Demystifying Most Favored Nation Innovation Models

The CMMI Innovation Center has played a key role in Most Favored Nation (MFN) drug pricing policies since 2020, with renewed efforts in 2025 and 2026. The foundation for MFN drug pricing policies began during the Trump Administration’s first term, which sought to curb high Medicare Part B prescription drug costs by benchmarking prices against those in other developed countries.

Although the 2020 rule was stalled by legal challenges, the policy initiative has since been revived through a combination of executive actions, pharmaceutical manufacturer agreements, and CMMI models. This publication provides a comprehensive overview of the GENEROUS, GLOBE, GUARD, and BALANCE MFN models, summarizing key information for payers and pharmaceutical manufacturers. We evaluated government documents that are available at the date of publication. However, the MFN models are updated rapidly, and changes should be expected.

The full version of this publication, including summary tables tailored for Market Access and Government Relations professionals, is available to Advantage+ subscribers.

THE GENEROUS MODEL

Overview

The GENEROUS (GENErating cost Reductions fOr U.S. Medicaid) Model is designed to lower the prices for drugs in Medicaid by aligning supplemental rebates with what is paid internationally through MFN pricing. In exchange, states adopt standardized coverage criteria negotiated by CMS instead of the current process of state-by-state negotiations and agreements. The model is voluntary for all participants including manufacturers and state Medicaid programs. It is a five-year model that began on January 1, 2026, and ends on December 31, 2030.

Model Drugs

Model drugs, which are defined at the NDC-9 level, include all single source and innovator multiple source Covered Outpatient Drugs (CODs). The model includes blood clotting factors and drugs approved exclusively for pediatric indications. Participating manufacturers must offer MFN pricing for their entire portfolio of single source and innovator multiple source CODs across all labeler codes. States have more flexibility and can select individual CODS offered by participating manufacturers. They may also change their selected drugs during annual renewals of their supplemental rebate agreements (SRAs).

Most Favored Nation Pricing

MFN pricing is based on a basket of countries that remains stable for the five-year model test period. Manufacturers must report the average net price for each drug in the country basket accounting for all discounts, rebates and price concessions provided in that country. The MFN Benchmark is the second lowest country-specific net price from the basket adjusted for GDP per capita using purchasing power parity. The adjusted MFN benchmark becomes the Guaranteed Net Unit Price (GNUP). The model then uses a specific formula to calculate a supplemental rebate which determines how much extra the manufacturer would pay to reach the target GNUP after the statutory rebate (URA).

Standardized Access Policy

The standardized access policy is the coverage criteria negotiated between CMS and manufacturers. It is a Key Term that the state must abide by if they select a model drug, unless modifications are necessary to comport with state law and approval is received from CMS. The application must be uniform across beneficiaries in both fee-for-service (FFS) or those enrolled in a managed care plan. Even if a state carves out high-cost drugs from their managed care contracts, the state must ensure that the managed care plan covers related services in accordance with the policy. If a state selects multiple products with MFN pricing in the same class, the state cannot disfavor one manufacturer from the other. 

The standardized policy includes: 

• Utilization management such as step therapy and quantity limits
• Patient eligibility criteria and provider qualifications
• Preferred Drug List (PDL) placement

The standardized access policy is part of a negotiation with manufacturers. In their applications, manufacturers report criteria that are currently used by different states for their drug and the number of states following that variation. Manufacturers also propose model criteria that reflects the current criteria negotiated with states for their CODs. Manufacturers will have ongoing negotiations with CMS on the coverage criteria, along with other Key Terms, from December 2025 through June 30, 2026. This will culminate in a Participation Agreement (PA) executed by June 30, 2026.

THE BALANCE MODEL

Objectives of the BALANCE Model

The BALANCE (Better Approaches to Lifestyle and Nutrition for Comprehensive hEalth) Model is a voluntary payment model that aims to test whether CMS negotiating prices and standardized coverage for GLP-1s, along with manufacturer-funded lifestyle interventions can improve health outcomes and reduce expenditures for Medicare and Medicaid Part D beneficiaries. There are staggered launch dates where Medicaid will begin on May 1, 2026, and Medicare Part D will begin on January 1, 2027, with a short-term bridge program that begins July 2026. 

Under the model, CMS would negotiate a “guaranteed, lowered net price” on behalf of participating state Medicaid agencies and Medicare Part D sponsors. In exchange, payer participants would agree to cover the model drugs to “improve metabolic health and weight management,” as well as negotiating reduced net prices for currently accepted indications (e.g. type 2 diabetes and cardiovascular disease). The model also pairs the GLP-1 medications with lifestyle support programs that will be paid for by pharmaceutical manufacturers which are consistent with FDA-labeling.

Pricing Mechanism

Since BALANCE includes both Medicaid and Medicare Part D, there are two different pricing mechanisms, each of which rely on rebates. In Medicaid, manufacturers pay their “guaranteed rebate” through a supplemental rebate agreement beyond the MDRP statutory rebates or other state supplemental agreement. This achieves a lower “net price to government”. For Medicare Part D, manufacturers offer rebates through Direct and Indirect Renumeration (DIR) rebates) and cost sharing limits (e.g. copayments or coinsurance) during the initial coverage phase.

Standardized Coverage Criteria

CMS seeks to develop standardized coverage criteria aimed at patients that meet a BMI threshold and/or have evidence of metabolic dysfunctions (e.g. heart failure, uncontrolled hypertension, pre-diabetes), as well as meeting FDA-approved label specifications. The coverage criteria may differ between Medicaid and Medicare markets but would be standardized within each market. State Medicaid programs will need to execute Supplemental Rebate Agreements (SRAs) that adopt the standardized criteria.

Lifestyle Support Program

A Key Term that is unique to the BALANCE model is a lifestyle support program that is entirely funded by the manufacturer to augment GLP-1 effectiveness. The program addresses three specific pillars to support holistic health to the beneficiary: diet and nutrition, physical activity, as well as medication adherence and side effect management. The programs must be at no cost to the beneficiary and include both digital and offline access to accommodate patients with limited digital access or fluency.  

THE GLOBE MODEL

Notice of Proposed Rulemaking (NPRM): The GLOBE Model 

On December 23, 2025, the Centers for Medicare & Medicaid Services (CMS) released a Notice of Proposed Rulemaking (NPRM) for the Global Benchmark for Efficient Drug Pricing (GLOBE) Model. The proposed rule aims to test an innovative payment model that modifies the Medicare Part B drug inflation rebate calculation for GLOBE Model drugs by using international drug pricing information to identify a benchmark that reflects prices paid in a set of economically comparable countries. 

GLOBE Model Drugs & Participants

Regarding pharmaceutical selection, CMS would identify qualifying Part B rebatable products that must: (1) be listed as antigout agents, antineoplastics, blood products and modifiers, central nervous system agents, immunological agents, metabolic bone disease agents, or ophthalmic agents in the USP DC; (2) be single source drugs or sole source biological products; (3) have Medicare Part B FFS spending exceeding $100 million over a 12‑month period; and (4) not fall under any category excluded from the GLOBE model. Notably, a Part B rebatable drug would have to meet all four criteria to be included in the model.

When Part B rebatable drugs subject to the GLOBE model are furnished to beneficiaries who are in the model cohort, participating manufacturers would pay GLOBE model rebates to the Medicare Part B account in the Federal Supplementary Medical Insurance Trust Fund if the amount specified exceeds a benchmark amount that would be based on available international drug pricing information, which would not be less than any rebates owed under the Medicare Part B Drug Inflation Rebate Program.

Understanding GLOBE Cost Estimates and Model Effectuation 

CMS expects that the GLOBE model would reduce out-of-pocket drug costs for Medicare beneficiaries and preserve or enhance quality of care. Further, CMS estimates that the GLOBE model would result in overall savings of $11.9 billion in Medicare Part B net spending during the 7-year model, inclusive of $8.4 billion in Medicare Part B FFS, 7.5 billion in Medicare Advantage (MA) savings, and $4 billion in premium offset impacts. Looking ahead, the proposed regulation has announced CMS’ intent and solicited public comments with a submission deadline of February 23, 2026. After public comments are considered, CMS may develop and publish a final regulation, and the effective date is dependent on any applicable legal requirements, implementation needs, potential significant impacts, or any applicable waivers. It is projected that GLOBE would be a 5-year model, expected to launch on October 1, 2026, ending September 30, 2031, with rebate invoicing and reconciliation continuing until September 30, 2033.

THE GUARD MODEL

Notice of Proposed Rulemaking (NPRM): The GUARD Model  

The Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model is a proposed drug payment model that would modify how manufacturer rebates are calculated for certain Medicare Part D drugs by using international price benchmarks instead of domestic inflation rebates, with the aim of lowering prescription drug costs for Medicare beneficiaries while preserving the quality of care. The proposed rule indicates the GUARD Model would run over a five-year performance period, launching January 1, 2027, and ending December 31, 2031, with rebate invoicing and reconciliation continuing into 2033. 

Under the model, manufacturer rebates would be required when Medicare drug prices exceed an international benchmark constructed from prices in economically comparable countries. CMS intends for the GUARD model to be mandatory for selected drugs and manufacturers within randomly selected geographic areas covering about 25 % of Medicare Part D enrollees, tied to the model’s rebate requirements. CMS proposes two potential benchmarking approaches:

• Method I (default international benchmark): the lowest per-unit price among the set of country-level average prices, adjusted by GDP (PPP).
• Method II (updated international benchmark): a volume-weighted average across available reference countries, adjusted by GDP (PPP), based on international price data voluntarily submitted by manufacturers.

If available, the applicable international benchmark is greater of these two adjusted values. 

Model Drugs & Participants 

Under the proposed rule, GUARD model drugs consist of Part D rebatable drugs that must be a single-source drug (approved under a New Drug Application (NDA) with no therapeutic equivalent) or a sole-source biological product (licensed under a BLA without a biosimilar). The specified therapeutic categories for GUARD are outlined in Figure 3, and eligible drugs fall within certain USP Medicare Model guideline categories. Notably, the product must exceed a minimum Part D gross spending threshold (proposed at $69 million for 2027) to focus on higher-cost drugs and biologicals. 

Rather than listing specific drugs by name, CMS is using a category-based design grounded in the USP Medicare Model Guidelines and Part D spending data. This means:

• Any drug meeting the proposed criteria and the spend threshold will be a GUARD Model drug once the model is implemented.
• The model could include dozens of high-cost, sole-source brand drugs in therapeutic classes commonly used under Medicare Part D.
• Drugs selected for the Medicare Maximum Fair Price (MFP) negotiation program are removed from the GUARD Model once their negotiated price takes effect. 

MEDICAID IMPLICATIONS

In conclusion, these models collectively signal a systemic shift towards international price alignment across major U.S. federal drug programs. For pharmaceutical manufacturers, this means strategic emphasis on global net pricing coordination, regulatory integration across programs, and forward-looking financial modeling to evaluate risk, optimize portfolios, and safeguard access. The ripple effects of MFN pricing, extending to Medicaid supplemental rebate negotiations, the Medicaid Best Price (BP) strategy, and even commercial pricing frameworks, underscore the urgency of preparation and guidance. 

Legal experts do not think the rebates under GENEROUS, GLOBE, and GUARD should not have an automatic impact on federal statutory rebates. Medicaid supplemental rebates in GENEROUS and BALANCE are excluded from AMP and BP by statute. The preamble to GLOBE specifies that the rebates would not be included in BP, AMP, and ASP. CMS does not explicitly state that GUARD rebates are excluded from AMP or BP, but the analysis shows they are likely excluded.  This protects manufacturers from having a lower model price automatically reset their statutory rebate for Medicaid or impact 340B. However, the models can still result in a lower Unit Rebate Amount (URA) if manufacturers choose to reduce their list price (WAC) to avoid triggering the penalties in GLOBE and GUARD. A reduction in WAC would likely lower AMP and lead to lower statutory rebates. Manufacturers will need to model whether a lower list price affects revenue more than paying the rebate.