Progress on drug price reform is remarkable
True to an earlier announcement, the Trump administration has taken the first steps toward more expansive coverage of GLP-1 weight-loss drugs in Medicare and Medicaid. When he came into office, President Trump made the decision not to finalize a proposed rule by the Biden administration that would have expanded coverage for obesity alone in Medicare and Medicaid. At the time, it was the right call. Given GLP-1 prices, expansion could have significantly impacted the finances of the government programs.
What has changed?
But a great deal has changed since that decision. Trump issued several executive orders to begin to reform drug pricing, including all aspects of the drug channel and introducing most-favored-nation (MFN) pricing. After threatening tariffs on brand drugs manufactured abroad, he has struck more than a dozen deals with brand drug makers that lower costs in Medicaid and introduce lower prices for self-pay Americans. These include major deals with GLP-1 drug makers Eli Lilly and Novo Nordisk that reduce net costs in Medicare and Medicaid for GLP-1s. And Trump has embraced Medicare drug price negotiations by negotiating year two savings (2025 negotiations to take effect in 2027) roughly double what his predecessor did in year one.
Now the president has introduced a proposed GLP-1 weight-loss coverage model. The Better Approaches to Lifestyle and Nutrition for Comprehensive hEalth (BALANCE) Model does a number of critical things to carry through on previous announcements by Trump, including extending GLP-1s in Medicare to obesity alone (not tied to another disease state) and reducing overall prices and copays dramatically in the program.
The BALANCE Model
Under the model, the Centers for Medicare and Medicaid Services (CMS) negotiates directly with pharmaceutical manufacturers for lower net prices and standardized coverage terms. Negotiation areas include:
- Guaranteed net pricing and potential out-of-pocket limits for beneficiaries.
- Standardized coverage criteria.
- Evidence-based lifestyle support offerings.
The BALANCE Model will launch in Medicaid as early as May 2026 and in Medicare Part D in January 2027. Participation will be voluntary for manufacturers, states, and plans. Manufacturers, states, and Part D plans need to apply by January 8, 2026. Both Novo and Eli are expected to participate. I would expect many MA plans would join the fold as well. While use carries financial exposure, it could also be a source of competitive advantage. Standalone Part D participation could be a somewhat different story given the precarious nature of the program given passage of significant cost-sharing reduction via the Inflation Reduction Act of 2022. I expect some but not all states will participate in Medicaid.
The BALANCE Model goes hand in hand with three other models recently introduced that would tie the prices Medicare (Part B and Part D) and Medicaid pay for medicines to what is paid in foreign countries — essentially MFN.
- The Global Benchmark for Efficient Drug Pricing Model, or GLOBE, would cover Part B drugs. A second mandatory initiative called Guarding U.S. Medicare Against Rising Drug Costs Model, or GUARD, would cover Part D drugs. The models would run from 2027 through 2031, with rebate invoicing and reconciliation continuing into 2033.
- The GENErating cost Reductions fOr U.S. Medicaid Model, or GENEROUS, would establish MFN in Medicaid and be a 5-year pilot. I would note that federal and state supplemental rebates in Medicaid are already very generous, meaning MFN in Medicaid may not amount to much if any savings. Drugs that are part of the model will have standardized coverage criteria in all state Medicaid programs.
Back to the BALANCE model, CMS may adjust capitated payment rates for obesity and increase the government reinsurance for drug fills. Final details will be announced ahead of the 2027 Part D bid process. Earlier, Trump has announced that co-pays would not exceed $50 per month. It is anticipated that existing users of GLP-1s in Medicaid and Medicare for approved disease states will benefit, not just new users for obesity alone. Lower costs for drugs will be via a prescribed rebate from manufacturers to Part D plans.
To bridge to 2027 in Part D, there will be a new GLP-1 payment demonstration beginning in July 2026. This will operate outside of Part D and plans will not carry risk for eligible GLP-1 products furnished under the demonstration.
Justification
In essence, the Trump administration argues for the program in the following ways:
- Extension of GLP-1 coverage promises huge savings down the road as obesity leads to new or the exacerbation of chronic disease states.
- The program will not cost Medicare anything as savings from lowering costs on current GLP-1 prescriptions will pay for the expansion to obesity alone.
The arguments are not without merit, but the financial picture likely will be more complicated than this. I would argue there is a high probability of near-term costs before some savings are seen in the long term.
#glp1s #weightlossdrugs #drugpricing #branddrugmakers
— Marc S. Ryan
