What began as a series of demand letters in July 2025 has evolved into something significantly more consequential. By February 2026, sixteen of the seventeen largest pharmaceutical manufacturers have signed Most-Favored-Nation (MFN) pricing agreements with the Trump administration, which commit them to Medicaid price parity, MFN pricing on new product launches, and participation in TrumpRx.gov in exchange for three-year tariff immunity and improved regulatory positioning. But as those voluntary deals settle, the Centers for Medicare & Medicaid Services (CMS) has moved to make MFN pricing mandatory for Medicare through two new models: GLOBE (Medicare Part B) and GUARD (Medicare Part D), both published in the Federal Register on December 23, 2025, with a public comment period that closed on February 23, 2026.
For life sciences companies, investors, and counsel, the implications extend well beyond the headline pricing question. The mandatory CMS models, if finalized, may affect royalty calculations, license agreement net sales definitions, M&A earnout and milestone structures, and SEC disclosures for any company with significant Medicare exposure in the covered therapeutic categories. This post addresses five things companies need to understand as MFN pricing transitions from political negotiation to binding commercial reality, beginning with the deal-structure implications that require the most immediate attention.
1. Deal Structure Implications: Royalties, Milestones, License Agreements, and TrumpRx
MFN pricing is not merely a pricing policy question — it has the potential to reorder commercial arrangements in ways that many existing agreements do not anticipate. Four categories deserve near-term attention:
Royalty Purchase Agreements
Most royalty purchase agreements (both traditional monetizations and synthetic royalties) define the purchased royalty base as ‘net sales’ or a defined variant thereof. Standard net sales definitions typically deduct government rebates, Medicaid best-price rebates, and chargebacks, but are generally drafted with the existing statutory rebate framework in mind, not the GLOBE/GUARD incremental rebate structure.
The question for existing royalty deals is whether GLOBE/GUARD rebates fall within existing ‘government rebate’ permitted deductions when calculating net sales for purposes of the royalty or represent a new mandatory deduction category outside the current contractual definition. Agreements negotiated before the framework is finalized will likely lack explicit treatment of MFN rebates. Royalty holders receiving payments on drugs in covered Part B or Part D therapeutic categories should review the net sales definitions within their agreements before the proposed effective dates (October 2026 for GLOBE, January 2027 for GUARD) to understand the potential impact.
For transactions currently being structured, counsel should consider explicit treatment of GLOBE/GUARD rebates in net sales definitions, address their treatment in revenue-based milestone calculations, and consider how mandatory rebate adjustments interact with any minimum payment floors or caps in the transaction structure. Specifically, whether any 125% non-compliance penalties are excluded from permitted deductions when calculating net sales for purposes of the royalty to prevent ‘penalty-sharing’ with holders of royalty interests.
M&A Earnouts and Milestone Payments
M&A deals with milestone payments tied to net sales, commercial revenue thresholds, or market penetration often lack explicit treatment of mandatory government pricing adjustments beyond the IRA negotiation program. GLOBE and GUARD represent a new category of mandatory net price reduction for drugs in covered therapeutic categories. For deals currently being negotiated, parties should explicitly address how GLOBE/GUARD rebates affect milestone calculations and whether ‘regulatory change’ provisions apply. Existing agreements should be reviewed to assess whether MFN-linked rebates triggering a material change in milestone economics would constitute a MAC, support a repricing request, or fall within the scope of any existing price-change representations.
License Agreement Most-Favored Pricing Provisions
Many pharma and biotech license agreements include most-favored pricing (MFP) provisions obligating the licensor to extend to the licensee any pricing terms more favorable than those offered to any other commercial customer. The TrumpRx DTC prices, which represent discounts of 33% to over 90% for enrolled products, raise the question of whether TrumpRx transactions constitute ‘commercial sales’ that trigger existing MFP obligations.
The administration has characterized TrumpRx as a direct federal arrangement rather than a standard commercial transaction, but that characterization has not been adjudicated. Licensing parties whose agreements include MFP provisions should assess whether their TrumpRx participation commits them to obligations they did not anticipate. New agreements should explicitly address TrumpRx and MFN-government-program sales in the MFP definition and whether there should be an express exclusion for ‘government-mandated pricing or discounts offered through federal direct-access portals (e.g., TrumpRx.gov)’ from the definition of a Commercial Sale to avoid portfolio-wide price matching.
International Launch Sequencing
The nineteen-country reference basket for GLOBE and GUARD creates a strong incentive to delay launches in lower-priced OECD markets to avoid setting the international benchmark before U.S. launch. That is because the benchmarks are fixed at model inception (October 1, 2026 for GLOBE; January 1, 2027 for GUARD) rather than floating, such that a single low-priced launch in a reference OECD country prior to the U.S. launch could permanently anchor the U.S. price for the five-year duration of the model. Companies managing global launch sequences for pipeline drugs in covered therapeutic categories should model the benchmark implications of their current launch sequencing and consider whether adjustments are warranted. This is now a standard item for regulatory diligence in M&A and licensing transactions involving international pipeline assets.
2. The Voluntary Deal Landscape: What’s In, What’s Out, and Why the Structure Matters
As of early February 2026, at least sixteen companies have signed bilateral MFN pricing agreements with the Trump administration, covering most of the major biopharma players. Although smaller and mid-sized biotechs were not among the original seventeen recipients of the July 2025 demand letters, they may be implicated if GLOBE and GUARD proceed toward finalization.
The commercial terms of the voluntary agreements share a common core, though individual deal terms have not been fully disclosed and remain substantially confidential:
- Medicaid MFN pricing: Manufacturers commit to pricing designated existing products at Medicaid’s best-available price, aligned with the MFN benchmark
- New launch MFN pricing: Designated new products must be priced at MFN levels from launch
- TrumpRx DTC participation: Designated products are listed on TrumpRx.gov at cash-pay discounts, ranging from 33% to over 93% off for enrolled drugs
- Tariff immunity: Participating companies receive a three-year suspension from pharmaceutical import tariffs
- U.S. manufacturing commitments: Several companies made major multi-billion dollar domestic investment pledges alongside their pricing agreements
Companies that have not signed deals face two distinct risks: continued tariff exposure as the administration escalates pharmaceutical import duties, and no exemption from the GLOBE/GUARD mandatory models if finalized. The bifurcation creates a meaningful compliance incentive that will likely draw additional participants before the mandatory models are expected to take effect beginning in October 2026.
3. GLOBE and GUARD: The Mandatory Medicare Framework
While the voluntary deals were negotiated bilaterally and their terms remain substantially confidential, CMS has proposed to make MFN-linked pricing mandatory for Medicare through two formal rulemaking proceedings, the comment period for which ended February 23, 2026.
GLOBE Model (Medicare Part B)
The GLOBE (Global Benchmark for Efficient Drug Pricing) model applies to single-source drugs and biologics with annual Medicare Part B fee-for-service spending exceeding $100 million, in specified therapeutic categories, including antigout agents, antineoplastics, blood products and modifiers, CNS agents, immunological agents, metabolic bone disease agents, and ophthalmic agents. The model replaces the current domestic inflation rebate benchmark with a price derived from a basket of nineteen OECD reference countries, maintained at initial benchmark levels throughout the model’s five-year run (October 1, 2026 to September 30, 2031).
The enforcement mechanism is aggressive: failure to pay GLOBE rebates triggers a civil monetary penalty (CMP) equal to 125% of the incremental rebate amount. CMS has explicitly reserved referral authority to DOJ, Treasury, and HHS OIG for persistent non-compliance. The model applies to 25% of Part B fee-for-service enrollees, selected geographically. CMS projects $11.9 billion in Part B savings plus spillover reductions in Medicare Advantage and Medicaid.
GUARD Model (Medicare Part D)
The GUARD (Guarding U.S. Medicare Against Rising Drug Costs) model applies to sole-source drugs and sole-source biologics in a broader set of therapeutic categories under the Medicare Part D Drug Inflation Rebate Program, including cardiovascular agents, blood glucose regulators, antivirals, antipsychotics, and respiratory agents. If a drug’s Medicare net price exceeds the international benchmark, the manufacturer owes a GUARD rebate replacing the standard inflation penalty when the GUARD amount is larger. CMS projects $14.1 billion in Medicare savings through 2033.
Both models apply the same nineteen-country OECD reference basket and use a fixed benchmark established at model inception rather than one that adjusts with future international pricing changes.
GLOBE vs. GUARD: Medicare MFN Coverage Summary
| GLOBE Model (Medicare Part B) | GUARD Model (Medicare Part D) | |
| Asset Type | Single-source drugs and sole-source biologics | Sole-source drugs and sole-source biologics |
| Financial Trigger | Annual Medicare Part B FFS spending exceeding $100 million | No specific dollar threshold; based on inclusion in the Inflation Rebate Program |
| Primary Therapeutic Categories | Antigout agents, Antineoplastics, Blood products and modifiers, CNS agents, Immunological agents, Metabolic bone disease agents, and Ophthalmic agents | Cardiovascular agents, Blood glucose regulators, Antivirals, Antipsychotics, and Respiratory agents |
| Benchmarking Logic | Replaces domestic inflation rebate with 19-country OECD basket price | Manufacturer owes rebate if Medicare net price exceeds the 19-country OECD benchmark |
| Performance Period | 5 years (October 1, 2026 – September 30, 2031) | 5 years (January 1, 2027 – December 31, 2031) |
| Non-Compliance Penalty | Civil Monetary Penalty (CMP) equal to 125% of the incremental rebate amount | Rebate replaces standard inflation penalty when the GUARD amount is larger |
4. The Legal Challenge Landscape
An earlier 2020 MFN Interim Final Rule was successfully challenged on APA procedural grounds, with courts finding that CMS lacked good cause to bypass notice-and-comment rulemaking. The 2025 GLOBE and GUARD models are being promulgated through formal Federal Register publication with a 60-day public comment period, which addresses the procedural deficiency identified in the 2020 litigation.
Industry stakeholders and commentators have identified several substantive grounds on which the models may face legal challenge, including questions of statutory authority, the “major-questions doctrine,” and whether the proposed framework satisfies the APA’s requirement that agency action not be arbitrary and capricious. Additionally, the models’ interaction with existing statutory programs, including the IRA’s Medicare Drug Price Negotiation Program (which is proceeding on a parallel track and now includes Part B drugs in its third negotiation cycle), may present further legal and operational complexity. Companies should monitor the finalization timeline and assess whether the models, individually or in combination with the IRA program, create overlapping compliance obligations for their portfolios.
5. SEC Disclosure Considerations
Public life sciences companies are navigating an increasingly complex disclosure environment, and the GLOBE/GUARD models add a layer of forward-looking uncertainty that may warrant disclosure updates in annual and quarterly reports.
Risk Factors and Forward-Looking Statement Safe Harbors
Companies with marketed or late-stage drugs or biologics in GLOBE or GUARD therapeutic categories, particularly antineoplastics, immunological agents, blood glucose regulators, cardiovascular agents, and CNS agents with >$100 million in annual Medicare Part B spending, should evaluate whether their existing risk factor and forward-looking statement safe harbor disclosures adequately addresses the mandatory model risk. A drug or biologic that generates significant Medicare revenues and falls in a covered therapeutic category is likely in scope for GLOBE or GUARD consideration, even if the final rule has not been issued.
MD&A
The SEC’s forward-looking disclosure requirements under MD&A require discussion of any known trends or uncertainties that are reasonably likely to have a material effect on revenues or operations. For companies with significant Medicare exposure in covered categories, the GLOBE/GUARD models may meet this threshold. As the rules are finalized in 2026, companies should consider the potential impact on revenues and operations and any disclosure implications.
Disclosure Timing
GLOBE and GUARD, if finalized as proposed, would take effect in October 2026 and January 2027, respectively. Calendar year-end companies filing their 2025 annual reports are doing so before either model is finalized. For companies with actual or potential blockbuster Medicare-exposed drugs in the covered categories, disclosure of these risks may warrant consideration as the rules are being finalized and once final.
A prior Biotech Briefings post discussed disclosure considerations around tariffs and the government shutdown for Q3 10-Q filings. The same analytical framework applies here: if the GLOBE/GUARD models, once finalized, would create a ‘known uncertainty’ that is reasonably likely to have a material effect, that uncertainty should be disclosed.