PhRMA Sues HHS and CMS Over Medicare GLOBE Drug Pricing Rule Set to Start Jan. 1

The Pharmaceutical Research and Manufacturers of America sued the Trump administration on Wednesday, Oct. 7, to block the GLOBE model, a Medicare Part B pricing rule that ties what the program pays for some drugs to prices in other wealthy countries.

The complaint was filed in the U.S. District Court for the District of Columbia. Defendants include Health Secretary Robert F. Kennedy Jr., the Department of Health and Human Services, CMS Administrator Mehmet Oz, CMS, the CMS Center for Medicare and Medicaid Innovation (CMMI), and CMMI Director Abe Sutton.

The rule was finalized last week and is set to take effect Jan. 1.

What GLOBE does

GLOBE stands for Global Benchmark for Efficient Drug Pricing. It covers Medicare Part B, which pays for drugs administered in hospitals and other healthcare settings. Under the model, drugs whose prices exceed what comparable developed countries pay would trigger rebates.

It is built on the "most favored nation" idea the administration has pushed since Trump returned to office. Many large and medium-sized drugmakers have already struck separate deals with the White House pledging MFN-style pricing, along with manufacturing and R&D commitments. In exchange, they received broad immunity from Trump's drug import tariffs.

The administration has touted 26 of those agreements. Signers include Pfizer, Eli Lilly and Novo Nordisk.

A rule with a shrinking footprint

CMS plans to waive GLOBE's requirements for any manufacturer that signed one of those White House deals. As a result, the rule could apply to as few as four drugmakers. A Washington Post health newsletter put the initial reach at three companies.

The savings estimate shrank with it. HHS now projects GLOBE will cut Medicare Part B spending by about $440 million over the model period. The proposed rule published last year projected roughly $11.9 billion.

Patient advocates told the Post the final model was weakened by industry exemptions. Drugmakers, meanwhile, are warning that GLOBE could set a precedent for broader international price controls.

PhRMA's argument

PhRMA's case is about legal authority, not the size of the rule. It argues CMS has stretched the authority of a program meant to test new pricing ideas into rewriting Medicare's pricing structure without congressional action.

"Congress has given CMS a little bit of authority to test models," PhRMA General Counsel Jim Stansel said in an interview. "Instead, CMS is doing exactly what Congress has declined to do multiple times over the last several years, and that's to replace the pricing structure in Medicare with a most-favored-nation structure."

PhRMA President and CEO Stephen Ubl said in a statement that the program "is unlawful and clearly exceeds CMS' authority." He added: "The policy doesn't make medicines more affordable for most beneficiaries, while putting future medical innovation and patient access at risk."

The complaint also makes an economic claim. It says MFN pricing "would lead to the loss of hundreds of new treatments over the next decade." That is PhRMA's projection, and the industry has an obvious financial stake in it.

The government's position

HHS did not immediately comment on the suit. In the final rule, though, the agency wrote that "CMS is acting within a detailed, purpose specific statutory framework that Congress designed precisely for this type of model test."

CMS has cited portions of the Social Security Act as its authority. Government officials have also pointed to a provision of the act stating that there shall be no judicial review of certain pricing changes. That provision could become the first fight in court.

Why sue over a narrow rule

Stansel said the lawsuit matters even though few companies are affected. His reasoning: GLOBE could outlast the voluntary deals drugmakers signed, and it could extend to future administrations beyond Trump.

Rachel Turow, a Skadden attorney not involved in the case, said the suit can be viewed as an attempt to stop future price controls using similar mechanisms. If the courts don't foreclose the idea that this process can be used "to impose drug pricing controls, then they've basically opened the floodgates," she said.

The White House deals are voluntary agreements. CMS plans to waive GLOBE for manufacturers that signed them, so the rule falls on whoever is left outside those deals.

History

This is not PhRMA's first round against MFN pricing. During the first Trump administration, the group sued over an earlier version, and a federal judge entered a temporary restraining order in its favor. That rule was invalidated on procedural grounds because the administration had rushed it without giving the public a chance to comment, and it was withdrawn after Joe Biden became president.

What comes next

GLOBE is set to take effect Jan. 1. The group is asking the court to declare the program illegal and prohibit government officials from enforcing it. Whether a judge reaches the merits, or finds that the judicial-review bar shuts the courthouse door, will help decide whether the rule takes effect on schedule.