As the Trump administration advances plans to bring its “most favored nation” drug pricing model to Medicare Part B, the pharmaceutical industry’s top lobbying group is pushing back in court.
In a new lawsuit (PDF), filed Wednesday in the U.S. District Court for the District of Columbia, the Pharmaceutical Research and Manufacturers of America (PhRMA) took issue with the administration’s GLOBE model, which was finalized last week and is set to take effect on Jan. 1.
The GLOBE, or Global Benchmark for Efficient Drug Pricing model, will use an alternative approach to calculating drug inflation rebates in Medicare Part B, which is concerned with therapies given in healthcare settings. The model would see regulators use international pricing information to set a benchmark that reflects costs paid in countries with similar economic positioning—an effort to tamp down on steep drug prices in the United States.
While the focus on Medicare Part B is new, the overall MFN philosophy of tying U.S. drug costs to those paid in a basket of high-income comparator countries is not.
Since the administration returned to office last year, many large and medium-sized drugmakers have made highly public-facing deals with the White House, pledging to implement “most favored nation” pricing across their portfolios, alongside manufacturing and R&D commitments, in exchange for broad immunity from President Trump’s drug import tariffs.
But bringing the MFN policies into Medicare Part B is both unlawful and exceeds the statutory authority of the Centers for Medicare & Medicaid Services, PhRMA argued in an Oct. 7 release.
The group contends that CMS is using the demonstration model to “impose nationwide price setting policies that Congress never authorized,” suggesting that the framework “[r]ewrites Medicare’s statutory rebate framework and expands civil monetary penalties beyond CMS’ authority.”
The model also raises “significant constitutional concerns” about the separation of powers and limits on authority granted by Congress, PhRMA suggested.
Those legal concerns notwithstanding, PhRMA further believes that GLOBE will have a negative impact on American patients and the country’s industry positioning more broadly, predicting that a slim 0.3% of Medicare Part B beneficiaries would ultimately enjoy lower out-of-pocket costs for their medicines under the proposed rule, with even fewer standing to benefit from the finalized form.
The trade group also cautioned that “artificially” curbing drug prices through “price controls” could reduce investment in U.S. R&D, potentially threatening future development and access opportunities in the country.
PhRMA also took issue with the GLOBE benchmarks’ reliance on countries that use quality-adjusted life years (QALYs) in their pricing and coverage systems, alleging that this methodology can be discriminatory against patients with disabilities, chronic conditions and rare diseases.
“The policy doesn’t make medicines more affordable for most beneficiaries, while putting future medical innovation and patient access at risk,” said Stephen Ubl, PhRMA’s president and CEO, in a statement.
“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,” he continued in his critique of GLOBE. “Patients need more choices and more breakthroughs—not government price-setting schemes that undermine both."
Ubl made his comments as he prepares to hang up his hat after more than a decade in charge of PhRMA. The trade group recently announced that it’s tapping Eric Cantor, the House majority leader from 2011 to 2014, as its new chief executive, effective Nov. 9.
Meanwhile, when CMS announced the finalization of the GLOBE model a little over a week ago, it projected that the model would confer out-of-pocket savings for beneficiaries without reducing quality, with lower coinsurance under the model set to be offered from April 1, 2027, to March 31, 2032.
CMS has said the program will exclude biosimilars and their reference products, once biosimilars for those medicines are available, as well as orphan drugs, plasma-derived products and some cell and gene therapies.
First announced in December, GLOBE was unveiled alongside a similar model for Medicare Part D dubbed GUARD, or the Guarding U.S. Medicare Against Rising Drug Costs model. That particular program has yet to be finalized.
PhRMA’s opening of a new front in its drug pricing litigation comes as it and multiple industry players have pushed back against other recent efforts on cost reform, with the Biden-era Inflation Reduction Act (IRA) and the Medicare drug price negotiations therein a frequent target.
Nevertheless, PhRMA’s legal contest faced a setback on that front in August when the U.S. Court of Appeals for the Fifth Circuit affirmed a previous ruling in district court rebuffing PhRMA and its co-plaintiffs’ arguments against the constitutionality of the IRA price negotiations.
The judge’s decision came down in large part to the determination that participation in Medicare and Medicaid is voluntary, pushing back against the common refrain in IRA challenges that drugmakers are compelled to take part in the price negotiations.