Borrowed Prices: Pharmaceuticals and the American Tab
The Centers for Medicare & Medicaid Services (CMS) has proposed two sweeping Innovation Center models—the Global Benchmark for Efficient Drug Pricing Model (GLOBE) and the Guarding U.S. Medicare Against Rising Drug Costs Model (GUARD)—that would tie Medicare drug payments to prices set by foreign governments. Framed as pragmatic cost-containment tools, the models would import foreign price controls directly into Medicare’s reimbursement architecture.
That approach rests on a false premise. American drug prices are not high because U.S. markets lack regulation. The opposite is closer to the truth. The United States already operates within a dense web of federal and state intervention: Medicare reimbursement formulas, mandatory rebates, Inflation Reduction Act “negotiation,” state-level coverage mandates, and a Food and Drug Administration (FDA) approval process marked by high compliance costs, protracted review timelines, and significant barriers to entry. Foreign governments then suppress pharmaceutical prices abroad, shifting a disproportionate share of global research-and-development costs onto the United States.
If that is the distortion, importing foreign price ceilings into Medicare is not a solution. It is capitulation—another bureaucratic contrivance layered onto an already overregulated system.
The better response is disciplined trade enforcement: the use of Section 301 of the Trade Act of 1974 to confront sustained foreign price suppression as an unfair trade practice that burdens U.S. commerce.