Drugmakers Sue to Block Trump Medicare Plan Tying Drug Costs to Lower Foreign Prices

The pharmaceutical industry’s leading trade group is suing the Trump administration over a new Medicare drug-pricing program that could lower out-of-pocket costs for some patients receiving expensive cancer, autoimmune, and other medications administered in medical settings.

The Pharmaceutical Research and Manufacturers of America, or PhRMA, filed the lawsuit on October 7, 2026, arguing that federal health officials do not have authority to tie certain Medicare Part B drug costs to lower prices in other countries without approval from Congress. The challenge comes one week after the Centers for Medicare & Medicaid Services finalized the Global Benchmark for Efficient Drug Pricing, known as the GLOBE model.

The model would use prices from 19 economically comparable countries, including Canada, Germany, France and the United Kingdom, to help calculate rebates for certain drugs covered by Original Medicare Part B.

The program does not apply to every Medicare beneficiary or to most prescriptions patients pick up at a pharmacy. Medicare Part B generally covers medications administered by a physician or other healthcare professional in settings such as clinics, doctors’ offices and hospital outpatient departments. GLOBE focuses on selected drugs in that category, including some cancer therapies and treatments for autoimmune diseases and arthritis.

Under the model, CMS would compare the cost of eligible Part B drugs with international pricing benchmarks. When a drug’s U.S. price exceeds the benchmark, its manufacturer could owe Medicare a larger rebate.

The international benchmark would also be used to reduce coinsurance for certain patients included in the program. Medicare Part B beneficiaries commonly pay a percentage of the cost of covered drugs, which can leave patients receiving expensive treatments with substantial out-of-pocket expenses. CMS says eligible patients could begin seeing those costs decline on April 1, 2027.

CMS plans to randomly select geographic areas covering approximately 25% of beneficiaries who have Original Medicare as their primary coverage. Only qualifying patients in those areas who receive drugs included in the model would be eligible for the reduced cost-sharing.

At the center of PhRMA’s lawsuit is the authority of the Center for Medicare and Medicaid Innovation, which Congress created under the Affordable Care ActAffordable Care Act (ACA)The Affordable Care Act (ACA), also known as Obamacare, is a federal health care law enacted in 2010 that expanded access to health insurance, created health insurance marketplaces and premium subsidies, expanded Medicaid in participating states, and established consumer protections for people with private health coverage.Read more → to test new approaches to healthcare payment and delivery. PhRMA argues that CMS has gone beyond testing a payment model and instead created a drug-pricing system that Congress itself never authorized.

The lawsuit asks the U.S. District Court for the District of Columbia to strike down the rule under the Administrative Procedure Act. PhRMA also invokes the major questions doctrine, which courts consider when deciding whether Congress clearly authorized an agency to act on an issue with substantial economic or political consequences.

The trade group raises a separate constitutional argument involving the limits on Congress’ ability to delegate legislative power to federal agencies. PhRMA contends that GLOBE gives health officials authority to impose pricing requirements that should instead be established through legislation.

PhRMA President and CEO Stephen J. Ubl said the industry shares the administration’s goal of making medicines more affordable but disputes CMS’ legal authority to impose the new system. The organization also argues that linking U.S. payments to foreign prices could reduce pharmaceutical research investment and eventually limit patient access to new treatments.

Those potential long-term effects are disputed. The administration says the model is designed to lower drug costs for Medicare patients and taxpayers while preserving access to treatment and quality of care.

When the final rule was announced September 30, CMS Administrator Mehmet Oz said Medicare patients and American taxpayers have long paid substantially more for prescription drugs than people in comparable countries.

The final rule excludes several categories of treatment, including certain drugs used only for rare diseases, plasma-derived products and some cell and gene therapies. Biosimilars and their reference biological products are also excluded once a biosimilar enters the U.S. market.

GLOBE’s immediate reach has narrowed because of separate voluntary pricing agreements between the Trump administration and pharmaceutical manufacturers. CMS plans to waive certain requirements for companies participating in those agreements, potentially leaving only a small number of drugmakers directly subject to the model when it begins.

Reflecting those exemptions, the government now estimates approximately $440 million in Medicare Part B savings over the projected period covered by the model and its related payments.

The legal fight echoes an earlier effort during Trump’s first administration to connect Medicare payments for certain drugs to international prices. A federal court blocked that most-favored-nation pricing rule in December 2020 after finding that the administration had bypassed required notice-and-comment procedures.

The current GLOBE rule went through formal notice-and-comment rulemaking, so PhRMA’s challenge raises different legal grounds from the procedural dispute that stopped the 2020 policy.

The lawsuit, Pharmaceutical Research and Manufacturers of America v. Kennedy, names Health and Human Services Secretary Robert F. Kennedy Jr., CMS Administrator Oz and other federal officials and agencies as defendants. The case has been assigned to U.S. District Judge Royce C. Lamberth.

PhRMA is asking the court to declare GLOBE unlawful and set aside the rule in its entirety. No ruling has been issued on the challenge.

Unless the court intervenes, the model will begin January 1, 2027, with lower coinsurance for eligible patients scheduled to start April 1. The lawsuit now puts the future of those changes before a federal judge, with the legal dispute centered on whether Congress gave CMS the authority to pursue lower Medicare Part B drug costs through this particular pricing model.