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# PhRMA Sued Over a Rule That Barely Covers Anyone. The Target Is Bigger Than Drug Pricing.
- URL: https://bioweek.com/phrma-sued-over-a-rule-that-barely-covers-anyone-the-target-is-bigger-than-drug-pricing/
- Published: 2026-10-08T05:03:38.000Z
- Updated: 2026-10-08T05:03:38.000Z
- Description: PhRMA sued CMS on October 7 over the GLOBE most-favored-nation rule for Medicare Part B. The final rule covers as few as four manufacturers and $440 million in projected savings. The suit's real target is the CMMI test authority beneath it.
- Author: BioWeek
- Tags: Policy, Markets

There is a paradox at the center of the lawsuit PhRMA filed on Wednesday: the industry's largest lobby is going to war against a Medicare rule that, by the government's own math, will barely touch anyone. CMS's final rule projects savings of $440 million over seven years, down from $11.9 billion in the December 2025 proposal. The number of manufacturers actually covered could fall to as few as four. PhRMA sued anyway, and the reason is that the rule on paper is not the rule that matters. The real dispute is about how much power the federal government's innovation lab has to reshape American medicine without Congress saying so.

### A shadow of the proposal

The [complaint](https://litigationtracker.law.georgetown.edu/wp-content/uploads/2026/10/PHARMA%5F2026.10.07%5FCOMPLAINT.pdf?ref=bioweek.com), filed October 7 in the U.S. District Court for the District of Columbia against HHS Secretary Robert F. Kennedy Jr., CMS Administrator Mehmet Oz, and CMMI Director Abe Sutton, among others, challenges the Global Benchmark for Efficient Drug Pricing Model, or GLOBE. Published as a final rule on September 30 and in the Federal Register on October 2, GLOBE ties Medicare Part B payment for certain drugs to a most-favored-nation benchmark drawn from prices in 19 reference countries, including Australia, Austria, Belgium, and Canada. Method I uses the lowest per-unit price among those countries, adjusted for purchasing power parity. Method II lets manufacturers report a volume-weighted net price average instead.

The [rule](https://www.federalregister.gov/documents/2026/10/02/2026-20281/global-benchmark-for-efficient-drug-pricing-globe-model?ref=bioweek.com) applies only to single-source drugs and sole-source biologics in seven therapeutic categories with more than $100 million in annual Part B spending, and only in randomly selected regions covering roughly 25 percent of Part B fee-for-service beneficiaries. Voluntary data collection starts January 1, 2027; the five-year performance period runs April 1, 2027 through March 31, 2032\. The final rule also added three exclusions absent from the proposal: orphan-only rare disease drugs, FDA-approved cell and gene therapies, and plasma-derived products.

What hollowed out the rule's reach is a waiver CMS never actually wrote into it. CMS stated it intends to waive mandatory participation for manufacturers that join GENEROUS, a voluntary model that trades MFN-style Medicaid pricing for negotiated coverage criteria. PhRMA's lawyers note the [waiver](https://litigationtracker.law.georgetown.edu/wp-content/uploads/2026/10/PHARMA%5F2026.10.07%5FCOMPLAINT.pdf?ref=bioweek.com) is uncodified and expires with GENEROUS's five-year period in 2031, which makes the shrunken $440 million estimate less a forecast than a negotiating position. Skadden's analysis adds that CMS's own regulatory flexibility review found the rule will impact a single small firm, at 2.3 percent or less of its U.S. revenue, and that exemptions could leave as few as four manufacturers covered.

### The major questions problem CMS built for itself

Here the paradox resolves into strategy. PhRMA argues CMS cannot escape the major questions doctrine by "artificially deflating" GLOBE's price tag through ad hoc discretionary exemptions. The doctrine, sharpened in West Virginia v. EPA and Learning Resources v. Trump, requires clear congressional authorization for agency actions of vast economic and political significance. CMS cut the price tag but kept the mechanism, and the complaint argues the mechanism is the problem. GLOBE imposes mandatory rebates that predetermine outcomes, in PhRMA's telling, and rewrites Medicare's rebate framework rather than testing anything.

The deeper target is Section 1115A of the Social Security Act, the statute that created CMMI and authorizes it to test payment and service delivery models that reduce expenditures while preserving quality of care. PhRMA contends price controls test nothing. The suit also argues CMS lacks authority to extend the 125 percent civil money penalty regime to GLOBE rebates, and that the rule smuggles in QALY-based pricing, barred by Congress at CMS, because 15 of the 19 reference countries use quality-adjusted life years. There is precedent history too: the first Trump administration's 2020 MFN demonstration was invalidated by three district courts.

### What a win would mean for CMMI

The stakes extend well beyond Part B drugs. Section 1115A underpins CMMI's entire model-testing portfolio, and a ruling that GLOBE exceeds the statute could narrow the innovation center's room for mandatory payment models generally. Its companion Part D model, GUARD, remains under White House review and unfinalized, so it would inherit whatever legal weather GLOBE creates. CMS added a severability clause at 42 C.F.R. 513.1(d) so the rule survives a partial strike, and litigation observers expect the outcome may turn on which circuit hears the challenge first.

That is the quiet significance of the lawsuit. An industry suing a rule covering a sliver of beneficiaries and four manufacturers is not fighting over this rule's economics. It is fighting over whether an unelected innovation center can impose binding price controls through a "test" authority written in 2010, and whether shrinking the numbers on paper can launder an expansion of power through review. The court's answer will define the boundary of CMMI's authority for years, for drugs and for everything else the center wants to mandate.