The Pharmaceutical Research and Manufacturers of America (PhRMA) filed a complaint on October 7 in the U.S. District Court for the District of Columbia. The suit challenges the Centers for Medicare & Medicaid Services' (CMS) Global Benchmark for Efficient Drug Pricing (GLOBE) model, a final rule that would apply most-favored-nation (MFN) pricing to certain Medicare Part B drugs.
The suit names Health and Human Services Secretary Robert F. Kennedy Jr., CMS Administrator Mehmet Oz, Center for Medicare and Medicaid Innovation Director Abe Sutton and their agencies as defendants. PhRMA asks the court to declare GLOBE unlawful and vacate the rule in its entirety.
How GLOBE Works
CMS published the final rule in the Federal Register on October 2. Under the rule, manufacturers would pay quarterly rebates to CMS. Each rebate would be based on the difference between a drug's average sales price and a reference price drawn from prices in 19 countries.
The rule applies to single-source drugs and biologics in categories including antineoplastics, immunological agents and ophthalmic agents that exceed $100 million in Part B spending over a 12-month period. Several groups of drugs are excluded: drugs selected for Medicare price negotiation, drugs approved only for rare diseases, cell and gene therapies, and plasma-derived products.
GLOBE would cover about 25% of Part B fee-for-service beneficiaries, selected by randomly chosen ZIP code areas. The rule takes effect November 30, with a five-year performance period beginning April 1, 2027. The complaint states that CMS estimates GLOBE's economic impact at $440 million over seven years, down from $11.9 billion in the proposed rule. The drop is largely because CMS expects to waive participation for manufacturers in its Medicaid-focused GENEROUS model. Unpaid rebates could draw civil monetary penalties of 125% of the amount owed.
Legal Arguments
PhRMA argues that CMS is using its demonstration authority under Section 1115A of the Social Security Act to impose nationwide price setting that Congress never authorized. The complaint makes three main claims about GLOBE:
- It is not a genuine "test," because mandatory rebates predetermine the outcome.
- It is not a "payment and service delivery model."
- It rewrites rather than waives Medicare's statutory rebate framework, including by expanding civil penalties.
The complaint also cites the major questions doctrine. It alleges that GLOBE violates a statutory ban on using quality-adjusted life years (QALYs) in Medicare by importing the pricing practices of the reference countries. It also raises constitutional claims under the Presentment Clause and the nondelegation doctrine. PhRMA notes that three district courts struck down a similar MFN rule in 2020.
"GLOBE is unlawful and clearly exceeds CMS' authority. The policy doesn't make medicines more affordable for most beneficiaries, while putting future medical innovation and patient access at risk," said Stephen J. Ubl, president and CEO of PhRMA. "We share the administration's goal of ensuring Americans can access and afford their medicines, but CMS cannot rewrite the law and bypass Congress to impose foreign price controls."
PhRMA states that only 0.3% of Part B beneficiaries would have seen lower out-of-pocket costs under the proposed rule, and even fewer under the final rule. This is partly because most beneficiaries have supplemental coverage. PhRMA also argues that the policy would reduce investment in research and development.
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