Beyond the headlines, the GLOBE and GUARD proposed rules contain regulatory nuances that most coverage has overlooked. These details aren’t bugs—they’re features with significant strategic implications.
When the CMS Innovation Center released the GLOBE and GUARD proposed rules, most analysis focused on the drugs proposed to be in the scheme and the choice of reference countries. But buried in the hundreds of pages of regulatory text are provisions that could prove just as consequential for pharmaceutical pricing strategy.
We’ve identified three details that deserve a closer look, plus an interesting footnote to consider. These aren’t obscure technicalities—they represent deliberate policy choices that create real opportunities (and risks) for manufacturers navigating the new MFN framework. Understanding them now, before the February 2026 comment deadline, could make the difference between optimal and suboptimal positioning.
Think in PPP-Adjusted Prices, Not Raw Prices
The benchmark formula means you need to evaluate international prices through a different lens
One of the most overlooked aspects of the GLOBE and GUARD Models is the PPP (Purchasing Power Parity) adjustment. In practice, this means reference country list prices are converted to U.S. dollars and then scaled by the ratio of U.S. per capita GDP (PPP) to the reference country’s per capita GDP (PPP).
What do these economic terms mean?
GDP (Gross Domestic Product) is the total value of all goods and services produced by a country in a year—essentially a measure of economic size.
GDP per capita divides GDP by the country’s population, giving a measure of average economic output per person. Higher GDP per capita generally indicates a wealthier country.
PPP (Purchasing Power Parity) adjusts for price level differences between countries. A dollar buys more in some countries than others—PPP accounts for this, making economic comparisons more meaningful. PPP data is maintained by the World Bank’s International Comparison Program.
The key insight is that manufacturers need to think about PPP-adjusted prices rather than raw prices when making strategic decisions. A low nominal price in one country may contribute more to your benchmark than a higher price elsewhere.
It’s also worth noting that the adjustment only works in one direction—countries with PPP ratios below 1.000 are floored at 1.000, not adjusted downward.
“In cases where the resulting ratio is less than 1.000, the GDP (PPP) adjuster is set to 1.000.”
GLOBE Proposed Rule, Table 5 footnote
The table below illustrates both mechanics for a selection of the 19 reference countries, using 2024 PPP values. The “PPP Ratio” column shows the raw calculation, while the “PPP Adjuster” column shows the value actually used after the 1.000 floor is applied:
| Country | % of U.S. Per Capita GDP (PPP) | PPP Ratio | PPP Adjuster | Adjusted $1,000 Drug Price |
|---|---|---|---|---|
| Ireland | 153% | 0.654 | 1.000 | $1,000 |
| Norway | 121% | 0.826 | 1.000 | $1,000 |
| Switzerland | 109% | 0.917 | 1.000 | $1,000 |
| Denmark | 98% | 1.024 | 1.024 | $1,024 |
| Netherlands | 94% | 1.065 | 1.065 | $1,065 |
| Germany | 83% | 1.202 | 1.202 | $1,202 |
| Canada | 75% | 1.332 | 1.332 | $1,332 |
| France | 72% | 1.385 | 1.385 | $1,385 |
| UK | 70% | 1.438 | 1.438 | $1,438 |
| Spain | 64% | 1.560 | 1.560 | $1,560 |
| Japan | 61% | 1.638 | 1.638 | $1,638 |
A $1,000 price in Japan produces a $1,638 PPP-adjusted price, while the same $1,000 price in Ireland only produces $1,000. Pricing teams should model PPP-adjusted prices across all reference countries, not just raw prices.
Strategic Implications
- Lower per-capita GDP markets carry more weight. Prices in countries like Japan and Spain get multiplied up significantly by the PPP adjuster, amplifying their impact on your benchmark.
- Update your pricing models. International pricing dashboards should show PPP-adjusted prices alongside raw prices to identify true benchmark exposure.
- Volume weighting compounds the effect. For Method II, the combination of volume concentration and PPP adjustments means high-volume, lower per-capita GDP markets disproportionately influence the benchmark.
The Method I Benchmark Lock-In
Once set, your benchmark is fixed for five years—regardless of what happens to international prices
Unlike GENEROUS, which relies solely on net prices, GLOBE and GUARD offer two benchmark calculation methods: Method I uses publicly available list prices, while Method II allows manufacturers to voluntarily submit net pricing data. CMS always calculates Method I, and where valid Method II data is submitted, uses the higher of the two benchmarks. For a full overview of how these models work, see our GLOBE & GUARD explainer.
Here’s something that hasn’t received nearly enough attention: under Method I, your benchmark price is calculated once at the time a drug enters the model and then remains fixed for the entire 5-year model duration.
“We believe it is essential to establish the per unit Method I GLOBE Model benchmark once at a baseline (at the time the drug enters the model) and use that benchmark for the duration of the GLOBE Model.”
GLOBE Proposed Rule, Section III.B.3
CMS explicitly acknowledges that this creates gaming opportunities. They state the design is “necessary to protect the integrity of the model test” against manipulation—but ironically, the fixed-benchmark approach creates precisely the incentive structure they claim to be preventing.
This is fundamentally different from traditional IRP systems, which typically recalculate reference prices periodically. The lock-in creates a one-time optimization problem rather than an ongoing pricing constraint.
Strategic Implications
- Launch timing matters enormously. Delaying launches in low-price reference markets until after the U.S. benchmark is calculated could lock in a higher baseline for five years.
- List price positioning at model entry is critical. Manufacturers could maintain artificially high list prices in reference countries until the benchmark is established, then reduce prices afterward without affecting the U.S. benchmark.
- International price erosion becomes less concerning. Once your benchmark is locked, subsequent price cuts in reference markets don’t trigger reimbursement reductions in the U.S.
Method II: Lower Baseline, Higher Ceiling
Net prices start lower, but stacked advantages can push the benchmark above Method I
Method II starts from a lower baseline than Method I—net prices are inherently lower than list prices due to rebates and discounts. The question is whether the advantages built into Method II can overcome that initial deficit.
Here’s how the components stack up. Net prices start lower than list prices, but four factors in Method II’s calculation methodology can bridge—or even exceed—the gap: (1) volume-weighted averaging instead of taking the lowest price, (2) PPP adjustment that amplifies prices from lower-GDP countries, (3) private channel inclusion which tends to pull averages higher, and (4) a 105% multiplier versus Method I’s 102%.
Example: How Method II Can Exceed Method I
Net price (Method II input)
List price (Method I uses this)
The proposed rules describe a two-step process: (1) calculate volume-weighted average net prices within each country across distribution channels, then (2) calculate a volume-weighted average across countries. CMS has not provided detailed guidance on how manufacturers should calculate within-country net prices. The example above reflects our interpretation and may require adjustment once CMS issues clarifying guidance.
Method II represents a significant departure from traditional international reference pricing systems. Most global IRP frameworks reference public or reimbursed list prices from a basket of countries. Method II differs in several key ways: it uses net prices rather than list prices, includes private channel sales alongside public sector pricing, applies PPP adjustments that amplify prices from lower per-capita GDP countries, and relies on voluntary manufacturer submission rather than publicly available data. In markets with significant private insurance or cash-pay segments, private channel pricing tends to pull volume-weighted averages higher than public-only benchmarks would suggest.
A Note on Administrative Burden
Every proposed rule includes Paperwork Reduction Act estimates of the compliance burden on affected parties. CMS estimates the burden at 26 hours per manufacturer in the first year (20 hours preparation, 6 hours submission), dropping to 13 hours annually thereafter. For context, this estimate is meant to cover:
- Collecting and verifying net pricing data across up to 19 countries
- Accounting for multiple distribution channels per country (public, private, hospital, retail)
- Applying currency conversions at specified exchange rate dates
- Calculating PPP adjustments and volume weightings
- Coordinating with local affiliates across multiple time zones
- Ensuring legal review of data accuracy and attestation requirements
- Documenting methodology for audit trail purposes
For manufacturers with complex global portfolios, the real burden will likely be measured in hundreds of hours, not 26. Plan accordingly.
The Bottom Line
The GLOBE and GUARD models aren’t just about reference pricing—they’re about reference pricing with a very specific set of design choices that create distinct strategic considerations. The benchmark lock-in, PPP-adjusted price thinking, Method II’s risk-reward tradeoff, and (let’s be honest) unrealistic burden estimates all point to a system that’s more nuanced than headlines suggest.
Whether these provisions survive the comment period unchanged remains to be seen. But understanding them now puts you in a stronger position to shape the final rules—and to optimize your strategy once they take effect.
Comment Period Deadline: February 23, 2026