Lancet Study Warns Confidential Exemptions Could Gut Medicare Drug Pricing Savings

Lancet Study: Confidential Manufacturer Exemptions Could Erode Most MFN Medicare Drug Savings
A Lancet analysis published September 13 warns that confidential manufacturer exemptions could erode most of the promised savings from the Trump administration's Most Favored Nation (MFN) Medicare drug-pricing policy, while giving drugmakers reason to raise prices abroad.
The study modeled 195 patented drugs accounting for $87.9 billion in annual Medicare prescription drug spending under the GLOBE and GUARD programs, which cover Part B and Part D drugs respectively. Without exemptions, the policy could save Medicare $5.2 billion under GLOBE and $6.4 billion under GUARD during its initial 25% phase, with savings potentially rising to $21 billion and $25.5 billion if expanded to all enrollees.
Seventeen manufacturers, covering 67% of the drugs analyzed, reached undisclosed agreements reportedly exempting them from the pricing rules, according to the study. Excluding those drugs shrinks potential Medicare savings by 71%, to just $3.3 billion. A post-publication update noted that deals announced August 31 raised the exempted-company count to 26, pushing projected lost savings to nearly 80%.
For 73% of the drugs with available sales data, projected Medicare savings exceeded the drug's annual revenue in its reference country, averaging 3.8 times that revenue, which researchers said gives manufacturers incentive to raise foreign prices or convert discounts into confidential rebates. Study lead author Thomas Hwang said referenced countries are facing pressure from the U.S. administration and industry to raise drug spending. Co-author Aaron Kesselheim said the pricing models face limited scope and expected legal challenges before delivering their projected savings.