By: Joe Page

Disclaimer: The views expressed and assertions made in this post are the author’s own and are not attributable to, and do not necessarily reflect the views of, the author’s employer.

On October 7, 2026, the Pharmaceutical Research and Manufacturers of America (“PhRMA”) sued the U.S. Department of Health and Human Services (“HHS”) and the Centers for Medicare and Medicaid Services (“CMS”) to block the Global Benchmark for Efficient Drug Pricing (“GLOBE”) Model, which CMS finalized a week earlier.[1] GLOBE targets certain high-cost Medicare Part B drugs, which are medicines usually administered by a doctor, such as infusions.[2] When Medicare pays more for one of these drugs than a benchmark based on prices in other wealthy countries, the manufacturer must refund the difference.[3] Congress has never expressly authorized this kind of most-favored-nation (“MFN”) pricing.[4] Instead, CMS relies on Section 1115A of the Social Security Act, which lets the agency test new ways of paying for and delivering care.[5] PhRMA’s lawsuit asks how far that authority reaches.[6]

Section 1115A created CMS’s Innovation Center to test payment and delivery models that reduce Medicare and Medicaid spending while preserving or improving quality of care.[7] The statute limits which models qualify: each must address a defined group of patients whose gaps in care lead to poor outcomes or avoidable spending.[8] It also lets CMS set aside certain Medicare requirements when needed to run a model.[9]

PhRMA argues that GLOBE is unlawful for several reasons.[10] First, GLOBE is not a genuine “test,” because its formula guarantees savings before it begins.[11] Second, it is not a new payment model; it simply lowers what Medicare pays for existing drugs.[12] Third, it identifies no defined patient population with specific gaps in care.[13] Fourth, rather than setting aside a statutory requirement, GLOBE rewrites the Inflation Reduction Act’s rebate program.[14] Finally, PhRMA invokes the major questions doctrine, under which courts demand clear congressional authorization before an agency adopts a policy of vast economic and political significance.[15]

CMS’s strongest defense may be a threshold one. Section 1115A(d)(2) bars judicial review of a model’s “elements, parameters, scope, and duration,” meaning courts generally cannot second-guess those choices.[16] In 2020, the first Trump administration tried to launch a similar MFN model, and three federal courts blocked it because CMS skipped notice-and-comment rulemaking, which requires agencies to publish proposed rules and consider public feedback.[17] Courts also held that the bar does not prevent review of the procedures used to create a model.[18] PhRMA, however, attacks GLOBE’s substance rather than its procedures, so those holdings offer little help. Because the statute shields both participant selection and model design, CMS will likely argue that its choice of drugs, its ZIP-code-based selection of patients, and its rebate formula are unreviewable.[19] PhRMA responds that it challenges CMS’s power to adopt GLOBE at all, a question the bar does not reach.[20]

CMS will likely contest each remaining argument, and the final rule previews its answers.[21] The agency frames GLOBE as testing whether linking Medicare payments to lower foreign prices can cut spending without harming quality of care.[22] Yet because the rebate is triggered only when the U.S. price exceeds the benchmark, savings are effectively built into the formula.[23] CMS’s better response is that the real unknown is whether patients’ access and quality hold steady, and the statute expressly ties a model’s survival to that question.[24] Still, a court may doubt that Congress meant “testing” to include an experiment whose financial result is largely known in advance. CMS’s defined population (patients facing heavy out-of-pocket costs) is similarly vulnerable: only about 22,000 beneficiaries would see those costs change.[25]

CMS stands on firmer ground on the major questions doctrine. The agency calls Section 1115A a detailed, purpose-specific framework, not a vague grant of power.[26] The final rule also shrank GLOBE dramatically: projected savings fell from $11.9 billion to about $440 million over seven years, and only about four manufacturers are expected to be covered.[27] The comparatively smaller model looks less like a policy of vast economic significance. However, Congress has repeatedly declined to enact MFN pricing, and the Supreme Court treats such refusals as a warning sign when an agency claims the power anyway.[28]

Because GLOBE ties U.S. revenue to the lowest prices abroad, manufacturers may raise foreign prices, delay launches in benchmark countries, or sign separate pricing deals with the administration to earn exemptions, as most affected companies already have.[29] PhRMA warns that mandatory MFN pricing could threaten over $500 billion in planned investment.[30] GLOBE also enforces rebates with civil penalties borrowed from the Inflation Reduction Act, so compliance planning hinges on whether those penalties survive.[31] Insurers should also watch: CMS is developing a similar model for Part D, the drug benefit run by private plans.[32] If courts accept CMS’s reading, the agency could use its authority to reshape other payment formulas that hospitals, physicians, and device makers rely on.[33]

 

[1] See Complaint at 1–5, Pharm. Rsch. & Mfrs. of Am. v. Kennedy, No. 1:26-cv-03498 (D.D.C. filed Oct. 7, 2026) [hereinafter Complaint]; Press Release, U.S. Ctrs. for Medicare & Medicaid Servs., CMS Finalizes New Mandatory Drug Payment Model to Deliver Lower Drug Prices for Beneficiaries in Original Medicare Part B (Sep. 30, 2026), https://www.cms.gov/newsroom/press-releases/cms-finalizes-new-mandatory-drug-payment-model-deliver-lower-drug-prices-beneficiaries-original.

[2] See 42 U.S.C. § 1395x(s)(2)(A) (covering drugs furnished incident to a physician’s service that are not usually self-administered); Complaint, supra note 1, at 13–14 (describing Part B drug coverage and payment).

[3] See Complaint, supra note 1, at 24–25 (explaining that the benchmark draws on prices from nineteen countries, including Canada, Germany, Japan, and the United Kingdom, adjusted for differences in national income); see generally Global Benchmark for Efficient Drug Pricing (GLOBE) Model, 91 Fed. Reg. 62936 (Oct. 2, 2026) (to be codified at 42 C.F.R. pt. 513) (establishing a model requiring manufacturers to rebate Medicare payments that exceed an internationally referenced benchmark).

[4] See Elijah E. Cummings Lower Drug Costs Now Act, H.R. 3, 116th Cong. (2019) (proposing international reference pricing for Medicare drugs that passed the House but was never enacted); Stephen Appezzato, Why PhRMA Sued to Block Medicare’s GLOBE Pricing Model, Pharm. Com. (Oct. 7, 2026), https://www.pharmaceuticalcommerce.com/view/why-phrma-sued-to-block-medicares-globe-pricing-model (reporting that efforts to have Congress endorse the administration’s MFN models have failed).

[5] 91 Fed. Reg. at 62937; 42 U.S.C. § 1315a(a)(1).

[6] See Complaint, supra note 1, at 3–5.

[7] 42 U.S.C. § 1315a(a)(1).

[8] See id. § 1315a(b)(2)(A) (limiting model selection to models that address a defined population with deficits in care leading to poor clinical outcomes or potentially avoidable expenditures).

[9] Id. § 1315a(d)(1).

[10] Complaint, supra note 1, at 35, 38, 42, 44–45, 47–48.

[11] Id. at 35–38.

[12] Id. at 38–43.

[13] Id. at 42–44.

[14] Id. at 25, 44–45.

[15] Id. at 47–48; see West Virginia v. EPA, 597 U.S. 697, 721–723 (2022) (requiring clear congressional authorization before an agency may exercise power of vast economic and political significance); Biden v. Nebraska, 600 U.S. 477, 501–06 (2023) (applying the doctrine to invalidate a student loan cancellation program).

[16] 42 U.S.C. § 1315a(d)(2)(C).

[17] See Ass’n of Cmty. Cancer Ctrs. v. Azar, 509 F. Supp. 3d 482, 494–99 (D. Md. 2020); Cal. Life Scis. Ass’n v. Ctrs. for Medicare & Medicaid Servs., No. 20-cv-08603-VC, 2020 WL 7696050, at *1 (N.D. Cal. Dec. 28, 2020) (granting a preliminary injunction based on CMS’s failure to comply with notice-and-comment requirements); Regeneron Pharms., Inc. v. U.S. Dep’t of Health & Hum. Servs., 510 F. Supp. 3d 29, 49 (S.D.N.Y. Dec. 30, 2020); see also 5 U.S.C. § 553(b)–(c) (requiring agencies to publish notice of proposed rules and give the public an opportunity to comment).

[18] See Regeneron, 510 F. Supp. 3d at 45; Cal. Life Scis. Ass’n, 2020 WL 7696050, at *1.

[19] See 42 U.S.C. § 1315a(d)(2)(B)–(C) (barring review of the selection of model participants and of a model’s elements, parameters, scope, and duration); Complaint, supra note 1, at 8 (anticipating CMS’s reliance on the review bar).

[20] Complaint, supra note 1, at 8 (citing Teva Pharms. USA, Inc. v. Kennedy, 187 F.4th 587, 602 (D.C. Cir. 2026)).

[21] See Global Benchmark for Efficient Drug Pricing (GLOBE) Model, 91 Fed. Reg. 62936, 62945, 62980, 63076–78, 63081 (Oct. 2, 2026) (to be codified at 42 C.F.R. pt. 513) (responding to commenters’ objections to the model’s legal basis).

[22] Id. at 63081.

[23] See Heath R. Ingram et al., GLOBE Most Favored Nations Drug Pricing Model for Medicare Part B Drugs Finalized and Scaled Down by CMS, Goodwin Procter LLP (Oct. 2, 2026), https://www.goodwinlaw.com/en/insights/publications/2026/10/alerts-lifesciences-hltc-globe-mfn-drug-pricing-model-medicare-part-b-finalized-scaled-down-by-cms [https://perma.cc/5NS5-HDGB] (describing the per-unit rebate as the amount by which Medicare’s payment exceeds the benchmark); Complaint, supra note 1, at 35–37 (arguing that GLOBE’s savings are preordained).

[24] See 42 U.S.C. § 1315a(b)(3)(B) (requiring CMS to end a model unless it is expected to improve quality without increasing spending or to reduce spending without reducing quality); 91 Fed. Reg. at 62937, 63081.

[25] See 91 Fed. Reg. at 62980; Complaint, supra note 1, at 44.

[26] 91 Fed. Reg. at 63078.

[27] See Ingram et al., supra note 23; see also Rachel Turow, CMS Finalizes the GLOBE Model: A Most-Favored-Nation Drug Payment Framework for Medicare Part B, Skadden, Arps, Slate, Meagher & Flom LLP (Oct. 5, 2026), https://www.skadden.com/insights/publications/2026/10/cms-finalizes-the-globe-model [https://perma.cc/V2X5-QEYK] (noting that the impact analysis suggests as few as four manufacturers may be covered).

[28] See West Virginia v. EPA, 597 U.S. 697, 731 (2022) (treating Congress’s repeated rejection of similar proposals as evidence that the agency lacked the claimed authority); Biden v. Nebraska, 600 U.S. 477, 503 (2023) (noting that Congress had “considered” and “chosen not to enact” similar proposals and treating that history as relevant to the agency’s asserted authority); see also Complaint, supra note 1, at 3 (asserting that Congress has repeatedly considered but declined to enact MFN pricing proposals).

[29] See Ingram et al., supra note 23 (advising manufacturers to reassess international pricing strategy and to weigh participation in the administration’s separate pricing agreements as a route to exemption); Turow, supra note 27 (reporting that thirty-two of thirty-six otherwise eligible drugs are made by companies with such agreements).

[30] Complaint, supra note 1, at 31–32 (quoting PhRMA’s comment letter on the proposed rule).

[31] See id. at 25–26; 42 U.S.C. § 1395w-3a(i)(7) (imposing civil monetary penalties on manufacturers that fail to pay Part B inflation rebates).

[32] See Appezzato, supra note 4 (discussing the proposed GUARD model for Part D); Turow, supra note 27 (noting that GUARD “remains under White House review”).

[33] See 42 U.S.C. § 1315a(d)(1) (permitting CMS to waive requirements of Title XVIII, the Medicare statute, as necessary to test a model); Appezzato, supra note 4 (explaining that a CMS win would confirm that mandatory models can tie Medicare payment to international benchmarks without new legislation).