies).
  • Plasma-derived products (42 C.F.R. § 427.400).

Additional exclusions carried over from the proposed rule include drugs for which a maximum fair price (MFP) under the Medicare Drug Price Negotiation Program is in effect, biosimilars and their reference biologics once a biosimilar enters the U.S. market, and drugs that are no longer Part B rebatable. CMS declined to exclude oncology drugs or drugs with breakthrough, fast-track, or priority-review designations.

Impact on reach: These exemptions are substantial. CMS now projects savings of only $440 million over seven years versus the $11.9 billion originally projected under the proposed rule. Per the rule’s own impact analysis, as few as four manufacturers will be covered when accounting for the number of waivers for manufactures that choose to participate in GENEROUS as discussed in the next section.

2. GENEROUS Participation as an Exemption Strategy

CMS has effectively codified that manufacturers participating in the GENEROUS Model (GENErating cost Reductions fOr U.S. Medicaid) will be carved out of GLOBE. CMS stated it intends to use its waiver authority under Section 1115A(d)(1) to waive the mandatory-participation requirement for any calendar quarter in which a manufacturer participates in the GENEROUS Model.

This carve-out is significant. More than 20 drugmakers have entered voluntary Medicaid discount agreements with the administration and obtained GLOBE exemptions through GENEROUS. Independent analysis has found that of 36 medicines that would otherwise qualify for GLOBE, 32 are made by companies with GENEROUS or Medicaid deals, leaving only about four drugs from three companies actually subject to the model.

For many companies, pursuing a voluntary Medicaid pricing agreement under GENEROUS may be the most effective and predictable path to avoiding GLOBE obligations, weighing the cost of the Medicaid discounts against the potential exposure under the Medicare model.

Companies most likely outside the scope of GLOBE include:

  • Makers of orphan and rare-disease drugs.
  • Cell and gene therapy developers.
  • Plasma-derived product manufacturers.
  • Biosimilar manufacturers and reference-product sponsors with biosimilar competition.
  • Manufacturers with an effective MFP under IRA negotiation.
  • Small and midsize companies below the $100 million threshold.
  • Manufacturers participating in the GENEROUS Model.

Given the level of exemption, CMS’s regulatory flexibility analysis concluded the rule will impact only one small firm, with an effect of 2.3% or less of that firm’s U.S. revenue.

3. Legal Vulnerability and Bases for Challenge

The final rule is widely expected to face litigation. Both PhRMA and BIO urged CMS to withdraw the proposed rule and characterized the model as unlawful. Industry has signaled the final rule is ripe for legal challenge, and the 2020 first-term MFN demonstration was previously enjoined by federal courts. The principal legal and statutory objections raised in public comments include:

  • Exceeds CMS’s authority under Section 1115A. GLOBE is not a genuine “test” but rather mandatory, nationwide price controls that exceed the scope of what CMS may pursue under the Center for Medicare and Medicaid Innovation (CMMI) statute.
  • Major questions doctrine. An economically transformative price-control scheme requires clear congressional authorization, which Section 1115A does not supply. Section 1115A also does not clearly authorize mandatory participation (citing West Virginia v. EPA; Learning Resources v. Trump).
  • Unauthorized civil monetary penalties. CMS cannot extend the IRA inflation-rebate penalty regime to new GLOBE rebates without explicit congressional authorization.
  • Commenters also voiced various constitutional concerns.

CMS addressed these comments in the preamble to the final rule, rejecting separation-of-powers and nondelegation arguments, asserting compliance with the APA and notice-and-comment process, and adding a severability clause (42 C.F.R. § 513.1(d)) providing that if any provision is held invalid the remainder survives. These objections are likely to form the basis of future litigation opposing the rule, and the outcome may turn on which federal circuit hears the initial challenge. We anticipate that, if industry chooses to sue, we will see that lawsuit in the coming weeks.

4. Net Price Calculation and Foreign Pricing Disclosure Requirements

For each GLOBE Model drug, CMS has offered two options to provide benchmark data to determine the U.S. pricing:

  • Method I: The lowest per-unit, GDP(PPP)-adjusted country-level price among 19 reference countries, derived from commercially available international pricing data (which may reflect list, ex-manufacturer or retail prices). CMS does not require the manufacturer to disclose anything for this calculation; it builds the benchmark from existing commercial data sources that generally do not capture confidential rebates. That omission may modestly inflate the benchmark in the manufacturer’s favor because the data overstate the prices manufacturers actually realize, and a higher benchmark means a smaller rebate under the most-favored-nation approach. But Method I uses the lowest country-level price, rather than an average, and then adjusts that price downward based on GDP(PPP). This means that even if a manufacturer is able to secure a confidential rebate in one country that allows the net price to appear high, but is not successful in doing so in all countries, CMS will still use the lowest price set and adjust it downward from there. The benchmark is set once and held fixed for the performance period.
  • Method II: The volume-weighted average of the manufacturer’s net prices across the reference countries, GDP(PPP)-adjusted, based on data the manufacturer voluntarily submits. “Net” means net of volume discounts, prompt-pay discounts, cash discounts, free goods, chargebacks and rebates. Method II submission is entirely voluntary. A manufacturer that cannot lawfully or practically obtain foreign net pricing — due to out-licensing arrangements, confidential foreign reimbursement agreements, or foreign antitrust or competition-law constraints — may simply elect not to submit for Method II, in which case the Method I benchmark applies.

Manufacturers should not assume, however, that keeping foreign rebates confidential will shield them from GLOBE exposure. The downward effect of Method I’s lowest-country selection and GDP(PPP) adjustment will generally more than offset any upward effect from omitted confidential rebates, so the Method I benchmark tends to be lower than a Method II benchmark based on the manufacturer’s actual net prices. That can produce a larger rebate obligation than submitting real net prices under Method II; CMS itself expects Method II’s volume-weighted average to tend to exceed the lowest-country Method I figure, which is why it offers Method II as an incentive. Thus, manufacturers that remain on Method I may maximize rather than minimize their rebate liability. This is a serious consideration for manufacturers that are currently working on foreign pricing arrangements and whether to voluntarily disclose. Of course, if one of the exemptions discussed above applies, then this is less of a concern.

5. Looking Ahead

Taken together, the broad exemptions and the availability of a GENEROUS exemption strategy mean the final GLOBE rule is likely to affect far fewer companies than the original proposal — and only if the rule survives what are expected to be significant legal challenges. With projected savings now at $440 million rather than $11.9 billion and far fewer manufacturers covered, the rule appears to have been issued primarily to allow the administration to tout action on drug pricing rather than to achieve the transformative savings originally projected.

Pharmaceutical and biopharmaceutical companies should consider taking the following steps:

  • Determine whether their Part B products fall within GLOBE’s narrowed scope, taking into account the new orphan-drug, cell and gene therapy, and plasma-derived product exclusions.
  • Assess whether a GENEROUS/Medicaid pricing strategy is the most efficient route to an exemption, weighing the cost of Medicaid discounts against GLOBE exposure.
  • Prepare for Method I and Method II benchmark and foreign-pricing reporting decisions, including evaluating the availability and legal accessibility of international net pricing data.
  • Monitor the anticipated litigation, which is likely to raise fundamental questions about the scope of CMMI’s authority under Section 1115A.

The related Part D “GUARD” model remains under White House review and has not been finalized.

This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.

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