GUARD Duty
But is anyone home?
Confession. I was a bit of angry elf on Saturday morning. I was making dozens of cookies for neighbors and was just stressed and frustrated. Two proposed rules on a Friday afternoon are never fun, during the holiday season, brutal. My husband said that I had to be more in the moment. Try putting some music on and find joy. Smug advice, but that doesn’t make it wrong. Bopped along to Mariah Carey and Wham while I baked and it all went much better.
So, Sunday morning, I woke up before the rest of the house and made reading GUARD a thing. Coffee, binder, dog by my side. It was actually fun? Long story short (too late), maybe we all need to remember how to make something just a tiny bit more fun. At least it will help more than GUARD will help beneficiaries…
GUARD Duty: Benchmark Abroad, Bill at Home
On Friday, the Centers for Medicare & Medicaid Services (CMS) released a proposed, mandatory model -- Guarding U.S. Medicare Against Rising Drug Costs (GUARD). They also posted additional information on their website. The model would use the Medicare Part D inflation rebate as a vehicle to extract international reference pricing for a selection of Part D drugs. Note that this is proposed and a lot could change. Comments are due February 23.
Here’s my current take based on one reading (note: if you want your teenagers to talk to you, try putting on noise canceling headphones and start working, they will swarm to you.)
Over five performance years (2027–2031), CMS would compare a model-defined “Medicare net price” for selected sole-source Part D drugs to a GDP (purchasing power parity, PPP)-adjusted international benchmark; if the U.S. price is higher, manufacturers would owe a GUARD rebate. Payments and reconciliation continue through 2033. The dollars go to the Medicare Supplementary Medical Insurance Trust Fund, not to point-of-sale benefit design.
Scope. Participation is mandatory for pharmaceutical manufacturers of included drugs. CMS limits the test to sole-source drugs and biologics in 17 United States Pharmacopeia (USP) categories (e.g., Antineoplastics, Antivirals, Immunological Agents), excludes products with a negotiated Maximum Fair Price, and sets a $69 million minimum-spend threshold (indexed). Orphan drugs are NOT excluded.
CMS will randomize geography to capture roughly 25% of Part D enrollees via selected areas; Employer Group Waiver Plans are out. 340B units are excluded from GUARD liability.
How the math works. CMS will construct a performance-year Medicare net price by starting with Wholesale Acquisition Cost (WAC) and subtracting (1) manufacturer rebates reported by plans as Direct and Indirect Remuneration (DIR) and (2) discounts provided under the Manufacturer Discount Program; the result is divided by total units (NCPDP units) for a per-unit figure. That U.S. proxy is compared to an international benchmark based on prices in economically comparable countries; CMS uses the lowest GDP(PPP)-adjusted country-level average derived from available datasets by default, or an across-country, volume-weighted net price if manufacturers voluntarily submit international net data. CMS applies the greater of the two benchmarks to determine liability. If the existing Part D inflation rebate would be larger, the inflation rebate governs.
Money flows and impacts. GUARD rebates are manufacturer-to-government transfers; CMS states they are not visible at the point of sale and do not directly change direct subsidies or reinsurance reconciliation for plans. CMS estimates $14.1 billion in Part D federal savings (2028–2033) alongside a $3.6 billion increase in beneficiary costs (cost sharing and premiums) over the same window, an acknowledgment that savings accrue to the Trust Fund while plan bidding dynamics and pricing behavior could raise what beneficiaries pay.
What should catch the eye (and concern)
Let’s go back to that last paragraph. The proposed rule spends a LOT of time focused on how beneficiaries struggle with affordability and dives into financial toxicity. And mentions this in multiple areas. BUT NOTHING IN THIS PROPOSAL HELPS BENEFICIAIRES AND IN FACT THE MODEL MAKES THINGS WORSE. I actually wonder if they had a totally different concept lined up and written and then switched it out for this inflation rebate penalty sort of last minute. Because this just doesn’t make sense.
I mean that’s my big one but there is other stuff that I found myself writing about in the margins of my printed copy (yup.)
A proxy dressed up as “net.” GUARD’s “Medicare net price” is not a transaction-level net paid by plans; it is a constructed proxy: WAC minus plan-reported manufacturer DIR and minus Manufacturer Discount Program amounts. CMS leans on sponsor-submitted DIR (including NDC-level “detailed DIR”) rather than observing every PBM–manufacturer term or pharmacy-retained remuneration. That’s a defensible policy choice, but it’s not the same as full net transparency -- and accuracy will rise or fall with DIR reporting and allocation.
International reference ≠ international net. CMS says existing sources are adequate to build country-level average prices for Method I, then adjusts for GDP(PPP). In the same discussion, CMS acknowledges those sources may not capture confidential rebates/off-invoice discounts, meaning the “reference” often reflects list-side averages, not true net. GUARD can end up comparing a U.S. proxy net to an international quasi-list average -- clean mechanics, messy economics.
No point-of-sale relief. The proposal devotes pages to “financial toxicity,” yet no direct pass-through to beneficiaries is proposed. CMS’s own actuarial tables project higher beneficiary spending net of premiums/cost-sharing in the test years. That disconnect, Trust Fund savings without at-counter relief, will be top of mind for patient advocates. I mean if you’re going to make manufacturers pay money, at least have it go to the people who need it most.
Operational hairball. GUARD requires international analog mapping, currency conversion, GDP(PPP) adjustment, exclusion of 340B units (despite PDEs not flagging 340B status), and reconciliation across PDE and DIR. CMS even assumes a 10% 340B share in impact estimates because it can’t directly observe those units in current claims data. This is just inviting disputes if unit attribution is off.
Market distortions are plausible. Because GUARD diverts dollars to the Trust Fund rather than to plans or the counter, CMS anticipates rebate strategy changes that could raise bids and premiums once premium stabilization sunsets. Tighter utilization management is a predictable second-order response. Because Part D could use more of it? (Sorry, I’m a little spicy today.)
Bottom line... GUARD is the most aggressive test yet of international reference pricing inside Part D, and it’s built on WAC-minus-DIR arithmetic on one side and PPP-adjusted country averages on the other. It does nothing to help beneficiaries and, instead increases their costs, plays with questions of equity and further destabilizes the Part D benefit.