# Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2025-23705

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** December 23, 2025
- **Citation:** 90 FR 60338

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 514
[CMS-5546-P]
RIN 0938-AV74
Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would implement the Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model to test a new Medicare payment model under section 1115A of the Social Security Act. The model proposes a test of an alternative payment method for calculating inflation rebates for certain Part D drugs and biological products. The proposed GUARD Model would test whether changing the calculation of the Part D inflation rebate would reduce costs for the Medicare program while preserving or enhancing quality of care for Part D enrollees.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, by February 23, 2026.

ADDRESSES:

In commenting, please refer to file code CMS-5546-P.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

1.
Electronically.
You may submit electronic comments on this regulation to
http://www.regulations.gov.
Follow the “Submit a comment” instructions.

2.
By regular mail.
You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-5546-P, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3.
By express or overnight mail.
You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-5546-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the
SUPPLEMENTARY INFORMATION
Section.

FOR FURTHER INFORMATION CONTACT:

Vinod Mitta, 667-290-8712 or
GUARDmodel@cms.hhs.gov.

SUPPLEMENTARY INFORMATION:

Information Included with Pic Comments:
We encourage commenters to include supporting facts, research, and evidence in their comments. When doing so, commenters are encouraged to provide citations to the published materials referenced, including active hyperlinks. Likewise, commenters who reference materials which have not been published are encouraged to upload relevant data collection instruments, data sets, and detailed findings as a part of their comment. Providing such citations and documentation will assist us in analyzing the comments.

Inspection of Public Comments:
All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:
http://www.regulations.gov.
Follow the search instructions on that website to view public comments. The Centers for Medicare & Medicaid Services (CMS) will not post on
Regulations.gov
public comments that make threats to individuals or institutions or suggest that the commenter will take actions to harm an individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Plain Language Summary:
In accordance with 5 U.S.C. 553(b)(4), a plain language summary of this rule may be found at
https://www.regulations.gov/.

I. Executive Summary

A. Background

Challenges related to the affordability of prescription drugs adversely affect taxpayers by diverting funds that could be used to improve health; such challenges also pose a direct concern for patients, with 55 percent of adults reporting that they remain concerned about medication affordability.
1 2

High drug costs limit access to care and treatment, which in turn, can have cascading consequences that lead to poor health for patients, increased medical spending, and potentially avoidable expenditures for all payers, including Medicare.
3

Results from recent surveys show that many Americans, including Medicare beneficiaries, face significant financial burden of care that has resulted in skipping or rationing medication due to cost.
4

1
Sparks, G., et al. (2024).
Public Opinion on Prescription Drugs and Their Prices.
KFF.
https://www.kff.org/health-costs/public-opinion-on-prescription-drugs-and-their-prices/
(Accessed: 10 December 2025).

2
Jones, E. & Noda, A. (2025).
Drug Costs and Their Impact on Care: Insights from Medicare Patients and Providers.
The Commonwealth Fund.
https://www.commonwealthfund.org/publications/issue-briefs/2025/feb/drug-costs-impact-care-insights-medicare-patients-providers
(Accessed: 10 December 2025).

3
Nekui, F., et al. (2021). Cost-related Medication Nonadherence and Its Risk Factors Among Medicare Beneficiaries.
Medical Care, 59
(1):13-21.
https://doi.org/10.1097/MLR.0000000000001458
.

4
Arnold Ventures, Commonwealth Fund, & PerryUndem. (2025).
Drug Costs and Their Impact on Care. https://www.arnoldventures.org/stories/drug-costs-and-their-impact-on-care
(Accessed: 10 December 2025).

Financial toxicity, or the negative impact that the monetary burden of medical care can have on patients' well-being, fiscal security, and overall health,
5

can be pronounced among the elderly population, most of whom are covered by Medicare, and among patients where the cost of treatment is high.
6

One in four adults taking prescription drugs report difficulty affording their medication, including 40 percent of those with household income of less than $40,000 per year.
7

A separate survey conducted concluded that about four in 10 older adults with Medicare reported problems accessing health care because of its costs, and that 14 percent of Medicare beneficiaries said they skipped taking or sometimes did not fill their prescription because of the expense; this can have serious health-related consequences for Medicare beneficiaries and may result in potentially avoidable costs for Medicare.
8

5
Arastu A., et al. (2020). Assessment of Financial Toxicity Among Older Adults with Advanced Cancer.
JAMA Network Open, 3
(12):e2025810.
https://doi.org/10.1001/jamanetworkopen.2020.25810
.

6
Narang, A.K. & Nicholas, L.H. (2016). Out-of-Pocket Spending and Financial Burden Among Medicare Beneficiaries with Cancer.
JAMA Oncology, 3
(6), 757.
https://doi.org/10.1001/jamaoncol.2016.4865.

7
Sparks, G., et al. (2024).
Public Opinion on Prescription Drugs and Their Prices.
KFF.
https://www.kff.org/health-costs/public-opinion-on-prescription-drugs-and-their-prices/
(Accessed: 10 December 2025).

8
Leonard, F., et al. (2023).
Medicare's Affordability Problem: A Look at the Cost Burdens Faced by Older Enrollees.
The Commonwealth Fund.
https://www.commonwealthfund.org/publications/issue-briefs/2023/sep/medicare-affordability-problem-cost-burdens-biennial
(Accessed: 10 December 2025).

Medicare Part D prescription drug costs have been rising over time, with total Part D gross drug spending increasing from $121 billion in 2014 to $276 billion in 2023, an increase of over 100 percent, as reported by the Medicare Payment Advisory Commission (MedPAC).
9

This translates to an approximately 66 percent increase in average gross spending for each beneficiary who used Part D drugs over that same period ($3,267 in 2014 to $5,429 in 2023).
10

The increase in Part D gross drug spending is consistent with overall trends in U.S. drug spending. A recent analysis shows that drug spending in the United States increased from $600 billion in 2018 to $858 billion in 2023 for all drugs (a 43 percent increase), regardless of payer source.
11

Retail prescription drug prices are expected to continue to increase over time, driven by a number of factors, including increases in the use of prescription drugs as well as increases in drug prices over time.
12

9
MedPAC. (2025).
Health Care Spending and the Medicare Program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025).

10
MedPAC. (2025).
Health Care Spending and the Medicare Program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025).

11
IQVIA. (2023).
The use of medicines in the U.S. 2023. https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/the-use-of-medicines-in-the-us-2023
(Accessed: 10 December 2025).

12
Poisal, J.A., et al. (2022). National Health Expenditure Projections, 2021-30: Growth to Moderate as COVID-19 Impacts Wane.
Health Affairs, 41
(4), 474-486.
https://doi.org/10.1377/hlthaff.2022.00113
.

Existing research finds that the prices of drugs sold in the United States are much higher than the prices of the same drugs sold in other countries. One study finds that overall, the U.S. health care system spends substantially more on outpatient drugs for older adults with complex conditions, such as heart failure, diabetes, and chronic obstructive pulmonary disease (COPD), who are mostly covered by Medicare, than 11 other economically similar countries (including, for example, Australia, France, Germany, Canada, and the United Kingdom).
13

The authors conclude that the United States is paying substantially higher prices for certain components of health care, including for drugs, than other countries.
14

Another study finds that prices for certain high expenditure single-source brand name prescription drugs covered under Medicare Part D in 2018 were 3 to 4 times higher in the United States, even after accounting for estimated manufacturer rebate amounts, compared to their prices in the United Kingdom, Japan, and Canada.
15

Among these countries, Japan and Canada use international reference pricing to help determine drug prices within the country.
16

Analyses by IQVIA show that per capita utilization of drugs is higher in certain regions and countries, specifically, in Western European countries and Japan, compared to North American countries, suggesting that utilization differences alone are not the drivers of the observed price differences.
17

The data also shows that U.S. brand-name prescription drug prices exceed those found in other Organization for Economic Co-operation and Development (OECD) countries.
18 19

13
Figueroa, J.F., et al. (2021). International Comparison of Health Spending and Utilization Among People with Complex Multimorbidity.
Health Services Research, 56
(S3), 1317-1334.
https://doi.org/10.1111/1475-6773.13708
.

14
Figueroa, J.F., et al. (2021). International Comparison of Health Spending and Utilization Among People with Complex Multimorbidity.
Health Services Research, 56
(S3), 1317-1334.
https://doi.org/10.1111/1475-6773.13708
.

15
Kang, S., et al. (2019). Using External Reference Pricing in Medicare Part D to Reduce Drug Price Differentials with Other Countries.
Health Affairs, 38
(5), 804-811.
https://doi.org/10.1377/hlthaff.2018.05207
.

16
Kang, S., et al. (2019). Using External Reference Pricing in Medicare Part D to Reduce Drug Price Differentials with Other Countries.
Health Affairs, 38
(5), 804-811.
https://doi.org/10.1377/hlthaff.2018.05207
.

17
IQVIA. (2025). The
Global Use of Medicines 2025: Outlook to 2029—Global Webinar. https://www.iqvia.com/-/media/iqvia/pdfs/events/presentation_global-meds-webinar_public.pdf
(Accessed: 10 December 2025).

18
Mulcahy, A.W., et al. (2024).
International Prescription Drug Price Comparisons: Estimates Using 2022 Data.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/sites/default/files/documents/277371265a705c356c968977e87446ae/international-price-comparisons.pdf
(Accessed: 10 December 2025).

19
The Organization for Economic Cooperation and Development (OECD) is a multilateral organization with 38 member countries. Comparing the United States to other OECD countries that are similar in economy, based on GDP and GDP per capita, allows for a more appropriate comparison.—
About the OECD, U.S. Mission to the Organization for Economic Co-operation and Development,
Available at
https://usoecd.usmission.gov/about-the-oecd/
.

The disparity between U.S. drug prices and prices in other economically comparable countries may have several drivers, but a key component is the substantial difference in the way prescription drug prices are determined in the United States and other economically comparable countries. Although there is wide variation in the way drug prices are determined in economically comparable countries, in general, many countries take a more centralized approach to drug pricing and/or have greater involvement in determining prices for drugs than the United States.
20

20
Syversen, I.D., et al. (2024). A Comparative Analysis of International Drug Price Negotiation Frameworks: An interview study of key stakeholders.
Milbank Quarterly, 102
(4), 1004-1031.
https://doi.org/10.1111/1468-0009.12714
.

In the United States, prices are set by drug manufacturers for the U.S. market and the incentives and payment mechanisms embedded within the U.S. pharmaceutical drug supply chain are complex. Drug manufacturers set a Wholesale Acquisition Cost (WAC), which is the published catalog or “list price” for a drug product; this represents the amount at which wholesalers are offered the drug product.
21

The manufacturer list price is not the ultimate net revenue realized by the manufacturer as there are multiple discounts and price concessions to stakeholders throughout the pharmaceutical drug supply chain; however, it may have influence throughout the pharmaceutical drug supply chain. Existing research shows that the list price of new brand-name drugs at launch have been increasing over time, with one study finding that from 2008 to 2021, the mean launch price increased by 13 percent per year; this increase was 11 percent per year for a subset of drugs for which the researchers were able to account for manufacturer rebates and drug characteristics.
22

21
Mulcahy, A.W. & Kareddy, V. (2021).
Prescription Drug Supply Chains: An Overview of Stakeholders and Relationships.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/reports/prescription-drug-supply-chains
(Accessed: 10 December 2025).

22
Rome, B.N., et al. (2022). Trends in Prescription Drug Launch Prices, 2008-2021.
JAMA, 327
(21), 2145.
https://doi.org/10.1001/jama.2022.5542
.

There are many factors that affect the amount that is ultimately paid by stakeholders for a pharmaceutical drug after discounts, rebates, and other price concessions are excluded (referred to as the `net price'), including the degree to which the drug is subject to market competition. In general (though there may be exceptions), drugs that face more limited competition have higher net prices than drugs that have greater market competition.
23 24 25

Among drugs

with competing therapies available, drug manufacturers have a particular incentive to compete against each other for formulary coverage by negotiating rebates with plan sponsors or their pharmacy benefit managers (PBMs). Within Part D, this generally includes drugs that are
not
in protected classes. (Centers for Medicare & Medicaid Services (CMS) protected classes are drugs for which Part D sponsors must include all or substantially all drugs within the classes on their formularies, which means that manufacturers do not have the same incentives to negotiate rebates or other price concession for these drugs.)
26

Ultimately, the negotiated rebates and other price concessions result in a “net” price (that is, list price net of rebates and other price concessions) for the drug that is lower than the list price.
27

Under the Part D program, this post point-of-sale compensation is included in Direct and Indirect Remuneration (DIR)
28

and is factored into CMS's calculation of final Medicare payments to Part D plans.
29

This, in turn, impacts Medicare costs under the Medicare Prescription Drug Benefit program, also known as Part D, which was created under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173, 117 Stat. 2066).
30

23
Government Accountability Office. (2023).
Medicare Part D: CMS Should Monitor Effects of Rebates on Plan Formularies and Beneficiary Spending
[GAO-23-105270].
https://www.gao.gov/assets/gao-23-105270.pdf
(Accessed: 10 December 2025).

24
Hernandez, I., et al. (2020). Changes in List Prices, Net Prices, and Discounts for Branded Drugs in the US, 2007-2018.
JAMA, 323
(9), 854.
https://doi.org/10.1001/jama.2020.1012
.

25
Mulcahy, A.W., et al. (2024).
Prescription Drug Prices, Rebates, and Insurance Premiums.
RAND.

https://www.rand.org/pubs/research_reports/RRA1820-3.html
(Accessed: 10 December 2025).

26
See section 1860D-4(b)(3)(G) of the Social Security Act. The six protected classes are: immunosuppressant, (for prophylaxis of organ transplant rejection), antidepressant, antipsychotic, anticonvulsant, antiretroviral, and antineoplastic. See also,
Medicare Prescription Drug Benefit Manual Chapter 6—Part D Drugs and Formulary Requirements, Centers for Medicare & Medicaid Services
(January 15, 2016) at § 30.2.5, available at
https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf
(Last accessed September 24, 2025).

27
Mulcahy, A.W. & Kareddy, V. (2021).
Prescription Drug Supply Chains: An Overview of Stakeholders and Relationships.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/reports/prescription-drug-supply-chains
(Accessed: 10 December 2025).

28
Fees, payments, or payment adjustments made after the point-of-sale that change the cost of Part D covered drugs for Part D sponsors or PBMs must be reported to CMS as Direct or Indirect Remuneration (DIR).

29
Centers for Medicare & Medicaid Services. (2017).
Medicare Part D—Direct and Indirect Remuneration (DIR).
U.S. Department of Health and Human Services.
https://www.cms.gov/newsroom/fact-sheets/medicare-part-d-direct-and-indirect-remuneration-dir
(Accessed: 10 December 2025).

30
Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, 117 Stat. 2066 (2003).
https://www.congress.gov/108/plaws/publ173/PLAW-108publ173.pdf
(Accessed: 10 December 2025).

Under the Part D program, drug price negotiations take place between Part D plan sponsors (or their PBMs) and pharmaceutical manufacturers. Until recently, the federal government has not been a participant in the negotiations for drug prices.
31

The Medicare program does not currently use international reference pricing, which broadly refers to the practice of taking pharmaceutical pricing data from other economically comparable countries into account in identifying domestic prices for drugs.
32

The Inflation Reduction Act of 2022 (IRA), Public Law 117-169, included a series of provisions, including the Medicare Drug Price Negotiation Program, which authorizes the Secretary of the Department of Health and Human Services (HHS) (hereafter, “the Secretary”) to negotiate the prices of certain qualifying high expenditure single source drugs without generic or biosimilar competition with manufacturers; however, the Medicare Drug Price Negotiation Program does not consider the prices of drugs in other economically similar countries
33

in negotiating the maximum fair price (MFP).

31
The exception to this is drugs that are selected for the Medicare Drug Price Negotiation Program, implemented by the Inflation Reduction Act, which authorizes Medicare to directly negotiate drug prices for certain high expenditure, single source Medicare Part B or Part D drugs.

32
Tordrup, D., et al. (2020).
Systematic Reviews for the Update of the WHO Guideline on Country Pharmaceutical Pricing Policies.
World Health Organization (WHO).
https://www.ncbi.nlm.nih.gov/books/NBK570141/pdf/Bookshelf_NBK570141.pdf
(Accessed: 10 December 2025).

33
Inflation Reduction Act of 2022, Public Law 117-169, 136 Stat 1818. The IRA is codified in multiple titles of the U.S. Code. The relevant sections of the Medicare Drug Price Negotiation Program are found at 42 U.S.C. 1320f-1 through 1320f-7.

B. Purpose

The prices of certain prescription drugs in the United States, including those covered under Part D, remain high, which contributes to increased costs under Part D. To address high spending under Part D, CMS proposes the testing of a new mandatory model under section 1115A of the Social Security Act (the Act), which authorizes the CMS' Center for Medicare and Medicaid Innovation (hereafter, “the CMS Innovation Center”) to test innovative payment and service delivery models for the purpose of evaluating whether they will reduce Medicare, Medicaid, and Children's Health Insurance Program (CHIP) expenditures while preserving or enhancing the quality of care furnished to the beneficiaries of such programs. The IRA included the Part D Inflation Rebate Program, which requires drug manufacturers to pay a rebate if they raise their prices for certain drugs faster than the rate of inflation. This rebate is paid to the Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund and is calculated and invoiced by CMS. The CMS Innovation Center, under its statutory authority, is proposing an innovative payment model that would test an alternative approach to the IRA's Part D Inflation Rebate Program that would change the calculation of the Part D drug inflation rebates for certain Part D drugs and biological products for the purpose of evaluating whether this approach would reduce program expenditures while maintaining or enhancing quality of care for beneficiaries. CMS proposes that the model's period of performance would begin on January 1, 2027 and end on December 31, 2033 and the payment period for the model would begin on January 1, 2027 and end on December 31, 2035.

C. Summary of Major Provisions

The proposed Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model would test changes to the Part D Inflation Rebate Program, specifically testing whether an alternative calculation for the Part D inflation rebate calculation for certain drugs and biological products would reduce program spending for Medicare and taxpayers while preserving or enhancing the quality of care furnished to Medicare beneficiaries. The proposed model includes the following major provisions:

• The GUARD Model would include a subset of Part D rebatable drugs that are included in the Part D Inflation Rebate Program. Specifically, the GUARD Model would include sole-source drugs and sole-source biological products that are in the following specific therapeutic categories: Analgesics; Anticonvulsants; Antidepressants; Antimigraine Agents; Antineoplastics; Antipsychotics; Antivirals; Bipolar Agents; Blood Glucose Regulators; Cardiovascular Agents; Central Nervous System Agents; Gastrointestinal Agents; Genetic or Enzyme or Protein Disorder: Replacement or Modifiers or Treatment; Immunological Agents; Metabolic Bone Disease Agents; Ophthalmic Agents; and Respiratory Tract/Pulmonary Agents. The GUARD Model would exclude: (1) generics and biosimilar biological products; (2) sole-source drugs or sole-source biological products with annual application-level
34

total gross covered

drug costs below the GUARD minimum spend threshold; and (3) drugs that are subject to a negotiated MFP, during the price applicability period.

34
Application-level refers to the New Drug Application (NDA) or Biologics License application

(BLA) associated with each GUARD Model drug. This means the total gross covered prescription drug costs for all Part D rebatable NDC-9s associated with the same application (NDA or BLA) as the GUARD Model drug.

• Manufacturers of Part D rebatable drugs, as defined in section 1927(k)(5) of the Act and 42 CFR 428.20, that receive a Part D inflation rebate report that includes a GUARD Model drug during an applicable period that overlaps with the GUARD Model performance period would be required to participate in the GUARD Model.

• The GUARD Model would select reference countries that are economically comparable to the United States by implementing the following criteria: the country must be included as an OECD country; must have a minimum of 60 percent of the United States's purchasing power parity (PPP)-adjusted per capita gross domestic product (GDP), and must have a minimum $400 billion (PPP)-adjusted aggregate GDP. The reference countries that meet these criteria and are therefore proposed to be selected for the model are the following: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden, Switzerland, and the United Kingdom.

• CMS proposes to test two approaches to calculating the GUARD Model international benchmark: the default international benchmark (also referred to as Method I) and the updated international benchmark (also referred to as Method II).

• For each GUARD Model drug for which data on international drug pricing in reference countries is available, CMS would calculate the GUARD Model default international benchmark. The GUARD Model default international benchmark for each GUARD Model drug would be identified as the lowest country-level average price among the set of average prices for each reference country, adjusted by the country-specific GDP based on PPP (hereafter, “GDP (PPP)”) adjuster, where an international product that is part of a GUARD Model drug's set of international analogs is sold.
35 36

35
To be a part of the set of international analogs, an international product must have an active ingredient, route of administration, dosage form, and strength that aligns with that of the GUARD Model drug.

36
Individual countries differ in the regulatory processes and standards governing approval of drugs and biological products. Use of international drug prices in the proposed GUARD Model should not be interpreted to connote FDA approval or to otherwise describe any scientific or regulatory relationship between U.S.-approved and non-U.S.-approved products.

• CMS would provide manufacturers with the option to submit international drug net pricing
37

data for the set of reference countries where international products that are part of a GUARD Model drug's set of international analogs are sold, including the across-country average net price. This submitted across-country average net price accounts for country-specific differences using a GDP (PPP) adjuster; if the data submitted is determined to be an applicable submission, it would become the GUARD Model updated international benchmark.

37
Where net pricing refers to drug prices exclusive of any discounts, rebates, or price concessions offered by manufacturers.

• CMS would determine a GUARD Model applicable international benchmark for each GUARD Model drug that would be the greater of the GUARD Model default international benchmark and the GUARD Model updated international benchmark, unless there is only a GUARD Model default international benchmark. If there is only a GUARD Model default international benchmark, it would become the GUARD Model applicable international benchmark.

• CMS would use this information to test an alternative inflation rebate payment calculation to determine whether manufacturers owe a GUARD Model rebate payment. The alternative inflation rebate calculation tested under the GUARD Model would compare a Medicare net price against the GUARD Model applicable international benchmark.

• The GUARD Model would require manufacturers to pay a GUARD Model rebate payment if the Medicare net price is greater than the GUARD Model applicable international benchmark for a GUARD Model drug. The Medicare net price would be calculated by subtracting manufacturer rebates (obtained from DIR) and discounts (under the Manufacturer Discount Program) from the WAC of the GUARD Model drug.

• The total GUARD Model rebate amount would be equal to the product of the per unit GUARD Model rebate amount for a GUARD Model drug for the performance year and the total number of units of the GUARD Model drug dispensed under Part D and covered by Part D plan sponsors in the GUARD Model geographic areas for the performance year.

• When the per unit GUARD Model rebate exceeds the per unit Part D inflation rebate amount, CMS would waive the rebate amount described in section 1860D-14B(b) of the Act and instead apply the GUARD Model rebate amount. The GUARD Model rebate payment would be deposited into the Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund.

• The GUARD Model evaluation would examine the main outcome, Medicare net spending, as well as additional outcomes of the GUARD Model, including the ways in which Part D plan benefits may change for GUARD Model drugs and whether and to what extent there are impacts on beneficiary cost sharing for GUARD Model drugs.

We also propose to waive program requirements that are necessary solely for the purposes of testing the GUARD Model. We propose to issue these waivers using our waiver authority under section 1115A(d)(1) of the Act. Specifically, we propose to waive the provisions in section 1860D-14B(b)(1) of the Act, which are the Medicare Part D inflation rebate calculation provisions; and, we propose to waive the provisions in section 1860D-14B(a)(1) of the Act, which describes the timing requirements for manufacturer rebates reports issued by CMS. Each of the proposed waivers is discussed in detail in section IV.R. this proposed rule.

D. Summary of Costs and Benefits

EP23DE25.000

II. Background

Prescription drug prices in the United States have been increasing over time, and the prices of certain drugs sold in the United States are substantially higher than prices in economically comparable countries. High prescription drug prices in the United States influence Part D spending, which has also increased over time (as we discuss later in this section).

A. Prescription Drug Prices in the United States

Medicare prescription drug costs have been rising over time, with total Part D gross drug spending increasing from $121 billion in 2014 to $276 billion in 2023, an increase of nearly 10 percent annually.
38

In 2024, Part D drug spending represented a large portion (about 40 percent)
39

of overall gross drug spending in the United States. The increase in Part D gross drug spending is consistent with overall trends in U.S. drug spending, which are rising over time. Gross drug spending has increased from $600 billion in 2018 to $858 billion in 2023 for all drugs, regardless of payer source.
40

Net drug spending increased by 11.4 percent in 2024 (from $437.1 billion in 2023 to $487 billion in 2024), more than double the increase from the previous year (4.9 percent growth in 2023, from $416.8 billion in 2022 to $437.1 billion in 2023).
41

These increases are driven by many factors; the way the United States pays for prescription drugs and the complex pharmaceutical drug supply chain also play a role.

38
MedPAC. (2025).
Health Care Spending and the Medicare program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025).

39
IQVIA. (2025).
Understanding the Use of Medicines in the U.S. 2025. https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/understanding-the-use-of-medicines-in-the-us-2025
(Accessed: 10 December 2025).

40
IQVIA. (2023).
The Use of Medicines in the U.S. 2023. https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/the-use-of-medicines-in-the-us-2023
(Accessed: 10 December 2025).

41
IQVIA. (2025).
Understanding the Use of Medicines in the U.S. 2025. https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/understanding-the-use-of-medicines-in-the-us-2025
(Accessed: 10 December 2025).

Existing research shows that the prices of drugs in the United States are much higher than prices for the same drugs sold in other countries and this gap is increasing over time.
42 43

In 2024, the United States accounted for less than 5 percent of the world's population (4.22)
44

and about 15 percent (14.9) of the world's real gross domestic product (GDP),
45

but U.S. gross spending on drugs accounted for over half of the world's gross spending on drugs (53.2 percent)
46

and only about 10 percent of the volume sold.
47

Among countries in the Organization for Economic Cooperation and Development (OECD), in 2024, the United States accounted for about 63 percent of spending on prescription drugs, but only 22 percent of the volume.
48

42
Kang, S., et al. (2019). Using External Reference Pricing in Medicare Part D to Reduce Drug Price Differentials with Other Countries.
Health Affairs, 38
(5), 804-811.
https://doi.org/10.1377/hlthaff.2018.05207.

43
Mulcahy, A.W., et al. (2024).
International Prescription Drug Price Comparisons: Estimates Using 2022 Data.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/sites/default/files/documents/277371265a705c356c968977e87446ae/international-price-comparisons.pdf
(Accessed: 10 December 2025).

44
Data from the U.S. Census Bureau: the U.S. and World Population Clock (Population Clock) and the International Database (International Database). The U.S. and world population in 2024 according to the U.S. Census Bureau's U.S. and World Population Clock was about 340 million and 8 billion which results in the U.S. population being 4.22% of the world population in 2024.

45
Data from the CIA World Factbook's real GDP at purchasing power parity (PPP) exchange rates (Real GDP (purchasing power parity) Comparison—The World Factbook). For 2024, the US. and world GDP in real GDP at PPP (2021 U.S. dollars) according to the CIA World Factbook was 25.7 and 172.4 trillion which results in the U.S. GDP being is 14.89% of the world GDP.

46
Mikulic, M. (2025).
Market Share of the Leading Global Pharmaceutical Markets 2024.
Statista.
https://www.statista.com/statistics/245473/market-share-of-the-leading-10-global-pharmaceutical-markets/#:~:text=The%20United%20States%20was%20the,including%20only%20the%20hospital%20market
(Accessed: 10 December 2025).

47
Author analysis based on IQVIA MIDAS® annual volume sales data using the kilogram measure January to December 2024 reflecting estimates of real-world activity. Copyright IQVIA. All rights reserved. The statements, findings, conclusions, views, and opinions contained and expressed in this research article are based in part on data obtained under license from the following IQVIA information service(s): IQVIA MIDAS. Copyright IQVIA. All Rights Reserved. The statements, findings, conclusions, views and opinions contained and expressed herein are not necessarily those of IQVIA or any of its affiliated or subsidiary entities.

48
Author analysis based on IQVIA MIDAS annual sales data using the estimated sales and kilogram measures from January to December 2024 reflecting estimated of real-world activity. Copyright IQVIA. All rights reserved.

Research from Office of Assistant Secretary for Planning and Evaluation (ASPE) and the RAND Corporation provides comparative data on U.S. prescription drug prices relative to other OECD member countries. These studies examine prescription drug pricing patterns and present findings on how U.S. prescription drug costs compare to international benchmarks. ASPE's

research indicated that U.S. prescription drug prices exceeded those of non-U.S. OECD countries combined in 2018. Specifically, U.S. gross prices for brand-name drugs were 344 percent of prices in non-U.S. countries.
49

The study also found that unbranded generic drugs had lower U.S. prices compared to the prices in other OECD countries. A 2024 report revealed an even larger gap, U.S. gross prices for certain drugs are higher than other countries. Specifically, for brand-name originator drugs,
50

U.S. prices are approximately 422 percent of prices in economically comparable countries or at least 322 percent if adjusted for rebates in the United States (but not in other countries).
51

The same study showed the United States paid less for unbranded generic drugs; specifically, U.S. prices for these drugs represent approximately 67 percent of the OECD countries combined. This indicates that pricing patterns vary between brand-name originator drugs and generic drugs in the U.S. market. This body of research also suggests that U.S. drug prices for brand-name originator drugs are growing faster than drug prices in other countries.

49
Mulcahy, A., et al. (2021).
International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Studies.
RAND.
https://www.rand.org/pubs/research_reports/RR2956.html
(Accessed: 16 December 2025).

50
The 2024 ASPE report defines brand-name originators as “the original drugs developed and licensed or approved via 351(a) or a New Drug Application (NDA) pathway.” The authors of the study are solely responsible for how brand-name originator drugs were defined for the study.

51
Mulcahy, A.W., et al. (2024).
International Prescription Drug Price Comparisons: Estimates Using 2022 Data.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/sites/default/files/documents/277371265a705c356c968977e87446ae/international-price-comparisons.pdf
(Accessed: 10 December 2025).

The widening gap over time between U.S. drug prices and prices in other economically comparable countries for certain types of drugs exist for many reasons. However, one component is the substantial difference in the way the United States and other economically comparable countries approach prescription drug pricing. Although there is wide variation in the way economically comparable countries determine prices, in general, many countries take a more centralized approach to drug pricing and may have greater involvement in establishing prices for drugs than the United States.
52

52
Syversen, I.D., et al. (2024). A Comparative Analysis of International Drug Price Negotiation Frameworks: An interview study of key stakeholders.
Milbank Quarterly, 102
(4), 1004-1031.
https://doi.org/10.1111/1468-0009.12714
.

The U.S. market and the incentives and payment mechanisms embedded within the U.S. pharmaceutical drug supply chain are complex. Drug manufacturers set the list price, also known as the Wholesale Acquisition Cost (WAC), which serves as the initial anchor price for a drug throughout the complex pharmaceutical drug supply chain market in the United States.
53

The pharmaceutical drug supply chain consists of many stakeholders, each with differing, potentially complex roles. Stakeholders include drug manufacturers, drug wholesalers, pharmacies, group purchasing organizations (GPOs), payers (that is, insurance plans, including Part D plans), and pharmacy benefit managers (PBMs).
54

When payers, including Medicare Advantage organizations offering Part D prescription drug coverage and standalone Part D plans, reimburse the pharmacy for a drug, the reimbursement is based on a negotiated payment amount for the drug plus a dispensing fee. Payers, including Part D plan sponsors, often contract with PBMs, which administer the outpatient pharmacy benefit and negotiate rebates with manufacturers. For drugs in competitive therapeutic classes, PBMs often negotiate with manufacturers to receive rebates in exchange for preferred formulary placement. These rebates, which are not typically applied at point-of-sale, ultimately reduce the net price of the drug faced by the payer. Under the Part D program, the post point-of-sale compensation is included in direct and indirect remuneration (DIR), and it is factored into the Centers for Medicare & Medicaid Services (CMS) calculation of final Medicare payments to Part D plans.
55

This, in turn, impacts Medicare costs, including premiums, under the Part D program.

53
Mulcahy, A.W. & Kareddy, V. (2021).
Prescription Drug Supply Chains: An Overview of Stakeholders and Relationships.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/reports/prescription-drug-supply-chains
(Accessed: 10 December 2025).

54
Mulcahy, A.W. & Kareddy, V. (2021).
Prescription Drug Supply Chains: An Overview of Stakeholders and Relationships.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/reports/prescription-drug-supply-chains
(Accessed: 10 December 2025).

55
Centers for Medicare & Medicaid Services. (2017).
Medicare Part D—Direct and Indirect Remuneration (DIR).
U.S. Department of Health and Human Services.
https://www.cms.gov/newsroom/fact-sheets/medicare-part-d-direct-and-indirect-remuneration-dir
(Accessed: 10 December 2025).

B. The Medicare Prescription Drug Benefit (Medicare Part D)

The Medicare Voluntary Prescription Drug Benefit Program, also known as Part D, is a federal prescription drug coverage program established under Title XVIII, Part D of the Social Security Act (hereafter, “the Act”) (sections 1860D-1 through 1860D-43 of the Act), as added by section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA); the program provides outpatient prescription drug coverage to Medicare beneficiaries.
56

Section 1860D-15 of the Act specifies the payment methodology for Part D plan sponsors, including direct subsidy payments, reinsurance, and risk corridor payments, as well as beneficiary premiums. The program is administered by private insurers through either standalone prescription drug plans (PDPs) or Medicare Advantage prescription drug (MA-PD) plans.
57

The prices of prescription drugs covered by a Part D plan are negotiated between the plan sponsor or its PBM and pharmaceutical drug manufacturers.
58

56
Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, 117 Stat. 2066 (2003).
https://www.congress.gov/108/plaws/publ173/PLAW-108publ173.pdf
(Accessed: 10 December 2025).

57
MA-PD plans offer both medical and prescription benefits (Medicare Part D) through Medicare Part C. Standalone PDP plans offer only Part D coverage.

58
The exception to this is drugs that are selected for the Medicare Drug Price Negotiation Program, implemented by the Inflation Reduction Act, which authorizes Medicare to directly negotiate drug prices for certain high expenditure, single source Medicare Part B or Part D drugs.

Under the program, Medicare typically subsidizes a portion of the Part D basic benefit costs for enrollees through reinsurance and direct subsidy payments made to Part D plans, and provides additional premium and cost sharing subsidies for low-income enrollees through the low-income subsidy (LIS) program.
59

Beneficiaries who voluntarily enroll in a Part D plan typically pay a monthly premium, and depending on their specific plan and drug utilization, may have to pay an annual deductible, copayments, and coinsurance.

59
MedPAC. (2024).
Part D Payment System. https://www.medpac.gov/wp-content/uploads/2024/10/MedPAC_Payment_Basics_24_PartD_FINAL_SEC.pdf
(Accessed: 10 December 2025).

The Inflation Reduction Act of 2022 (IRA), Public Law 117-169, made several additions and amendments to the Act that affected the structure of the defined standard Part D drug benefit. Currently, the Part D defined standard benefit consists of three phases that enrollees go through depending on their use and cost of drugs: the deductible phase, the initial coverage phase, and the catastrophic coverage phase. Plans are responsible for setting the specific

deductible, up to a maximum of $615 in 2026.
60

In the 2026 defined standard benefit, enrollees are responsible for 25 percent of drug costs until their true out-of-pocket (TrOOP) spending reaches $2,100, after which they enter the catastrophic coverage phase. Once enrollees reach the catastrophic coverage phase, they are not responsible for any further out-of-pocket payments for a covered Part D drug. The deductible and $2,100 annual out-of-pocket cap in effect for 2026 will be adjusted each year based on the annual percentage increase in average expenditures for covered Part D drugs among Part D eligible individuals in the United States.
61

In the defined standard benefit initial coverage phase, manufacturers are typically responsible for 10 percent of costs for certain brand drugs and biologics under the Manufacturer Discount Program and Part D plans are typically responsible for 65 percent.
62

In the catastrophic coverage phase, Part D plans are typically responsible for 60 percent of drug costs, drug manufacturers are typically responsible for 20 percent, and Medicare pays the remaining 20 percent for brand-name drugs and biologics.
63

60

Medicare.gov
. (n.d.).
Medicare Part D Costs.
Centers for Medicare and Medicaid Services (CMS), U.S Department of Health and Human Services.
https://www.medicare.gov/health-drug-plans/part-d/basics/costs
(Accessed: 10 December 2025).

61
Centers for Medicare & Medicaid Services. (2025).
Final CY 2026 Part D Redesign Program Instructions.
U.S. Department of Health and Human Services.
https://www.cms.gov/newsroom/fact-sheets/final-cy-2026-part-d-redesign-program-instructions
(Accessed: 10 December 2025).

62
Under the Manufacturer Discount Program, there is a multi-year phase-in period for applicable discounts for certain manufacturers' applicable drugs. See section 1860D-14C(g)(4) of the Act.

63
This is the Part D standard benefit for brand-name drugs and biologics. There are some differences in the Part D standard benefit for generic drugs.

Under section 1860D-2(a)(1) of the Act, each Part D plan is required to offer either the defined standard benefit, as described previously, or an alternative coverage structure that is actuarially equivalent to the defined standard benefit. In addition, under section 1860D-2(a)(2) of the Act, Part D plan sponsors may offer enhanced or supplemental benefits. Analysis of the landscape files available on
CMS.gov
reveal that for 2026, 49 percent of standalone Part D plan offerings include enhanced benefits and 98 percent of MA-PD plans have enhanced benefits.
64

This flexibility allows Part D plans to compete for enrollees based on the benefit design and premiums. It also leads to differences between plans' specific design (for example, whether they require a deductible and, if so, the deductible amount); coverage (for example, the specific drugs covered and tier placement of covered drugs); beneficiary cost sharing (for example, whether a drug is subject to coinsurance or copayment); and other components. Each plan maintains its own formulary, consistent with Medicare formulary requirements in 42 CFR 423.120(b)(2) and 423.272(b)(2). CMS evaluates formularies based on requirements, including sufficiency of categories and classes, tier placement, and utilization management restrictions. These requirements include, for example, that each plan must cover at least two drugs within each therapeutic category and class and generally, all drugs within the six protected classes (immunosuppressants, antidepressants, antipsychotics, anticonvulsants, antiretrovirals, and antineoplastics)
65

as well as selected drugs under the Medicare Drug Price Negotiation Program for which a negotiated maximum fair price (MFP) is in effect. The Medicare Payment Advisory Commission (MedPAC) has reported that in 2023, Part D covered 54.9 million enrollees, of which about 14 million were enrolled in LIS;
66

Part D enrollees had total gross spending of about $276 billion, which translates to about $5,429 per Part D enrollee who used a Part D covered drug.
67

Previous research by ASPE has found that in 2019, about 5.7 million Medicare beneficiaries did not have prescription drug coverage.
68

64
Centers for Medicare & Medicaid Services. (2025).
Prescription Drug Coverage (Part D).
U.S. Department of Health and Human Services.
https://www.cms.gov/medicare/coverage/prescription-drug-coverage
(Accessed: 10 December 2025).

65
See also: Medicare Prescription Drug Benefit Manual Chapter 6—Part D Drugs and Formulary Requirements, Centers for Medicare & Medicaid Services (January 15, 2016) at § 30.2, Available at
https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf
(Last accessed September 24, 2025).

66
For eligible enrollees whose income and resources are limited, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 established Extra Help (a subsidy) for prescription drugs, which provides financial assistance for prescription drugs (premiums, deductibles, and co-payments). Under the IRA, beginning in 2024, the LIS program is expanded to individuals with limited financial resources and incomes up to 150 percent of the Federal Poverty Limit (FPL).

67
MedPAC. (2025).
Health Care Spending and the Medicare program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025).

68
Tarazi, W., et al. (2022).
Medicare Beneficiary Enrollment Trends and Demographic Characteristics.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/sites/default/files/documents/b9ac26a13b4fdf30c16c24e79df0c99c/medicare-beneficiary-enrollment-ib.pdf
(Accessed: 10 December 2025).

To offer the Part D benefit, under section 1860D-11(b) of the Act, each Part D plan sponsor must submit an annual bid to CMS for each plan it intends to offer, including the plan's benefit design, service area, and the sponsor's actuarial estimate of the expected cost of covering the standard benefit for an average enrollee.
69

These bids, which are due to CMS annually in June, use actuarial methods to project gross drug costs at the point of sale and subtract expected manufacturer rebates, other price concessions, and other components to estimate the net plan liability. As part of the process of bid development, Part D plan sponsors consider the price of a drug, the estimated rebate payments and price concessions from various entities, including pharmacies and drug manufacturers, and other factors. Manufacturer rebates represent the majority of these rebates received by Part D plans and substantially reduce Part D plans' net drug costs.
70

Part D plan bids are used to calculate the Part D National Average Monthly Bid Amount (NAMBA) and derive the base beneficiary premium (BBP) amount. Although the BBP does not represent the actual premiums paid by Part D enrollees, which is dependent on individual Part D plan offerings, this estimate influences the average level of enrollee premiums across the Part D plan market. Typically, Medicare subsidizes 74.5 percent of the average cost of basic benefits in the form of direct subsidies and reinsurance. However in 2025, MedPAC reports that the Medicare subsidy increased to about 83 percent of the average cost of basic benefits due to the IRA's premium cap that institutes a 6 percent cap on annual increases in the BBP.
71

69
MedPAC. (2024).
Part D Payment System. https://www.medpac.gov/wp-content/uploads/2024/10/MedPAC_Payment_Basics_24_PartD_FINAL_SEC.pdf
(Accessed: 10 December 2025).

70
MedPAC. (2023).
Assessing postsale rebates for prescription drugs in Medicare Part D, Report to the Congress: Medicare and the Health Care Delivery System.

https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_Ch2_MedPAC_Report_To_Congress_SEC.pdf
(Accessed: 10 December 2025).

71
MedPAC. (2025).
Chapter 4: Part D Outlook, Medicare Payment Advisory Commission.

https://www.medpac.gov/wp-content/uploads/2025/06/Jun25_Ch4_MedPAC_Report_To_Congress_SEC.pdf
(Accessed: 10 December 2025).

C. Recent Drug Pricing Policy Reforms

The IRA's amendments to Part D of Title XVIII of the Act included provisions that change the Part D benefit. As part of these changes, the IRA included several provisions that directly changed manufacturer liability under the Part D program.

Section 11102(a) of the IRA added new section 1860D-14B of the Act, which establishes requirements for drug manufacturers to pay inflation rebates for certain Part D drugs. Specifically, pharmaceutical drug manufacturers that increase the price for a Part D rebatable drug faster than the rate of inflation (as measured by changes in the Consumer Price Index for all Urban Consumers, CPI-U), as described in section 1860D-14B of the Act, are required to pay Part D drug inflation rebates to the Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund for each 12-month applicable period.

Under these provisions, a “Part D rebatable drug” is defined as a drug or biological described at section 1860D-14B(g)(1)(C) of the Act and is: (1) a drug approved under a New Drug Application (NDA) under section 505(c) of the Federal Food, Drug, and Cosmetic (FD&C) Act (21 U.S.C. 301
et seq.
); (2) a drug approved under an Abbreviated New Drug Application (ANDA) under section 505(j) of the FD&C Act that meets the criteria in section 1860D-14B(g)(1)(C)(ii) of the Act; or (3) a biological licensed under section 351 of the Public Health Service (PHS) Act (42 U.S.C. 201
et seq.
). In general, the statute excludes multi-source generic drugs from the definition of a Part D rebatable drug and limits generics that may be Part D rebatable drugs to sole-source generics—that is, generic drugs for which (1) the reference listed drug approved under section 505(c) of FD&C Act, including any “authorized generic drug” (as that term is defined in section 505(t)(3) of the FD&C Act), is not being marketed, as identified in the Food and Drug Administration's (FDA's) National Drug Code (NDC) Directory; (2) there is no other drug approved under section 505(j) of the FD&C Act that is rated as therapeutically equivalent and that is being marketed, as identified in FDA's NDC Directory; (3) the manufacturer is not a “first applicant” during the 180-day exclusivity period; and (4) the manufacturer is not a “first approved applicant” for a competitive generics therapy. The Part D Inflation Rebate Program also excludes drugs or biological products with an average annual total cost under Part D of less than $100 per individual using such drug or biological product for the first applicable period; this amount is adjusted by percentage changes in the CPI-U annually thereafter.

The Part D inflation rebate calculation examines year-over-year changes to determine whether an inflation rebate is owed for a Part D rebatable drug. Specifically, the Part D inflation rebates are calculated, as reported under section 1927(b)(3) of the Act
72

and further clarified in a December 2023 guidance,
73

for each Part D rebatable drug by establishing a historical benchmark price and comparing this price against the price for an applicable 12-month period. The inflation rebate amounts are based on the difference between the drug's volume weighted annual average manufacturer price (AnMP) in a given 12-month applicable period and the inflation-adjusted volume weighted annual average manufacturer price of the benchmark period. This means if the Part D rebatable drug's AnMP in an applicable period exceeds the drug's inflation adjusted payment amount, an inflation rebate amount would be due. The average manufacturer price (AMP) represents the average price paid to the manufacturer for the drug in the United States by wholesalers.

72
Social Security Act, Payment for Covered Outpatient Drugs (section 1927 of the Act, 42 U.S.C. 1396r-8).
https://www.ssa.gov/OP_Home/ssact/title19/1927.htm
(Accessed: 10 December 2025).

73
Centers for Medicare & Medicaid Services. (2023).
Medicare Part D Drug Inflation Rebates Paid by Manufacturers: Revised Guidance, Implementation of Section 1860D-14B of the Social Security Act.
U.S. Department of Health and Human Services.
https://www.cms.gov/files/document/medicare-part-d-inflation-rebate-program-revised-guidance.pdf
(Accessed: 10 December 2025).

The statute defines an “applicable period” to mean a 12-month period beginning with October 1 of a year (beginning with October 1, 2022). As such, October 1, 2022 was the beginning of the first 12-month period for which drug manufacturers will be required to pay rebates to Medicare if a Part D rebatable drug's price increases faster than the rate of inflation over the 12-month period. December 31, 2025 is the date by which CMS is required to begin invoicing pharmaceutical drug manufacturers for the Part D inflation rebates they owed Medicare for the 12-month applicable periods that began on October 1, 2022 and October 1, 2023.
74

For subsequent applicable periods, CMS must invoice pharmaceutical drug manufacturers for any Part D inflation rebates they owe Medicare by no later than 9 months after the end of the applicable period.

74
Centers for Medicare & Medicaid Services. (2024).
Fact Sheet: Medicare Prescription Drug Inflation Rebate Program Policies in the Calendar Year 2025 Physician Fee Schedule Final Rule.
U.S. Department of Health and Human Services.
https://www.cms.gov/files/document/medicare-prescription-drug-inflation-rebate-program-final-fact-sheet.pdf
(Accessed: 10 December 2025).

Section 11201 of the IRA, as codified in sections 1860D-14C and 1860D-43 of the Act, established a new Manufacturer Discount Program, which became effective January 1, 2025. The Manufacturer Discount Program replaced the Medicare Coverage Gap Discount Program (CGDP), which was enacted into law in section 3301 of the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by section 1101 of the Health Care and Education Reconciliation Act (HCERA) of 2010 (Pub. L. 111-152) (referred to collectively as the Affordable Care Act) and codified in sections 1860D-14A and 1860D-43 of the Act. Effective January 1, 2011, the CGDP made manufacturer discounts for brand name drugs and biologic products (with biosimilars included starting in 2019) available to applicable beneficiaries at the point of sale. The CGDP provided non-low-income subsidy beneficiaries in the coverage gap phase of the Part D benefit, a 50 percent discount on the negotiated price of the drug at point of sale. For an applicable drug to be covered under Part D, the manufacturer had to sign a manufacturer agreement with the Secretary.

Section 53116 of the Bipartisan Budget Act of 2018 (BBA) (Pub. L. 115-123), changed the CGDP amount from 50 to 70 percent for applicable beneficiaries beginning in 2019. The BBA also reduced beneficiary cost sharing in the coverage gap phase to 25 percent in 2019 and subsequent years. The CGDP was sunset effective December 31, 2024, and the new Manufacturer Discount Program became effective January 1, 2025. The Manufacturer Discount Program differs from the CGDP in several important ways. First, the Manufacturer Discount Program discount is applied to applicable drugs dispensed to beneficiaries who receive a low-income subsidy as well as those who do not. Also, discounts are applied in the initial coverage and catastrophic phase of the benefit at 10 and 20 percent, respectively. The IRA outlined a method to identify certain specified manufacturers and specified small manufacturers, as defined in statute, and set forth a multiyear phase-in period to phase-in the full discount percentages for these manufacturers. Finally, unlike the CGDP, Manufacturer Discount Program discounts do not count towards a beneficiary's TrOOP
75

costs (meaning that manufacturer payments made under the Manufacturer Discount Program will not accrue to a beneficiary's incurred costs).

75
See sections 1860D-2(b)(4)(C)(iii) and (E) of the Social Security Act).

The IRA also established the Medicare Drug Price Negotiation Program, codified in sections 1191 through 1198

of the Act, which gave the Secretary authority to negotiate a MFP for certain high expenditure, single source drugs and biologics without generic or biosimilar competition with participating drug manufacturers. The program began with a set of drugs covered under Part D and expands over time to include drugs payable under Part B that meet the criteria. On August 29, 2023, CMS published the list of 10 drugs covered under Part D selected for initial price applicability year 2026; the negotiated MFPs for these drugs will go into effect on January 1, 2026.
76

The second set of 15 drugs covered under Part D that were selected for negotiation for 2027 were announced on January 17, 2025, and the MFPs, if agreed upon by the manufacturers and CMS, for these drugs are expected to go into effect on January 1, 2027.
77

76
Centers for Medicare & Medicaid Services. (2024).
Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026.
U.S. Department of Health and Human Services.
https://www.cms.gov/newsroom/fact-sheets/medicare-drug-price-negotiation-program-negotiated-prices-initial-price-applicability-year-2026
(Accessed: 10 December 2025).

77
Centers for Medicare & Medicaid Services. (2015).
HHS Announces 15 Additional Drugs Selected for Medicare Drug Price Negotiations in Continued Effort to Lower Prescription Drug Costs for Seniors.
U.S. Department of Health and Human Services.
https://www.cms.gov/newsroom/press-releases/hhs-announces-15-additional-drugs-selected-medicare-drug-price-negotiations-continued-effort-lower
(Accessed: 10 December 2025).

D. High Drug Costs Under Part D

Although the provisions under the IRA included a series of changes to the Part D benefit, including allowing Medicare to negotiate for certain drugs, they do not fully address the issue of high drug spending in the Part D program. High drug prices affect Part D spending, particularly for certain types of drugs (for example, single-source brand-name drugs), and influence overall program spending. Moreover, enrollees may ration their prescription drugs due to cost, which can have serious health-related consequences for Medicare enrollees and may result in avoidable costs for Medicare.
78

78
Leonard, F., et al. (2023).
Medicare's Affordability Problem: A Look at the Cost Burdens Faced by Older Enrollees.
The Commonwealth Fund.
https://www.commonwealthfund.org/publications/issue-briefs/2023/sep/medicare-affordability-problem-cost-burdens-biennial
(Accessed: 10 December 2025).

Part D gross drug spending has risen over time (from $348 gross drug spending per month per LIS enrollee in 2010 to $765 gross drug spending per month per LIS enrollee in 2023 and $163 per month per non-LIS enrollee in 2010 to $309 per month per non-LIS enrollee in 2023).
79

Analyses show that Part D gross spending is concentrated among certain types of drugs, particularly certain types of brand name drugs such as specialty drugs. One study examined trends in total gross drug spending under Part D between 2012 to 2021 specifically for drugs with the top 1 percent, 5 percent, and 10 percent of spending. Findings showed that gross drug costs increased by 103 percent from 2012 to 2021, driven both by increases in the number of prescriptions as well as increases in prices for existing drugs. Drugs in the top 1 percent of spending in Part D accounted for an increasing share of total gross drug costs over time, increasing from 31.4 percent to 41.1 percent from 2012 to 2021. Spending specifically for specialty drugs increased by over 500 percent over the study period and accounted for 71.1 percent of total gross drug costs in 2021, even though specialty drugs accounted for 6.2 percent of prescriptions in 2021.
80

79
MedPAC. (2025).
Health Care Spending and the Medicare program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025).

80
Niu, S., et al. (2024). Concentration of spending and share of specialty drug spending in Medicare Part D over a 10-year period.
Journal of Managed Care & Specialty Pharmacy, 30
(12), 1355-1363.
https://doi.org/10.18553/jmcp.2024.30.12.1355
.

In 2023, MedPAC reported that Medicare gross spending on brand-name drugs was about $171.2 billion and spending on biologics was about $60 billion, collectively representing about 84 percent of the total gross drug spending.
81

Generic drugs represented the remaining 15 percent of spending.
82

Additionally, although there were more prescriptions filled for generic drugs (about 82 percent across the top 15 therapeutic classes, including diabetic therapy, antineoplastics, anticoagulants, asthma/chronic obstructive pulmonary disease (COPD) agents, and others in 2023), the majority of gross spending (91 percent) was for brand-name products within these therapeutic classes.
83

81
MedPAC. (2025).
Health Care Spending and the Medicare program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025).

82
MedPAC. (2025).
Health Care Spending and the Medicare program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025).

83
MedPAC. (2025).
Health Care Spending and the Medicare program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025.

Enrollee out-of-pocket costs for drugs covered under Part D vary based on several factors. Research by ASPE finds that in 2022, Part D enrollees who do not receive LIS had greater average out-of-pocket costs than their LIS enrollee counterparts ($464 per non-LIS enrollee vs. $52 per LIS enrollee); these differences are particularly pronounced for enrollees who reached the catastrophic coverage phase of the Part D benefit ($3,093 per non-LIS enrollee vs. $87 per LIS enrollee). ASPE analysis also finds that, prior to the IRA's out-of-pocket cap going into effect, among enrollees who reached the catastrophic coverage phase of the Part D benefit, annual out-of-pocket prescription drug costs were highest for enrollees with certain health conditions (such as enrollees with cystic fibrosis, metabolic and immune disorders, certain types of cancers, and those who have undergone major organ transplant) and those who take certain types of medications. For example, enrollees who took certain brand name single source drugs used to treat cancers had significantly higher out-of-pocket costs than the average Part D enrollee.
84

84
Sayed, B.A., et al. (2024). Inflation Reduction Act Research Series, Medicare Part D Enrollee Out-Of-Pocket Spending: Recent Trends and Projected Impacts of the Inflation Reduction Act. Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/reports/medicare-part-d-enrollee-out-pocket-spending
(Accessed: 10 December 2025).

The IRA caps enrollees' out-of-pocket costs for prescription drugs at $2,100 in 2026 (and this cap is adjusted annually based on the annual percentage increase in average expenditures for covered Part D drugs in the United States for Part D eligible individuals in the previous year), which reduces the out-of-pocket costs for certain Part D enrollees who take expensive medications covered under the Part D program. However, although the provision has gone into effect, there remain concerns about the affordability of prescription drugs covered under Part D. Specifically, there is concern that Part D plan sponsors are shifting from a fixed copayment model for high-cost brand-name drugs to a coinsurance-based model, where the enrollee pays a percentage of the price at the point-of-sale in the pharmacy, potentially exposing Part D enrollees who take certain drugs to higher costs.
85

Additionally, CMS analysis of the Medicare Current Beneficiary Survey (MCBS) finds that nine percent of Medicare beneficiaries reported that they decided
not
to fill a prescription in

2025 due to cost.
86

All of this suggests that Part D enrollees with certain health conditions and particularly those who take certain brand-name drugs or biologics may still experience high out-of-pocket spending.

85
Trish, E. & Blaylock, B. (2025).
Shifting Cost-Sharing Burden to Beneficiaries in Medicare Part D.
U.S.C. Schaeffer Center White Paper Series. White Paper No. 2025-06.
https://schaeffer.usc.edu/research/cost-sharing-burden-medicare-part-d/
(Accessed: 10 December 2025).

86
Internal CMS analysis of Medicare Current Beneficiary Survey data collected May-July 2025 (Office of Enterprise Data and Analytics).

In addition to out-of-pocket costs for their prescription drugs, enrollees also pay monthly premiums for their Part D coverage, which may impact whether a Medicare beneficiary elects to enroll in a Part D plan. Previous ASPE research finds that in 2019, about 5.7 million Medicare beneficiaries did not have any prescription drug coverage.
87

From 2024 to 2025, MedPAC found a decrease in the average premiums paid by enrollees, from $27 to $23. This decline is largely attributed to the IRA's 6 percent cap on base beneficiary premiums, which remains in effect through 2029 and to the voluntary Part D Premium Stabilization Demonstration. This demonstration, which began in 2024 for calendar year 2025, is testing an approach to stabilize the year-over-year changes in premiums for standalone PDPs during the implementation of the Part D redesign.
88

MedPAC analysis shows that average monthly premiums are higher for standalone PDPs than MA-PD plans. This is driven in part by the additional tools and flexibilities available to MA-PD plans (for example, MA-PD sponsors that submit MA bids that are below the applicable benchmark can use MA rebates to reduce Part D premiums) compared to PDPs.
89

87
Tarazi, W., et al. (2022).
Medicare Beneficiary Enrollment Trends and Demographic Characteristics.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/sites/default/files/documents/b9ac26a13b4fdf30c16c24e79df0c99c/medicare-beneficiary-enrollment-ib.pdf
(Accessed: 10 December 2025).

88
Centers for Medicare & Medicaid Services. (2025).
2026 Medicare Part D Bid Information and Part D Premium Stabilization Demonstration Parameters.
U.S. Department of Health and Human Services.
https://www.cms.gov/newsroom/fact-sheets/2026-medicare-part-d-bid-information-and-part-d-premium-stabilization-demonstration-parameters
(Accessed: 10 December 2025).

89
Suzuki, S., et al. (2025).
Structural differences between the Part D PDP and MA-PD markets.
MedPAC.
https://www.medpac.gov/wp-content/uploads/2025/04/Tab-D-Structural-issues-in-Part-D-April-2025.pdf
(Accessed: 10 December 2025).

E. Rationale and Need for GUARD Model Test

Within the United States, the prices of certain types of drugs have been increasing over time, which impacts spending in Part D and affordability of Part D coverage for Medicare beneficiaries. Brand-name drugs and biologics, in particular, represent a large portion of Part D spending in spite of the fact that generic drugs have a higher volume of use.
90 91

The IRA addresses certain high drug costs under Part D. However, the IRA provisions—specifically the Drug Price Negotiation Program—focuses on a small set of drugs and only after they are available in the market for a period of time. The current Part D Inflation Rebate Program requires manufacturers to pay a rebate for certain drugs based on price changes over time within the United States. While this approach is useful for curbing post-launch increases in drug prices, the Part D Inflation Rebate Program does not address the high launch prices of drugs, which continue to increase over time and contribute to high Medicare drug spending. One way to address high Part D spending is to test a change in the IRA's Part D inflation rebate calculation by using a benchmark that takes into account drug pricing information from economically comparable countries. The benchmark could then be subtracted from a net price that uses the manufacturer's starting point for negotiations (for example, the publicly available list price); manufacturer rebates and discounts could be netted from this figure (to give credit to manufacturers for rebates that have been paid). This approach is different from the current Part D Inflation Rebate Program, which compares each applicable drug's current year price (based on the applicability period as described previously in this Section of the proposed rule) to the inflation adjusted benchmark period price, and in so doing, evaluates changes in prices
within
the United States over time.
92

90
Trish, E. & Blaylock, B. (2025).
Shifting Cost-Sharing Burden to Beneficiaries in Medicare Part D.
U.S.C. Schaeffer Center White Paper Series. White Paper No. 2025-06.
https://schaeffer.usc.edu/research/cost-sharing-burden-medicare-part-d/
(Accessed: 10 December 2025).

91
MedPAC. (2025).
Health Care Spending and the Medicare program. https://www.medpac.gov/wp-content/uploads/2025/07/July2025_MedPAC_DataBook_SEC.pdf
(Accessed: 10 December 2025).

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In addition, unlike the Medicare Drug Price Negotiation Program, which has requirements for the number of years a drug has been on the market before it is eligible to be selected for negotiation, under the GUARD Model, if a drug meets the criteria, it would be included and potentially be subject to a rebate regardless of how long it has been on the market.

Under the CMS Innovation Center's statutory authority under section 1115A of the Act, we propose to address this key issue of persistent high domestic Medicare drug spending for certain drugs and biologics through the GUARD Model, which tests changes to the Part D inflation rebate provision by implementing an innovative alternative payment method for the purpose of reducing Medicare drug spending and preserving or improving quality of care for Part D enrollees.

III. Summary Provisions Proposed in the Guard Model

The proposed GUARD Model would test changes to the Part D Inflation Rebate Program, specifically testing whether an alternative for the Part D inflation rebate calculation for certain drugs and biological products would reduce program spending for Medicare and taxpayers while preserving or enhancing the quality of care furnished to Medicare beneficiaries. The proposed model includes the following major provisions:

• The GUARD Model would include a subset of Part D rebatable drugs that are included in the Part D Inflation Rebate Program. Specifically, the GUARD Model would include sole-source drugs and sole-source biological products that are in the following specific therapeutic categories: Analgesics; Anticonvulsants; Antidepressants; Antimigraine Agents; Antineoplastics; Antipsychotics; Antivirals; Bipolar Agents; Blood Glucose Regulators; Cardiovascular Agents; Central Nervous System Agents; Gastrointestinal Agents; Genetic or Enzyme or Protein Disorder: Replacement or Modifiers or Treatment; Immunological Agents; Metabolic Bone Disease Agents; Ophthalmic Agents; and Respiratory Tract/Pulmonary Agents. The GUARD Model would exclude (1) generics and biosimilar biological products; (2) sole-source drugs or sole-source biological products with annual application-level
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total gross covered drug costs below the GUARD minimum spend threshold; and (3) drugs that are subject to a maximum fair price (MFP), during the price applicability period. For a more detailed discussion, see section IV.B. of this proposed rule.

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Application-level refers to the New Drug Application (NDA) or Biologics License application (BLA) associated with each GUARD Model drug. This means the total gross covered prescription drug costs for all Part D rebatable NDC-9s associated with the same application (NDA or BLA) as the GUARD Model drug.

• The Centers for Medicare & Medicaid Services (CMS) proposes in section IV.D. of this proposed rule that manufacturers of “Part D rebatable drugs,” as defined in section 1927(k)(5) of the Act and 42 CFR 428.20, that receive a Part D inflation rebate report that includes a GUARD Model drug for an applicable period that overlaps with the GUARD Model performance period

would be required to participate in the GUARD Model.

• CMS proposes in section IV.E. of this proposed rule that the GUARD Model would select reference countries that are economically comparable to the United States. Reference countries must meet the following criteria: they must be a part of the Organization for Economic Cooperation and Development (OECD), have a minimum of 60 percent of the United States's purchasing power parity (PPP)-adjusted per capita gross domestic product (GDP), and a minimum $400 billion (PPP)-adjusted aggregate GDP. The reference countries that meet these criteria and are therefore proposed to be selected for the model are the following: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden, Switzerland, and the United Kingdom.

• As part of the GUARD Model, CMS proposes to test two approaches to calculating the GUARD Model international benchmark: the default international benchmark (also referred to as the Method I benchmark) and the updated international benchmark (also referred to as the Method II benchmark).

• For each GUARD Model drug for which data on international drug pricing in reference countries are available, CMS would calculate the GUARD Model default international benchmark. The GUARD Model default international benchmark for each GUARD Model drug would be identified as the lowest country-level average price among the set of average prices for each reference country, adjusted by the country-specific GDP based on PPP (hereafter, “GDP (PPP)”) adjuster, where an international product that is part of a GUARD Model drug's set of international analogs
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is sold. Please see section IV.G. of the proposed rule.

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To be a part of the set of international analogs, an international product must have an active ingredient, route of administration, dosage form, and strength that aligns with that of the GUARD Model drug.

• CMS would provide manufacturers with the option to submit international drug net pricing data for the set of reference countries where international products that are part of a GUARD Model drug's set of international analogs are sold, including the across-country average net price. This submitted across-country average net price accounts for country-specific differences using a GDP (PPP) adjuster; if the data submitted is determined to be an applicable submission, it would become the GUARD Model updated international benchmark. Please see section IV.F. of this proposed rule.

• CMS would determine a GUARD Model applicable international benchmark for each GUARD Model drug that would be the greater of the GUARD Model default international benchmark and the GUARD Model updated international benchmark, unless there is only a GUARD Model default international benchmark. If there is only a GUARD Model default international benchmark, it would become the applicable international benchmark. Please see section IV.G. of this proposed rule.

• CMS would use this information to test an alternative inflation rebate payment calculation to determine whether manufacturers owe a GUARD Model rebate payment. The alternative inflation rebate calculation tested under the GUARD Model would compare a Medicare net price against the applicable international benchmark. Please see section IV.H. of this proposed rule.

• The GUARD Model would require manufacturers to pay a GUARD Model rebate payment if the Medicare net price is greater than the GUARD Model applicable international benchmark for a GUARD Model drug. The Medicare net price would be calculated by subtracting manufacturer rebates (obtained from direct and indirect remuneration (DIR)) and discounts (under the Manufacturer Discount Program) from the wholesale acquisition cost (WAC) of the GUARD Model drug. Please see section IV.H. of this proposed rule.

• The total GUARD Model rebate amount would be equal to the product of the per unit GUARD Model rebate amount for such GUARD Model drug for the performance year and the total number of units of the GUARD Model drug dispensed under Part D and covered by Part D plan sponsors in the GUARD Model geographic areas for the performance year. Please see section IV.H. of this proposed rule.

• When the per unit GUARD Model rebate exceeds the per unit Part D inflation rebate amount, CMS would waive the rebate amount described in section 1860D-14B(b) of the Act and instead apply the GUARD Model rebate amount. The GUARD Model rebate payment would be deposited into the Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund.

• The evaluation would examine the main outcome, Medicare net spending, as well as additional outcomes of the GUARD Model, including the ways in which Part D plan benefits may change for GUARD Model drugs and whether and to what extent there are impacts on beneficiary cost sharing for GUARD Model drugs.

IV. Detailed Description of Provisions in the Proposed Guard Model

In this Section, CMS proposes our policies for testing and implementing the GUARD Model, including model-specific definitions and the general framework for implementation of the GUARD Model. The proposed model-specific terms are described in applicable Sections of this proposed rule. We propose to codify these model-specific terms at proposed 42 CFR part 514. In addition, for purposes of this proposed rule and the proposed GUARD Model, we propose that the following terms would have the same meaning as set forth in 42 CFR 428.20: “applicable period”; “Consumer Price Index for All Urban Consumers” (CPI-U); “applicable threshold”; “average manufacturer price” (AMP); “manufacturer”; “national drug code” (NDC) ; “Part D rebatable drug”; and “unit.” We also propose that “covered Part D drug” has the same meaning as set forth in 42 CFR 423.100, and “line extension” has the same meaning as set forth in 42 CFR 428.200.

The remaining sections of this proposed rule are organized as follows: In section IV.A. of this proposed rule, we describe the proposed model performance and test period. In section IV.B. of this proposed rule, we present the Part D covered drugs that would be included in the GUARD Model. In section IV.C. of this proposed rule, we present the model test design, geographic selection, and beneficiary population that would be included in the GUARD Model. In section IV.D. of this proposed rule, we present the GUARD Model participants, including the requirement that participation is mandatory as well as requirements for participants during the GUARD Model performance period and after the ending of the performance period. In section IV.E. of this proposed rule, we present the existing international drug pricing data that CMS proposes to use to generate the GUARD Model default international benchmark as well as CMS' proposed data sources and methods to identify the reference countries for the GUARD Model. In section IV.F. of this proposed rule, we present the option for manufacturers to submit international drug net pricing data, if they choose to do so; the requirements for such data submission; and the process to elect this option if preferred for the purpose of determining the updated international benchmark. In section IV.G. of this proposed rule, we

present the proposal to determine the GUARD Model applicable international benchmark based on the set of reference countries, including the default international benchmark and the updated international benchmark (which only applies if the manufacturer elects to submit international drug net pricing data, and it is deemed applicable by CMS). In section IV.H. of this proposed rule, we propose the methods to determine the GUARD Model rebate payment, including the data inputs and the calculation steps for the GUARD rebate payment amount. Section IV.I. of this proposed rule presents the proposals for reports of rebate amounts and timing of reports for GUARD Model participants. In section IV.J. of this proposed rule, we present the proposed reconciliation process for a GUARD rebate payment and the suggestion of error process. In section IV.K. of this proposed rule, we present the enforcement mechanisms that would be used to ensure manufacturer payment of rebates are paid in a timely manner. Section IV.L. of this proposed rule presents the proposed quality and monitoring strategy for the GUARD Model, and section IV.M. of this proposed rule presents the proposed beneficiary protections and compliance related activities that CMS would require under the GUARD Model. Section IV.N. of this proposed rule presents the GUARD Model's interaction and coordination with other models and programs and CMS' approach for taking these into account. Section IV.O. of this proposed rule presents the proposed evaluation approach for the GUARD Model, including the key outcomes that would be examined. Section IV.P. of this proposed rule presents information on the limitations on review that apply to CMS Innovation Center Models, including the GUARD Model. Section IV.Q. of this proposed rule presents program waivers that CMS proposes to apply to the GUARD Model. Section IV.R. of this proposed rule denotes that the GUARD Model and its provisions are severable from other CMS programs. Section IV.S. of this proposed rule presents information on the termination of the GUARD Model. Section IV.T. of this proposed rule presents the process for response to comments on this proposed rule.

A. Proposed Model Performance and Test Period

CMS is proposing in § 514.1(c) that the GUARD Model would have a 7-year overall test period, which would consist of 5 performance years, during which GUARD Model rebate payments would apply, and 7 payment years during which CMS calculates, invoices, collects, and reconciles the GUARD Model rebates for a performance year, unless the model is terminated sooner, in accordance with proposed § 514.910(a).

In § 514.5, we propose to define “payment year” as a 12-month period beginning on January 1 and ending on December 31 during the GUARD Model test period. As such, we propose to define “GUARD Model payment period” as the 7-year period beginning on January 1, 2027 through December 31, 2033, as specified in § 514.1(c). We propose a 7-year payment period to allow for sufficient time for payments to be invoiced and collected after the end of the 5 performance years of the GUARD Model.

In § 514.5, we propose to define the “GUARD Model performance period” as the 5-year period, beginning on January 1, 2027, through December 31, 2031, as specified in § 514.1(c). We propose to define at § 514.5, the “performance year” (PY) as the 12-month period beginning on January 1st and ending on December 31st during the GUARD Model performance period, and in alignment with the GUARD Model duration as specified in § 514.1(c). We propose to utilize a 5-year performance period because it would allow for sufficient time and duration to test an alternative to the Part D inflation rebate calculation under the Medicare Part D Inflation Rebate Program, using the applicable international benchmark price, as described in section IV.G. of this proposed rule, and for the purpose of understanding the impacts of the GUARD Model. A 5-year performance period would allow CMS to examine whether the Model reduces expenditures under Part D and maintains or improves quality of care for Part D enrollees; that is, whether the GUARD Model—(1) maintains spending while improving quality; (2) maintains quality while reducing spending; or (3) reduces spending and improves quality. We believe this is sufficient time to evaluate the way the GUARD Model impacts Medicare net spending for the GUARD Model drugs. Within this time horizon, we would also be able to observe short-, intermediate-, and some long-term impacts of the GUARD Model, such as manufacturer and other stakeholder responses as well as changes in cost sharing for beneficiaries. See section IV.L. of this proposed rule for the quality and monitoring approach and section IV.O. of this proposed rule for the evaluation strategy of the GUARD Model.

CMS proposes in § 514.110(c) that it would be necessary to continue GUARD Model processes for payment beyond the end of the GUARD Model performance period and reconciliation activities beyond the GUARD Model payment period. CMS believes the reconciliation activities beyond the end of the GUARD Model payment period would pose minimal burden to manufacturers. Examples of reconciliation activities that could take place after the end of the GUARD Model payment period are responses to reconciliation reports, suggestion of error processes, and payment of any reconciled rebate amounts due or owed.

B. GUARD Model Drugs

1. Proposed Identification of GUARD Model Drugs

From among the Part D rebatable drugs included in the Part D Inflation Rebate Program, as defined in 42 CFR 428.20 and identified in 42 CFR 428.101, CMS proposes at § 514.120(a) that GUARD Model drugs would be defined as sole-source drugs and biological products identified at the NDC-9 level, except those that meet certain exclusions, as described in section III.B.2. of this proposed rule. This means that for every performance year, only sole-source drugs and sole-source biological products included in the Part D Inflation Rebate Program would be considered for the GUARD Model.

CMS proposes at § 514.120(a) that identification of drugs and biological products would be at the NDC-9 level because this is the same unique prescription drug product number that is used to identify a Part D rebatable drug in accordance with 42 CFR 428.20 and 428.101. We would use the NDC-9 level at which to identify the drugs in the Medicare Part D Prescription Drug Event (PDE) data. At § 514.5 CMS defines “PDE data” to mean records submitted by a Part D plan to CMS each time a beneficiary fills a prescription under Medicare Part D. A PDE record is data summarizing the final adjudication of a Part D dispensing event that is reported to CMS by the Part D sponsor using a CMS-defined file layout.

We propose at § 514.100 that for the purposes of the GUARD Model test, a “sole-source drug” will be defined as a drug approved by the Food and Drug Administration (FDA) under a New Drug Application (NDA) under section 505 of the Food Drug and Cosmetics Act (FD&C Act) for which there are no

generic(s),
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as defined at § 514.5, rated as therapeutically equivalent (under the FDA's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations”). The generic rated as therapeutically equivalent to the drug must be recognized as a therapeutic equivalent in the FDA's Orange Book and be identified as marketed in the FDA's NDC Directory. From this definition, it follows that a multi-source drug, which is a drug with at least one therapeutically equivalent generic approved and marketed, is not a GUARD Model drug.

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At § 514.5 we define “generic” to mean, for the United States, a marketed drug submitted in an ANDA and approved under an ANDA under section 505(j) of the FD&C Act.

We propose at § 514.100 that a “sole-source biological product,” for purposes of the GUARD Model test, will be defined as a biological product licensed by the FDA under a Biologics License Application (BLA) under section 351(a) of the Public Health Service (PHS) Act that is not the reference biological product, as defined at 42 U.S.C. 262(i)(4), for a biosimilar biological product licensed by FDA in a BLA under section 351(k) of the PHS Act. The biosimilar biological product
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must have the biological product as its reference product as defined at 42 U.S.C. 262(i)(4) in the FDA's Purple Book and be identified as marketed in the FDA's NDC Directory. From this definition, it follows that a multi-source biological product, which is a biological product with at least one biosimilar biological product licensed and marketed that has said biological product as their reference product, is not a GUARD Model drug.

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At § 514.5 we define “
biosimilar biological product”
to mean, for the United States, a marketed biological product submitted in a BLA under section 351(k) of the PHS Act.

At the time of evaluating inclusion of a drug into the GUARD Model (based on being sole-source drugs or biological products) for each performance year, CMS would use the FDA's NDC Directory, including historical information from NDC Directory files such as discontinued, delisted, and expired listings, provided by the FDA or published on the FDA website to identify whether the generic or biosimilar biological products are being sold or marketed for purposes of the GUARD Model. Additionally, CMS proposes at § 514.120(a) that should a sole-source drug or sole-source biological product become multi-source at any point during a performance year, it would only be subject to the GUARD Model for the period of the performance year during which it was sole-source.

CMS recognizes that based on the definitions of sole-source previously described, authorized generics and unbranded biological products could potentially be GUARD Model drugs. Authorized generics are drugs sold without their brand name by the original manufacturer or a third party under the NDA of the original drug. Unbranded biological products are biological products sold without their brand name by the original manufacturer or a third party licensed by the BLA 351(a) of the original biological product.
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Since both authorized generics and unbranded biological products are, directly or indirectly, sponsored by the original pharmaceutical drug manufacturer, CMS believes that if their NDC-9 is included in the Part D Inflation Rebate Program, then subject to the exclusions described in section III.B.2. of this proposed rule, they would be included in the GUARD Model.

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It is possible for there to be an unbranded biological product derived from a biosimilar biological product, which would have been licensed under section 351(k) of the PHS Act. Given that at § 514.120 CMS proposes to exclude generics and biosimilar biological products and that biosimilar biological products are defined at § 514.5 as those licensed under section 351(k), it follows that these specific unbranded biological products would be excluded from the GUARD Model.

Under the proposed policies, the GUARD Model drugs would consist of a subset of Part D rebatable drugs. CMS believes that focusing the GUARD Model test on a subset of the Part D rebatable drugs, rather than all Part D rebatable drugs, would allow CMS to understand the GUARD Model's impacts with a smaller set of drugs. For example, testing the GUARD Model on a select subset of drugs would allow CMS to understand how the Part D plan market would respond to the alternative rebate payment methodology tested under the GUARD Model. In § 514.120(a), we propose sole-source drugs and sole-source biological products for inclusion in the GUARD Model because generally, these drugs face similar market dynamics. By including only sole-source drugs and sole-source biological products in the GUARD Model, we expect that learnings from the test would not be influenced by the very different market dynamics that exist for other types of drugs included in the Part D Inflation Rebate program.

When determining the scope of drugs included in our proposal for the GUARD Model, we considered two key characteristics related to market dynamics for sole-source drugs and sole-source biological products. First, sole-source drugs and sole-source biological products experience different competitive forces than multi-source drugs and multi-source biological products. The entry of a generic drug, which changes a sole-source drug into a multi-source one, has been shown to shift utilization from the original drug to the generic by 75 percent within a year,
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with prices falling on average by more than half for the sole-source drug.
99 100

Biosimilar biological product entry, which changes a sole-source biological product into a multi-source biological product, has been shown to shift utilization from the original biological product to the biosimilar biological product by 40 percent within a year, with prices falling by up to 25 percent.
101

These shifts and prices in multi-source drug
102

and multi-source biological product
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markets varies by market size, product form, therapeutic area, distribution channel, and other idiosyncratic characteristics. Therefore, by only including sole-source drugs and sole-source biological products, the GUARD Model test can focus on understanding the impacts on these types of drugs without having to account for confounding factors that may arise due to the entry of generics or biosimilars, which fundamentally alters market dynamics.
104

98
Grabowski, H., et al. (2016). Updated Trends in US Brand-name and Generic Drug Competition.
Journal of Medical Economics, 19
(9), 836-844.
https://doi.org/10.1080/13696998.2016.1176578
.

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Darling P., et al. (2024)
Economic Considerations Related to Biosimilar Market Entry.
American Bar Association.
https://www.americanbar.org/groups/antitrust_law/resources/newsletters/economic-considerations-biosimilar-market-entry/
(Accessed: 10 December 2025).

100
Aitken, M. (2016).
Price Declines after Branded Medicines Lose Exclusivity in the U.S.
IQVIA.
https://www.iqvia.com/-/media/iqvia/pdfs/institute-reports/price-declines-after-branded-medicines-lose-exclusivity-in-the-us.pdf
(Accessed: 10 December 2025).

101
Maini L. et al. (2021). Biosimilar Entry and the Pricing of Biologic Drugs.
SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3760213
.

102
Frank, R.G., et al. (2021). The Evolution of Supply and Demand in Markets for Generic Drugs.
The Milbank quarterly, 99
(3), 828-852.
https://doi.org/10.1111/1468-0009.12517
.

103
McGeeney, J.D., et al. (2025). Measuring the First Mover Advantage in US Biosimilar Markets.
Value Health. https://doi.org/10.1016/j.jval.2025.07.011
.

104
Bosworth, A., et al. (2023).
Changes in the List Prices of Prescription Drugs, 2017-2023.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://www.aspe.hhs.gov/reports/changes-list-prices-prescription-drugs
(Accessed: 10 December 2025).

Second, pharmaceutical drug manufacturer rebates and discounts are significantly different for sole-source

and multi-source drugs and biological products. Although there are many factors that influence the net price of a drug, which is exclusive of rebates, discounts, and other price concessions, in general (though there are exceptions), drugs that face more limited competition (such as sole-source drugs and sole-source biological products) maintain higher net prices than drugs that have market competition (such as multi-source drugs and multi-source biological products).
105

106

107

This occurs for multiple reasons, but one reason is due to the specific features of the sole-source drug market. Part D plan sponsors or their pharmacy benefit managers (PBMs) negotiate with pharmaceutical drug manufactures for rebates in exchange for favorable formulary placement, which includes assigning drugs into tiers with different cost sharing requirements (for example, coinsurance vs. copayment); prior authorization requirements; utilization management approaches, and other aspects. Although Part D plan sponsors or their PBMs negotiate with pharmaceutical drug manufactures for formulary placement for both sole-source drugs and sole-source biological products as well as multi-source drugs and biological products, negotiation is fundamentally different due to the different characteristics of these types of drugs.

105
Government Accountability Office. (2023).
Medicare Part D: CMS should monitor effects of rebates on plan formularies and beneficiary spending
(GAO-23-105270).
https://www.gao.gov/assets/gao-23-105270.pdf
.

106
Hernandez, I., et al. (2020). Changes in List Prices, Net Prices, and Discounts for Branded Drugs in the US, 2007-2018.
JAMA, 323
(9), 854-862.
https://doi.org/10.1001/jama.2020.1012
.

107
Mulcahy, A.W., et al. (2024).
Prescription Drug Prices, Rebates, and Insurance Premiums.
RAND.
https://www.rand.org/pubs/research_reports/RRA1820-3.html
(Accessed: 10 December 2025).

These two key differences illustrate how market dynamics vary between sole-source drugs and biological products and multi-source drugs and biological products, and the way these differences directly impact their pricing dynamics. CMS believes that the focus of the GUARD Model on sole-source drugs and sole-source biological products mitigates the potential confounding factors that would arise if the full set of Part D rebatable drugs were included in the GUARD Model test.

Further, CMS proposes in § 514.120(a) to limit the subset of sole-source drugs and sole-source biological products to those classified by the United States Pharmacopeia (USP) Drug Classification as belonging to certain categories selected by CMS. The categories selected by CMS, hereinafter referred to as “USP selected categories” are proposed at § 514.120(e) and include the specific categories from the USP Drug Classification that correspond to all of the Part D protected classes and additional categories based on several considerations. The primary reasons for selection of these categories are that Medicare beneficiaries taking these drugs have conditions for which deficits in care exist and they represent a meaningful amount of spending under Part D.

a. Approach for Selecting Categories From the United States Pharmacopeia

Under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, 117 Stat. 2066 (2003), section 1860D-4(b)(3)(C)(ii) of the Act, the USP is required to develop and revise the Medicare Model Guidelines, which is a classification system used for the purpose of supporting Part D formulary development and submission. The Medicare Model Guidelines include a list of categories and classes that may be used by prescription drug plans; USP revises them on a continuous basis based on changes in therapeutic uses of covered Part D drugs and the additions of new covered Part D drugs.
108

108
Historically, every 3 years, the USP publishes an updated version of the Medicare Model Guidelines. The current guidelines can be found following this link
https://www.usp.org/health-quality-safety/usp-medicare-model-guidelines.

CMS proposes at § 514.120(d) to use the `category' field of the USP Drug Classification because CMS believes this field is sufficient to identify drugs and biological products for conditions where Medicare beneficiaries may experience deficits of care, while allowing for differences in mechanism of action and molecular or biological targets for products that treat the same therapeutic area. We recognize that a drug or biological product may be listed in more than one USP category. We propose at § 514.120(d) that as long as one of the categories selected for inclusion in the GUARD Model applies to the drug or biological product, it will be considered to have met this criterion and would be included in the GUARD Model.

CMS proposes at § 514.120(d) to identify the Part D rebatable drugs classified as belonging to one of the categories listed later in this Section of this proposed rule using their RxNorm
109

Concept Unique identifier,
110

active ingredient(s), NDC-9, or the FDA approved indication. Using the current guidelines, the USP Medicare Model Guidelines v9.0,
111

CMS proposes at § 514.120(a) that a drug or biological product whose listed USP categories include at least one of the following USP selected categories (as defined at § 514.120(e)) would be included in the GUARD Model if they meet all other inclusion criteria and limited to the exclusion criteria proposed at § 514.120(c): Analgesics; Anticonvulsants; Antidepressants; Antimigraine Agents; Antineoplastics; Antipsychotics; Antivirals; Bipolar Agents; Blood Glucose Regulators; Cardiovascular Agents; Central Nervous System Agents; Gastrointestinal Agents; Genetic or Enzyme or Protein Disorder: Replacement or Modifiers or Treatment; Immunological Agents; Metabolic Bone Disease Agents; Ophthalmic Agents; and Respiratory Tract/Pulmonary Agents.

109
The National Library of Medicine (NLM) produces RxNorm. RxNorm provides normalized names and unique identifiers for medicines and drugs. The goal of RxNorm is to allow computer systems to communicate drug-related information efficiently and unambiguously. See
https://www.nlm.nih.gov/research/umls/rxnorm/index.html.

110
An RXCUI is a machine-readable code or identifier that points to the common meaning shared by the various source names grouped and assigned to a particular concept. A concept is a fundamental unit of meaning in RxNorm.
https://www.nlm.nih.gov/research/umls/rxnorm/overview.html.

111
The current guidelines can be found here:
https://www.usp.org/health-quality-safety/usp-medicare-model-guidelines.

The proposed list of USP categories includes categories that correspond to the six Medicare Protected Classes (anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants) identified by CMS as those for which “all or substantially all” drugs must be covered by Part D plans.
112

The USP categories that correspond to the Medicare Protected Classes are Anticonvulsants, Antidepressants, Antineoplastics, Antipsychotics, Antivirals, Bipolar Agents, and Immunological Agents, as defined at § 514.5. The Bipolar Agents USP category has significant overlap with the Medicare Protected Classes of antidepressants and antipsychotics; thus, CMS considers Bipolar Agents to correspond with the Medicare protected classes and this category would be included in the GUARD Model. These USP categories that correspond to the protected classes are included because of their relevance for vulnerable

beneficiaries that depend on these drugs for serious conditions. Except for Anticonvulsants, among the Part D rebatable sole-source drugs and sole-source biological products, all of the USP selected categories that correspond to Medicare protected classes have 2024 total covered gross drug costs above $1 billion.
113

The top three spending categories that correspond to Medicare Protected Classes in 2024 are Immunological Agents, Antineoplastics, and Antivirals; for these categories, among Part D rebatable sole-source drugs and sole-source biological products, the total covered drug costs are $32, $30, and $10 billion, respectively.

112
Centers for Medicare & Medicaid Services. (2016).
Medicare Prescription Drug Benefit Manual: Chapter 6—Part D drugs and formulary requirements
(Rev. 18, Issued Jan. 15, 2016). U.S. Department of Health and Human Services.
https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf
(Accessed: 10 December 2025.

113
CMS analysis using preliminary list of Part D rebatable drugs for 2024 and PDE data as of October 1, 2025.

The proposed list also includes additional categories that correspond to drugs that are used for conditions for which Medicare beneficiaries experience deficits of care and that are within the top spending categories for the Part D Inflation Rebate Program based on previous spending trends. The additional USP selected categories (as defined at § 514.120(e)) are Analgesics; Antimigraine Agents; Blood Glucose Regulators; Cardiovascular Agents; Central Nervous System Agents; Gastrointestinal Agents; Genetic or Enzyme or Protein Disorder: Replacement or Modifiers or Treatment; Metabolic Bone Disease Agents; Ophthalmic Agents; and Respiratory Tract/Pulmonary Agents. Among the Part D rebatable sole-source drugs and sole-source biological products, in 2024, all of these USP selected categories have total covered gross drug costs above $1 billion.
114

The top two spending categories in 2024 were Blood Glucose Regulators and Respiratory Tract/Pulmonary Agents.

114
CMS analysis using preliminary list of Part D rebatable drugs for 2024 and PDE data as of October 1, 2025.

CMS proposes at § 514.120(d) that once CMS has identified the drug or biological product's category, it should remain in that category for the entire GUARD Model performance period. Accordingly, drugs or biological products will retain their category, while newly added drugs or biological products will retain the category assigned at the time of their identification, based on the USP Medicare Model Guidelines available at the time. Additionally, as defined at § 514.5, any change to the definition of Medicare Protected Classes in Chapter 6 section 30.2.5 from the Medicare Prescription Drug Benefit Manual would be carried over.

b. Addressing Deficits of Care Among Part D Enrollees

We propose these categories partly because Part D enrollees who take these drugs have conditions for which deficits of care are documented. For example, Part D beneficiaries who have immunological diseases (and therefore may take immunological agents), endocrine diseases (and therefore may take blood glucose regulators and metabolic bone disease agents), neurological diseases (and therefore may take analgesics, anticonvulsants, antimigraine agents, central nervous system agents) and chronic diseases (and therefore may take cardiovascular agents, gastrointestinal agents, respiratory tract and pulmonary agents), may experience affordability challenges related to their treatment.
115 116 117

There is evidence that patients with autoimmune diseases such as rheumatoid arthritis and systemic lupus erythematosus, neurological disease such as multiple sclerosis and myasthenia gravis, and endocrine diseases such as diabetes mellitus, continue to experience financial burden.
118 119 120

115
Dusetzina, S.B., et al. (2022). Many Medicare Beneficiaries Do Not Fill High-Price Specialty Drug Prescriptions.
Health Affairs, 41
(4), 487-496.
https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2021.01742.

116
San-Juan-Rodriguez, A., et al. (2019). Trends in Prices, Market Share, and Spending on Self-administered Disease-Modifying Therapies for Multiple Sclerosis in Medicare Part D.
JAMA Neurology, 76
(11), 1386-1390.
https://doi.org/10.1001/jamaneurol.2019.2711.

117
Tarazi, W., et al. (2022).
Prescription Drug Affordability among Medicare Beneficiaries.
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
https://aspe.hhs.gov/sites/default/files/documents/1e2879846aa54939c56efeec9c6f96f0/prescription-drug-affordability.pdf
(Accessed: 15 December 2025).

118
Sandoval-Heglund, D., et al. (2024). Economic Insecurities and Patient-Reported Outcomes in Patients with Systemic Lupus Erythematosus in the USA: a cross-sectional analysis of data from the California Lupus Epidemiology Study.
Lancet Rheumatology, 6
(2), e105-e114.
https://doi.org/10.1016/S2665-9913(23)00296-5.

119
Weinstein, D.R., et al. (2022). Multiple Sclerosis: Systemic Challenges to Cost-Effective Care.
American Health & Drug Benefits, 15
(1), 13-20.
https://pubmed.ncbi.nlm.nih.gov/35586614/.

120
Khan, S., et al. (2025). Insulin Rationing Persists Despite Policy Changes: Repeated Cross-Sectional Studies, 2017 vs 2024.
Journal of General Internal Medicine,
10.1007/s11606-025-09886-9. Advance online publication.
https://doi.org/10.1007/s11606-025-09886-9.

Additionally, CMS analysis of the Medicare Current Beneficiary Survey (MCBS) finds that nine percent of Medicare beneficiaries reported that they decided
not
to fill a prescription in 2025 due to cost.
121

Financial distress associated with cost coping behaviors, such as rationing or skipping medicines or delaying care that could worsen health outcomes continues to raise concerns for providers treating a range of conditions. This includes, for example, providers treating autoimmune diseases such as systemic lupus erythematosus
122

and neuromyelitis optical spectrum disorder,
123

endocrine diseases such as diabetes mellitus,
124

neurological diseases such as multiple sclerosis
125 126

and myasthenia gravis,
127

and chronic diseases such as cardiovascular diseases
128 129

and inflammatory bowel disease.
130

121
Internal CMS analysis of Medicare Current Beneficiary Survey data collected May-July 2025 (Office of Enterprise Data and Analytics).

122
Sandoval-Heglund, D., et al. (2024). Economic Insecurities and Patient-Reported Outcomes in Patients with Systemic Lupus Erythematosus in the USA: a cross-sectional analysis of data from the California Lupus Epidemiology Study.
Lancet Rheumatology, 6
(2), e105-e114.
https://doi.org/10.1016/S2665-9913(23)00296-5.

123
Wingerchuk, D.M., et al. (2022). Aligning Payer and Provider Strategies with the Latest Evidence to Optimize Clinical Outcomes for Patients with Neuromyelitis Optica Spectrum Disorder.
Journal of managed care & specialty pharmacy, 28
(12-a Suppl), S3-S27.
https://doi.org/10.18553/jmcp.2022.28.12-a.s1.

124
Patel, M.R., et al. (2022). Measurement and Validation of the Comprehensive Score for Financial Toxicity (COST) in a Population with Diabetes.
Diabetes Care, 45
(11), 2535-2543.
https://doi.org/10.2337/dc22-0494.

125
Singer, B.A., et al. (2024). Early Use of High-Efficacy Therapies in Multiple Sclerosis in the United States: benefits, barriers, and strategies for encouraging adoption.
Journal of Neurology, 271
(6), 3116-3130.
https://doi.org/10.1007/s00415-024-12305-4.

126
Mizell, R. (2024). The Impact of Insurance Restrictions in Newly Diagnosed Individuals with Multiple Sclerosis.
International Journal of MS Care, 26
(1), 17-21.
https://doi.org/10.7224/1537-2073.2022-069.

127
Choi, S.A., et al. (2025). Health Care Costs and Resource Utilization Among Patients with Myasthenia Gravis in the United States.
Journal of Managed Care & Specialty Pharmacy, 31
(5), 472-481.
https://doi.org/10.18553/jmcp.2025.31.5.472.

128
Sukumar, S., et al. (2023). Financial Toxicity of Medical Management of Heart Failure: JACC Review Topic of the Week.
Journal of the American College of Cardiology, 81
(20), 2043-2055.
https://doi.org/10.1016/j.jacc.2023.03.402.

129
Wang, S.Y., et al. (2021). Out-of-Pocket Annual Health Expenditures and Financial Toxicity from Healthcare Costs in Patients with Heart Failure in the United States.
Journal of the American Heart Association, 10
(14), e022164.
https://doi.org/10.1161/JAHA.121.022164.

130
Nguyen, N.H., et al. (2021). National Estimates of Financial Hardship from Medical Bills and Cost-related Medication Nonadherence in Patients with Inflammatory Bowel Diseases in the United States.
Inflammatory Bowel Diseases, 27
(7), 1068-1078.
https://doi.org/10.1093/ibd/izaa266.

Although the GUARD Model does not directly impact Part D enrollees' out-of-pocket costs for these drugs, we believe the GUARD Model has the capacity to address deficits of care experienced by the populations who take the drugs that fall within these categories. The GUARD Model test requires a GUARD Model

rebate payment, as described in Section IV.H. of this proposed rule, if a GUARD Model drug's Medicare net price is greater than an international benchmark. It is possible that in response to the alternative payment strategy tested under the model, manufacturers reduce their net price for a given drug, for instance by reducing launch prices for drugs that are likely to become GUARD Model drugs. If manufacturers decrease launch prices for GUARD Model drugs for the purpose of reducing their liability under the GUARD Model, it may have cascading effects. For example, such a response may benefit Part D plans, who may then change their benefit design and offerings for Part D plan enrollees and potentially reduce cost sharing for the drugs included in the GUARD Model.

It is also possible manufacturers respond to the GUARD Model by reducing the list prices of the drugs included in the model. A reduction of list prices would reduce a manufacturer's rebate liability under the GUARD Model. Given that the list price of drugs is used as a starting point for negotiations in the pharmaceutical drug supply chain, it is possible that a reduction in list prices may lead to a reduction in the out-of-pocket costs paid by Part D enrollees who take these drugs, particularly if the out-of-pocket cost is based on coinsurance instead of a flat copayment.

In sum, CMS proposes at § 514.5 that “GUARD Model drug” means, subject to the exclusions set forth in § 514.120(c), a Part D rebatable drug, as set forth in section 1860D-14B(g)(1) of the Act and defined in 42 CFR 428.20 and determined in 42 CFR 428.101, that is a sole-source drug or sole-source biological product as defined in § 514.100, has a USP category classification that includes at least one of the USP selected categories, as defined in § 514.120(e), and is identifiable by a unique NDC-9 for which a payment was made under Medicare Part D. This means that CMS proposes to limit the GUARD Model test to the subset of sole-source drug and sole-source biological products belonging to USP selected categories among the Part D rebatable drugs, with some exclusions. Focusing the GUARD Model test on sole-source drugs and source biological products allows the GUARD Model test to identify the impact of the model without having to consider and potentially adjust for the very different market dynamics between these different types of drugs. Additionally, selecting drugs in specific USP categories with deficits of care and high costs means the GUARD Model focuses on drugs with the greatest potential for savings for the Medicare program and Part D enrollees. Moreover, the proposed approach allows for testing of the GUARD Model on a smaller subset of Part D rebatable drugs, which would generate learnings and insights that can help CMS understand how stakeholders may respond, even for drugs that are not included in the GUARD Model.

2. Proposed Exclusion of Certain Part D Rebatable Drugs

CMS proposes in § 514.120(a) to test the GUARD Model with a subset of Part D rebatable drugs, specifically, sole-source drugs and sole-source biological products belonging to the proposed selected therapeutic USP categories.
131

CMS proposes to exclude from the GUARD Model, generics and biosimilar biological products. At § 514.5 we propose “generic” to mean, for the United States, a drug approved and marketed under an Abbreviated New Drug Application (ANDA) under section 505(j) of the FD&C Act; and “biosimilar biological product” to mean, for the United States, a biological product approved and licensed under a BLA under section 351(k) of the PHS Act. Given that the only generics that are Part D r

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2025-23705. Public record. Not legal advice.