With changes to the GLOBE drug-pricing model could influence how pharma companies structure international licensing deals, we examine the potential implications of orphan-drug exclusions and Method II pricing flexibility for biotech, regional pharma, and investors.
Could US drug-pricing reform create new opportunities for international pharma licensing and M&A?
The Global Benchmark for Efficient Drug Pricing (GLOBE) Model links manufacturer rebates for selected physician-administered Medicare Part B drugs to international reference prices, aiming to lower US drug costs. Starting in 2027, the mandatory model will cover approximately 25% of Original Medicare Part B beneficiaries in randomly selected ZIP-code-based areas across the US.
The final GLOBE rule, announced on September 30, 2026, introduced two changes of particular interest to potential dealmakers:
- Orphan-only drugs are now officially excluded from the GLOBE MFN model.
- CMS has introduced greater flexibility under price reporting Method II, including where data are genuinely unavailable under licensing arrangements.
The opportunity is limited to manufacturers and drugs covered by GLOBE. CMS also intends to waive GLOBE participation for manufacturers participating in its separate GENEROUS model.
GLOBE's proposed Part D counterpart, the GUARD MFN model, has not yet been finalized. The changes discussed here therefore apply to GLOBE, although similar considerations may become relevant to GUARD depending on its final design.
1. Orphan-drug exclusion could encourage more ex-US licensing
Under the initially proposed GLOBE framework, launching an orphan drug in lower-priced markets could have affected US economics through international benchmarking. That risk could have discouraged some ex-US launches or made geographic licensing less attractive.
For orphan-only drugs now excluded from the final model, this specific GLOBE-related concern no longer applies. The change improves the case for commercializing rare-disease therapies in markets which previously looked unattractive when potential US spillovers were considered.
The implications are particularly relevant for US-focused biotechs without an international sales infrastructure. Such companies now have greater freedom to out-license European, Asian, or other regional rights. On the other side of the transaction, mid-sized pharma companies could find new opportunities to acquire those rights and deploy local commercialization expertise.
The potential value is not just a better launch decision: It is a different allocation of international rights. Eligibility matters, however: The exclusion applies to drugs whose approved indications are exclusively for rare diseases.
2. Method II flexibility could create a new rationale for geographic licensing
GLOBE establishes international benchmarks using two methods:
- Method I (default): CMS uses available international pricing information, primarily list prices, to identify the lowest GDP purchasing-power-parity (PPP)-adjusted reference-country price.
- Method II (voluntary): Manufacturers may submit international net prices to calculate a volume-weighted average of GDP-PPP-adjusted net prices across reference countries.
CMS uses the higher of the two benchmarks when manufacturers voluntarily submit Method II data. Countries with low net prices and high sales volumes can pull down the outcome of Method II. If a manufacturer licenses such a market to an independent company and genuinely cannot obtain its net pricing data, CMS may accept a submission without those data. This could improve the benchmark and reduce US rebates - but only if Method II exceeds Method I.
Marketed products: Identifying potential licensing targets
Regional and mid-sized pharma companies, including PE-backed platforms, could screen marketed assets for unusually low PPP-adjusted publicly observable list prices and meaningful sales in particular reference markets. These signals may flag an unfavorable Method I benchmark, but they cannot reveal confidential net prices or establish a Method II opportunity on their own.
A regional buyer or licensee could then approach the originator with a geographic proposal and jointly examine the confidential net-price and volume data. The question is whether high-volume, low-net-price territories meaningfully dilute the Method II benchmark, and whether reallocating rights could improve the benchmark enough to change US economics.
Where licensing makes net-price data genuinely unavailable, and CMS accepts the manufacturer's explanation, a more favorable Method II benchmark could potentially reduce US rebate exposure. That possibility would add to, not replace, the usual licensing economics: Upfront payments, royalties, foregone local profits, and transaction costs.
The result could be a mutually attractive transaction: A regional player acquires an established asset, while the originator monetizes rights that may have limited standalone appeal. But any rebate benefit must be modeled, not assumed, especially because Method I may still determine the applicable price benchmark for GLOBE.
Pipeline products: Creating deals that otherwise might not happen
For US focused biotechs, partnering ex-US rights is already common. But GLOBE could even encourage manufacturers which are capable of launching globally to out-license selected markets for a product rather than retain worldwide rights.
Potential structures include pre-launch regional licenses, co-development agreements, and milestone-based options. Such deals could combine local expertise and development funding with a more favorable geographic rights structure, provided the expected US benefit outweighs the economics of retaining those markets.
Timing matters: GLOBE's current performance period ends March 31, 2032.
3. Implications for M&A, BD&L, and private equity
GLOBE adds complexity to asset valuation: The allocation of international rights may affect the economics of the retained US business.
For BD&L teams and PE-backed regional platforms, this could unlock new licensing and dealmaking opportunities beyond traditional local-market economics. The key is identifying eligible assets where restructuring geographic rights creates value and validating the potential upside through confidential pricing data and deal-level modeling.
Reach out to our team of experts to learn more about these updates.
