Reducing Biosimilar Costs, More MFN Deals, and a New PIC Related to ACA Fraud

The Christian celebration of the birth of Christ—a reminder of God’s love for humanity—is just two days away. I wish you and your family a very merry Christmas season.

While Christmas is upon us, there has been no slowdown in health policy. This is the final Paragon newsletter of the year, and it covers three items.

• An important policy brief by Chris Medrano on a new FDA policy that could reduce biosimilar development costs and expand options for American patients.
• Key drug pricing developments with the White House announcing MFN agreements with nine more pharmaceutical companies and two new CMMI models.
• A new Paragon Pic showing how the overwhelming amount of enrollment growth in Affordable Care Act (ACA) exchanges occurred among the group made eligible for fully subsidized coverage by Biden’s COVID subsidy boosts.

Streamlining Biosimilars: Why the FDA’s New Direction Matters

On December 22, Paragon published a new policy brief by Chris Medrano, “Platinum-Standard Science: FDA’s New Streamlined Framework for Biosimilars and Interchangeability,” on the Food and Drug Administration’s (FDA) recent shift in how biosimilars are approved in the United States. The agency will no longer require comparative efficacy or switching studies and will instead rely primarily on advanced analytical technologies that are more precise, less costly, and better at detecting clinically meaningful differences. The result could be transformative: biosimilar development costs may fall by as much as $100 million per product, while time to market could shrink dramatically.

This change reflects more than a decade of experience showing that biosimilars are widely used in the United States and abroad, with no evidence that switching patients from reference biologics increases safety risks or reduces efficacy. A 2023 FDA meta-analysis examining more than 30 switching studies confirmed no differences in serious adverse events, treatment discontinuation, or clinical outcomes between patients who switched from the biologic and those who did not. At the same time, modern analytical tools have proven more sensitive than clinical trials at identifying potential problems during development.

Despite this evidence, U.S. law still maintains a two-tier system in statute that distinguishes between “approved” biosimilars and those deemed “interchangeable.” That distinction once reflected scientific uncertainty, but today it primarily creates confusion and impedes pharmacy-level substitution. In most states, pharmacists may substitute a biosimilar for a brand-name biologic only if the FDA has granted an interchangeability designation. This limits competition and slows uptake.

The FDA’s 2025 reforms are an important first step, but Congress should amend the statute to recognize all FDA-approved biosimilars as interchangeable. Updating the regulatory framework to reflect modern evidence would strengthen trust, accelerate competition, and expand access to some of the most expensive medicines in the health care system.

More MFN Deals Plus Two New CMMI Drug Pricing Models

On December 19, President Trump announced agreements with nine major pharmaceutical manufacturers—Amgen, Bristol Myers Squibb, Boehringer Ingelheim, Genentech, Gilead Sciences, GSK, Merck, Novartis, and Sanofi—that align U.S. prescription drug prices with the lowest prices paid by other developed nations for new drugs under a most-favored-nation (MFN) framework. Paragon has previously written about the advantage of prospective pricing for MFN policies and ensuring the selected countries are economically similar to the U.S.

The agreements cover drugs for chronic conditions, including type 2 diabetes, rheumatoid arthritis, chronic obstructive pulmonary disease, asthma, HIV, and certain cancers. The agreements would provide all state Medicaid programs access to MFN pricing, require companies to repatriate foreign revenue benefits, and offer discounted direct-to-consumer prices through TrumpRx. Participating manufacturers also committed to investing in U.S. manufacturing and donating key drug ingredients to a national reserve. These actions build on prior MFN pricing commitments with five other companies.

CMS’s Innovation Center also proposed two mandatory MFN drug pricing models for Medicare: The Global Benchmark for Efficient Drug Pricing (GLOBE) model for Part B drugs and the Guarding U.S. Medicare Against Rising Drug Costs (GUARD) model for Part D drugs. The models would peg certain Medicare drug prices to existing prices paid in select OECD countries and require manufacturers to pay rebates when U.S. prices exceed the benchmark. Together, the models would apply to roughly 42 percent of Medicare enrollees and a substantial share of Part B and Part D drug spending.

GLOBE would replace the existing Part B inflation rebate for selected single-source drugs with a rebate tied to the greater of either the lowest or average adjusted foreign price. GUARD would apply a similar approach in Part D, requiring rebates when net prices exceed adjusted international benchmarks. CMS projects combined savings from the two models of $26 billion across Medicare over the five-year demonstrations. The models follow an earlier voluntary Medicaid MFN model and rely on retrospective application of pricing to existing drugs.

CMS frames GLOBE and GUARD as efforts to reduce drug spending and narrow price differences between the U.S. and other developed countries. The models raise questions about the scope of mandatory, large-scale demonstrations implemented using Innovation Center authority.

ACA Enrollment Surged Among Those Who Qualified for Zero-Premium Plans

In a new Paragon Pic, we show that ACA exchange enrollment growth since 2020 has been overwhelmingly concentrated among individuals claiming incomes between 100 and 150 percent of the federal poverty level (FPL)—the income band most susceptible to fraud and improper enrollment because it qualifies for zero-premium coverage. Enrollment in this category surged from roughly 3 million to more than 10 million in federally facilitated exchange states, while growth in all other income categories combined was far more modest. By 2025, more than half of all exchange enrollees reported incomes in this narrow range in federal exchange states.

This builds on a previous Paragon Pic documenting shifts in the distribution of exchange enrollees across income categories and the growing dominance of the 100–150 percent of FPL group. Biden’s COVID-era subsidy boosts exacerbated improper and phantom enrollment, leading to U.S. taxpayers sending $35 billion to insurers on behalf of enrollees who did not have a single claim in 2024, with the problem likely growing more severe in 2025. For more on this issue, see our “Obamacare Fraud, by the Numbers” one-pager and our report, The Greater Obamacare Enrollment Fraud.