CMS Proposes New Mandatory Drug Payment Model to Deliver Lower Drug Prices for Beneficiaries in Medicare Part D
The Centers for Medicare & Medicaid Services (CMS) is proposing a groundbreaking drug payment model to address the increasingly expensive cost of drugs in Medicare Part D while preserving or enhancing Medicare beneficiaries’ quality of care. Building upon the Trump Administration’s historic efforts, the Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model is expected to lower spending for Medicare beneficiaries without hurting their quality of care while also improving the sustainability of the Medicare program and the Medicare Trust Fund and protecting innovation.
“As HHS Secretary, I am focused on making health care affordable – starting with the price Americans pay for prescription drugs,” said Health and Human Services Secretary Robert F. Kennedy, Jr. “On May 12, President Trump ordered an all-of-government response to the unfair gap between U.S. drug prices and what other nations pay. CMS is answering that call with two new models under Parts B and D that tie drug prices and rebates to costs in comparable countries. Americans deserve access to low-cost medicines on the same terms as other developed nations.
“Seniors who rely on Medicare Part D drugs should never have to choose between filling their prescriptions and filling their grocery carts or gas tanks,” said CMS Administrator Dr. Mehmet Oz. “That’s why we’re proposing the GUARD Model to reduce costs and improve quality of care by addressing the broken pricing system that forces Americans to pay top dollar for drugs foreigners get at a fraction of the cost.”
Americans pay on average three times what other developed countries pay for the same medications, and Medicare Part D drug spending in 2024 made up about 30% of drug spending in the U.S. High costs are causing some older Americans who rely on these medications to experience financial strain and causing some to skip dosages to save money at the expense of their health.
“GUARD is an innovative solution designed to bring Americans the drugs they need at prices they can better afford,” said CMS Innovation Center Director Abe Sutton. “No American should be forced to choose between filling prescriptions and buying groceries or other essential items.”
The GUARD Model would test new rebate formula for Medicare Part D drugs, which includes outpatient prescription drugs typically dispensed at retail, mail order, home infusion, and long-term care pharmacies. The GUARD Model would factor in existing Medicare Part D manufacturer rebates and discounts, and CMS would leverage its authority to test a change in the calculation of inflation rebates in Medicare Part D that accounts for how much certain drugs cost in economically similar countries.
The intent of the proposed GUARD Model is to test an innovative payment model that modifies the inflation rebate for GUARD Model drugs using international drug pricing information to identify a benchmark that reflects prices paid in a set of economically comparable countries, which CMS expects would reduce program expenditures for Medicare Part D while preserving or enhancing beneficiaries’ quality of care.
The GUARD Model would begin Jan. 1, 2027, and operate for five years with rebate invoicing and payment continuing until 2033. The model would encompass 25% of Part D enrollees and would only apply to beneficiaries that live in randomly selected geographic areas of the country.
For information on the GUARD Model, visit https://www.cms.gov/priorities/innovation/innovation-models/guard.
View the proposed rule on the GUARD Model at the Federal Register at https://www.federalregister.gov/d/2025-23705.
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