GLOBE and GUARD Could Reshape Biotech Out-Licensing

Two proposed Medicare payment models could have consequences well beyond drug pricing. The Global Benchmark for Efficient Drug Pricing, or GLOBE, would apply to certain physician-administered drugs covered under Medicare Part B. The Guarding U.S. Medicare Against Rising Drug Costs, or GUARD, model would cover selected outpatient medicines under Part D. 

Both would use prices in economically comparable countries to calculate rebates owed by manufacturers when U.S. prices exceed an international benchmark. GLOBE is proposed to begin October 1, 2026, and GUARD on January 1, 2027. Each would operate for five years and initially cover geographic areas representing approximately 25% of Medicare beneficiaries. 

CMS argues that the models would reduce Medicare and patient spending. The Biotechnology Innovation Organization (BIO; of which MichBio is a state affiliate), however, warns that their design does not reflect how smaller biotech companies finance and commercialize medicines. 

Why out-licensing matters 

Small and midsize biotech companies frequently lack the capital and infrastructure to commercialize a medicine worldwide. Instead, they may license development or marketing rights for Europe, Asia or another territory to a larger partner. 

Such agreements can provide: 

• Upfront funding to sustain operations and clinical development. 

• Milestone payments tied to regulatory or commercial progress. 

• Access to a partner’s local regulatory and market expertise. 

• A way to preserve U.S. rights without building a global sales organization. 

The company that discovered the medicine may retain U.S. rights while transferring foreign pricing and commercialization decisions to its licensee. In more complex arrangements, separate companies may hold the patent, market the product domestically and sell it overseas. 

According to BIO’s analysis, this division of responsibility creates a fundamental problem for international reference pricing: the company liable for a Medicare rebate may have little or no control over the foreign price used to calculate it. 

New risks for licensing transactions 

If finalized, GLOBE and GUARD could change how companies evaluate both existing and future partnerships. 

Key implications include: 

• Less control over U.S. exposure. An overseas licensee may set a local price that maximizes access in its territory but unintentionally reduces the benchmark used for Medicare. 

• Limited access to pricing data. Contractual restrictions, competition law and country-specific confidentiality rules may prevent licensors from obtaining foreign net-price information. 

• Lower asset valuations. Buyers and investors may discount a product’s value if international pricing could trigger significant U.S. rebates. 

• More complex negotiations. Future agreements may include additional data-sharing, consultation, launch-sequencing and change-in-law provisions. 

• Potential disputes. Existing contracts negotiated before international reference pricing was contemplated may not clearly allocate the resulting financial risk. 

Legal analysis from Skadden notes that companies may reconsider out-licensing strategies, seek to renegotiate commercial rights or, in some cases, attempt to buy back previously licensed territories. Each option could be costly and difficult, particularly when the asset has advanced since the original agreement. 

Broader effects on innovation 

The immediate impact would fall on commercial-stage products, but the effects could reach much earlier in the development cycle. Out-licensing proceeds often fund clinical trials, regulatory work and other pipeline programs years before a product reaches patients. 

If the future value of regional rights becomes less certain, licensees may offer smaller upfront payments or demand stronger control provisions. Some biotech companies could delay partnerships, retain rights they are not equipped to commercialize or avoid launching in lower-priced international markets. 

Those responses may protect U.S. revenue in individual cases, but they could also reduce access abroad and make development financing harder to secure. Media reporting has placed the models within a broader federal effort to tie Medicare prices to those in other developed countries, while noting strong pharmaceutical-industry opposition to the approach. CMS describes GLOBE and GUARD as proposed mandatory demonstrations rather than finalized policy. 

What biotech companies should consider 

Companies with existing or planned international licenses should begin assessing their exposure by: 

• Mapping which products, territories and partners may intersect with the reference countries. 

• Reviewing pricing authority, data access and change-in-law provisions in current contracts. 

• Modeling how foreign launch prices could affect U.S. rebates and asset value. 

• Coordinating business development, legal, market-access and finance teams before signing new agreements. 

• Monitoring final rules and potential legal challenges. 

GLOBE and GUARD remain proposals, and their final form is uncertain. Even so, they have introduced a new consideration into biotech dealmaking: a foreign price set by an independent partner could create a significant U.S. liability. 

MichBio will continue following the proposals and work with BIO and Michigan’s life sciences community to communicate their potential effects on emerging companies, investment and patient access.