The pharmaceutical industry's most powerful lobbying group sued the Trump administration on Wednesday, taking aim at a new Medicare rule that calculates manufacturer rebates paid to CMS using international drug prices. The Pharmaceutical Research and Manufacturers of America, known as PhRMA, filed the challenge in federal court in Washington, arguing the administration overstepped its authority in rolling out the policy.
PhRMA's suit targets the Global Benchmark for Efficient Drug Pricing Model, or GLOBE, a Medicare Part B program that calculates manufacturer rebates using international drug pricing information, according to the Georgetown Law litigation tracker. The industry group filed its complaint in the U.S. District Court for the District of Columbia, as reported by the Raleigh News & Observer, which described the move as an effort to invalidate the administration's push to benchmark U.S. drug prices against lower costs charged overseas.
The lawsuit names Health Secretary Robert F. Kennedy Jr., the Department of Health and Human Services, CMS Administrator Mehmet Oz, the Centers for Medicare and Medicaid Services, CMMI Director Abe Sutton, and the Center for Medicare and Medicaid Innovation as defendants, according to the litigation tracker. PhRMA contends GLOBE is invalid under the Administrative Procedure Act because it relies on standards that fall outside CMMI's authorizing statute, the same source notes.
What the Final Rule Actually Does
CMS finalized the GLOBE Model on September 30, according to Pharmaceutical Commerce, implementing it as a mandatory Medicare payment model under section 1115A of the Social Security Act, per the Federal Register. The model will apply to beneficiaries in randomly selected geographic areas covering roughly a quarter of people enrolled in Original Medicare, according to the Centers for Medicare & Medicaid Services. The agency's own program page clarifies that GLOBE applies only to certain Original Medicare Part B drugs and does not touch Medicare Advantage or Part D utilization, per CMS.
The final version is considerably narrower than what CMS originally proposed. It excludes orphan-only drugs, plasma-derived products, certain cell and gene therapies, and biosimilars and their reference biologics once a biosimilar launches, Pharmaceutical Commerce reports.
Savings Projections Shrank Dramatically
Those carve-outs have gutted the program's projected financial impact. CMS now estimates GLOBE will reduce Medicare Part B spending by about $440 million over the model's seven-year period, down sharply from the roughly $11.9 billion projected when the rule was first proposed, according to the News & Observer's sourcing. Law firm Sidley Austin reported that CMS also cut its estimate of the model's annualized net savings from approximately $2.3 billion to about $80 million under the final rule.
CMS now projects that just four manufacturers of GLOBE Model drugs will remain subject to the program after the final rule's exemptions took effect, according to Sidley's analysis. STAT News reported that the pilot is not expected to have much impact precisely because most companies were exempted from it.
Timeline Details Differ Across Reports
Accounts of when GLOBE actually takes effect vary. Pharmaceutical Commerce reported the model runs from January 1, 2027, through March 31, 2032, while Sidley's analysis described the final rule as delaying the first performance year to April 1, 2027, with the five-year performance period ending March 31, 2032, followed by a two-year window for rebate invoicing and reconciliation.
A Familiar Legal Playbook
This is not the industry's first fight over most-favored-nation style pricing. PhRMA successfully sued in 2020 to block an earlier version of the policy, and that rule was ultimately invalidated on procedural grounds because the administration had rushed it out without giving the public a chance to comment, per the News & Observer's reporting. Whether the current lawsuit follows a similar path remains to be seen, but the group is once again framing the pricing effort as government overreach that exceeds what Congress authorized for CMS's demonstration models.
