PhRMA’s GLOBE Drug Pricing Lawsuit Seeks to Block the Medicare Rule

The Pharmaceutical Research and Manufacturers of America filed a GLOBE drug pricing lawsuit on 7 October 2026 in the US District Court for the District of Columbia. The complaint challenges a Medicare rule that would tie Part B drug payments to prices paid in 19 other countries.

The complaint, Case No. 1:26-cv-03498, names Health and Human Services Secretary Robert F. Kennedy Jr., the Department of Health and Human Services, CMS Administrator Mehmet Oz, the Centers for Medicare & Medicaid Services, CMMI Director Abe Sutton and the Center for Medicare and Medicaid Innovation as defendants. It targets the final rule for the Global Benchmark for Efficient Drug Pricing, published at 91 Fed. Reg. 62,936 on 2 October 2026, and asks the court to declare the rule unlawful, set it aside, postpone its effective date and block its enforcement.

What the GLOBE rule does

Since the Medicare Modernization Act, Part B has paid providers 106 percent of a drug’s average sales price, calculated from sales to all purchasers in the United States. GLOBE leaves that baseline in place and recovers the difference through rebates instead.

Ad

The rule covers single-source Part B drugs in seven therapeutic classes, among them antineoplastics, immunological agents, ophthalmic agents, central nervous system agents, metabolic bone disease agents, blood products and antigout agents. To qualify, a drug must be a single source drug or sole source biological product, must exceed a minimum spend threshold of $100 million in Part B expenditures over a 12-month period, and must not already be selected for the Medicare Drug Price Negotiation Program created by the Inflation Reduction Act of 2022. Drugs approved exclusively for rare diseases under section 526 of the Federal Food, Drug, and Cosmetic Act, cellular and gene therapies on the FDA’s approved list, and plasma-derived products are excluded.

CMS calculates a foreign reference price for each covered drug by two methods and takes the higher result. The first looks to the lowest price among the 19 comparator countries after adjusting for GDP. The second uses a weighted average of net prices abroad, but is available only to manufacturers that submit confidential international pricing data. Manufacturers must then pay quarterly rebates to CMS that bring their effective reimbursement down to that reference price, or face civil money penalties set at 125 percent of the incremental rebate amount.

The 19 countries are Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden, Switzerland and the United Kingdom.

GLOBE takes effect on 30 November 2026, with collection of voluntary manufacturer pricing data starting 1 January 2027. Its five-year performance period runs from 1 April 2027 through 2032, and CMS expects rebates to flow through 2034. Roughly a quarter of Medicare Part B fee-for-service beneficiaries are covered, selected by whether they live in randomly chosen ZIP Code Tabulation Areas, and neither manufacturers nor beneficiaries may opt out. CMS will not notify the affected beneficiaries, according to the complaint.

CMS puts the economic impact at $440 million over the seven-year payment period, down from $11.9 billion in its proposed rule, largely because it assumes that manufacturers which signed participation agreements for the GENEROUS Medicaid model before 17 August 2026 will receive a waiver. The complaint notes that CMS declined to codify that exemption, leaving it discretionary.

Why the GLOBE drug pricing lawsuit turns on section 1115A

CMS rests the rule on a single provision, section 1115A of the Social Security Act, 42 U.S.C. § 1315a, which lets the innovation center test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care. PhRMA calls that a minor and ancillary provision, borrowing the description four dissenting justices gave it in NFIB v. Sebelius, 567 U.S. 519, 704-05 (2012).

The complaint raises four statutory objections and says each one is independently fatal.

First, GLOBE is not a test. A test requires some research or experimental goal, and the outcome here is preordained: rebates tied to foreign prices mechanically lower what manufacturers receive. The complaint compares the rule to a family that cuts household spending by buying the same goods at a lower price, which is not a test of any new spending approach.

Second, GLOBE is not a payment or service delivery model. Congress used the phrase to describe how payments are structured, not how much is paid, the complaint argues. The models listed in the statute shift care away from fee-for-service, put providers at risk for outcomes or tie payments to performance. GLOBE leaves the structure of Part B payment alone and changes only the amount that manufacturers hand back. If a worker’s hourly wage rises from $15 to $20, no one calls that a new payment model, the complaint says.

Third, GLOBE fails the conditions for a Phase I test. Section 1115A(b)(2)(A) permits testing only where the Secretary finds evidence that a model addresses a defined population with deficits in care that lead to poor clinical outcomes or potentially avoidable expenditures. GLOBE imposes its model on beneficiaries selected at random by ZIP code, a group the complaint says has nothing in common beyond that selection, and CMS concedes it steered away from areas with the populations most affected by affordability or access barriers in order to preserve randomization. Nor does the rule identify any deficit in care, PhRMA argues, because about 90 percent of Medicare fee-for-service beneficiaries carry supplemental coverage and CMS did not contest that only about 22,000 beneficiaries would see any out-of-pocket change.

Fourth, GLOBE rewrites the statute rather than waiving it. The waiver power in section 1115A(d)(1) allows the agency to relax existing requirements, not to add new ones, and the complaint leans on Biden v. Nebraska, 600 U.S. 477, 498 (2023), where the Supreme Court held that new and substantially different provisions cannot be described as a waiver. GLOBE replaces the inflation rebate calculation that Congress wrote into the Inflation Reduction Act with a foreign-price formula of its own and imports an enforcement regime to match, including penalties that the complaint says no statute authorizes.

Quality-adjusted life years and the appropriations objection

The complaint also says GLOBE collides with section 1182(e) of the Social Security Act, 42 U.S.C. § 1320e-1(e), which bars the HHS Secretary from using quality-adjusted life years, or a similar measure that discounts the value of a life because of disability, as a threshold for determining coverage, reimbursement or incentive programs under Medicare. Fifteen of the 19 countries in the GLOBE formula use quality-adjusted life years to set drug reimbursement, formally or informally. CMS answers that the rule does not establish a quality-adjusted reimbursement formula and only uses foreign prices as an input, but the complaint invokes the principle that an agency may not do indirectly what it could not do directly.

PhRMA next argues that the rebates breach federal appropriations law. Money collected would be deposited in the Supplementary Medical Insurance Trust Fund, which the complaint calls an unauthorized augmentation of CMS’s appropriations, because the Inflation Reduction Act authorizes only inflation rebate payments for that account. There is no severability defense either, the complaint adds, since the rebate formula is the rule’s operating core.

What happens next

The complaint pleads two counts under the Administrative Procedure Act: that GLOBE is in excess of statutory authority and not in accordance with law, and that it is contrary to constitutional right. PhRMA asks the court to declare the rule unlawful, hold it unlawful and set it aside under 5 U.S.C. § 706(2), postpone its effective date under 5 U.S.C. § 705 and grant preliminary and permanent injunctive relief including a temporary restraining order. The case is assigned to the District of Columbia, where PhRMA is headquartered and most of the defendants sit.

A companion rule remains in draft. CMS proposed the Guarding U.S. Medicare Against Rising Costs, or GUARD, model at 90 Fed. Reg. 60,338 in December 2025 to bring the same foreign-reference approach to Medicare Part D, and has not finalized it. PhRMA’s complaint warns that upholding the GLOBE rule would leave the agency free to extend the same pricing method across the Medicare program.

Source: PhRMA v. Kennedy, Case No. 1:26-cv-03498 (D.D.C., filed 7 October 2026), challenging the GLOBE final rule, 91 Fed. Reg. 62,936 (2 October 2026).