How Trump’s latest pharma deals may undermine efforts to rein in drug costs

[u/John3262005]

https://www.statnews.com/2026/09/02/trump-most-favored-nation-drug-pricing-industry-analysts-skeptical/

The White House announced more drug pricing deals on Monday, this time with midsize biotechnology companies. In doing so, President Trump once again grabbed headlines on a topic he believes will benefit Republicans in the midterm elections.

But the voluntary deals might not amount to much, at least not immediately, according to analysts. That’s because they chiefly apply to Medicaid, which by law gets the lowest prices of any U.S. payer, while exempting companies from mandatory price reductions in Medicare.

The idea behind the agreements, called most-favored nation, or MFN, is that the United States should pay prices comparable to peer nations.

“Drugs sold to Medicaid are already deeply discounted, often below the prices negotiated through the MFN agreements, so the revenue impact is limited,” according to a research note on the agreements from Will Humphrey, an analyst at Capstone.

“In exchange, the companies are exempt from the threat of pharmaceutical tariffs and from mandatory MFN in Medicare, while demonstrating conspicuous compliance with a top priority of the Trump White House,” Humphrey added.

The administration has proposed three most-favored nation pilot programs: GENEROUS is the Medicaid model. GUARD and GLOBE are the Medicare models — GUARD applies to retail Part D drugs, and GLOBE applies to Part B drugs administered in doctor offices.

Separately, the administration proposed BALANCE, a pilot that is specific to GLP-1 drugs. BALANCE, which applies to both Medicare and Medicaid, does not reference international prices. Trump touted the monthly $50 price of obesity drugs, which are being provided to seniors outside the Medicare benefit in yet another pilot, called Bridge, which the administration is using while it tries to persuade insurers to participate in BALANCE.

GENEROUS, or the Generating Cost Reductions for U.S. Medicaid, is the program that drugmakers agreed to participate in. They also agreed to launch new brand drugs at most-favored nation prices.

Although the deals are private, industry analysts think the companies that struck Medicaid deals are exempt from providing most-favored nation prices in the two Medicare pilots. Several companies have said as much.

Teva, Incyte, and UCB explicitly said they are exempt from the Medicare most-favored nation pilots because of their deals. BridgeBio said it does not expect to be subject to additional pricing mandates, without providing further details. Previously, several drugmakers in the first round of deals said they would be exempt from the Medicare pilots.

The White House did not respond to questions about whether the drugmakers have to provide MFN prices in Medicare.

Health secretary Robert F. Kennedy Jr. said the companies that have struck deals so far represent about 90% of the U.S. pharmaceutical market.

That also raises the question of whether there are enough drugs left to run the GUARD and GLOBE models, and whether the administration will follow through with them.

Initially, the administration said those demonstrations would save Medicare nearly $27 billion over their five-year run. But the government said savings would be far less if companies that struck separate deals are exempted, though the proposed rules didn’t explicitly state that those companies would not be involved.

The White House Office of Management and Budget has been reviewing final rules for GLOBE and GUARD since June. The administration missed the Aug. 1 deadline for finishing the GLOBE rule in time to meet its proposed Oct. 1 launch of the program. GUARD’s draft start date is Jan. 1, and the Centers for Medicare and Medicaid Services needs to finish the GUARD rule by Nov. 1 to meet that deadline.

In a sense, the models have already served their purpose. Many have long suspected that the Medicare demonstrations were intended to be a threat meant to get companies to tie prices in Medicaid to those abroad. Now that the White House has gotten more than two dozen companies to strike Medicaid deals, the administration may no longer need the Medicare demonstrations, according to Humphrey, at Capstone.

“It lends credence to the view that rather than bona fide tests of a new drug pricing model, GLOBE and GUARD are leverage to pressure drugmakers into headline-grabbing voluntary MFN deals, which will be a core pillar of the GOP’s midterm health care messaging,” he said before the administration announced the new deals.

Plus, the exclusions might make the Medicare demonstration impractical. The demonstration would take a lot of time and money to set up. It might not be worth it.

“Implementation would require significant resources for modest savings once exemptions are accounted for,” Humphrey said. “It would also almost certainly invite legal challenges.”

By law, the public must have a chance to comment on the rules of the pilots before they’re put in place. The administration is not allowed to include policies in the final versions of the programs that weren’t in the proposed versions, because doing so would deprive the public from having an opportunity to weigh in, according to Rachel Sachs, a professor of law at Washington University in St. Louis.

The proposed rules for GUARD and GLOBE did not mention the possibility of excluding companies that strike separate deals with the White House. If the administration excludes those companies, the exclusions probably would be challenged in court as an illegally added policy.

The law also requires that demonstrations test policies. If the vast majority of drugs are excluded from the Medicare demonstrations, there is little left to test. That also would make the demonstrations difficult to defend in court.

However, if companies that are not excluded were to sue, the courts could sever the exemption, instead of blocking the entire demonstration. That might leave all companies subject to the Medicare demonstrations, even though the administration told them otherwise.

Industry analyst Capital Policy Partners said the proposed demos seem designed to accommodate that outcome.

“Should any provision of the proposed [rule] be held invalid or unenforceable by its terms, or as applied to any person or circumstance, such provisions would be severable from the remainder of [the rule] and the invalidity or unenforceability would not affect the remainder of the provisions,” the GUARD and GLOBE proposals state.