By Michael Erman
Oct 7 (Reuters) – The pharmaceutical industry’s top lobby group on Wednesday sued to invalidate the Trump administration’s efforts to benchmark US drug prices to lower costs overseas in the Medicare health insurance program, arguing that it is an illegal government overreach.
The GLOBE rule intends to set hospital drug prices for Medicare patients. Its final version was published last week on exactly how a “most-favored-nation” pricing system based on what is paid in a group of comparable countries would be integrated in the Medicare Part B program.
The PhRMA lobby group filed its lawsuit in the US District Court for the District of Columbia against Health Secretary Robert F. Kennedy Jr., the US Department of Health and Human Services he runs, and the Centers for Medicare & Medicaid Services and two of its officials.
The lobby group argues in its lawsuit that CMS, Medicare’s regulator, has stretched the authority of a program to test new pricing ideas into rewriting Medicare’s pricing structure without congressional action.
Congress has given CMS “a little bit of authority to test models,” PhRMA General Counsel Jim Stansel said in an interview. “Instead, CMS is doing exactly what Congress has declined to do multiple times over the last several years, and that’s to replace the pricing structure in Medicare with a most-favored-nation structure.”
Medicare is the US government program that provides health coverage to about 70 million people aged 65 and older or with disabilities.
HHS was not immediately available to comment on the lawsuit. In the finalized version of the rule, however, the agency argued that it was not overstepping its bounds, writing, “CMS is acting within a detailed, purpose specific statutory framework that Congress designed precisely for this type of model test.”
The rule is expected to have limited reach. CMS plans to waive the requirement for manufacturers that have signed separate deals with the White House to participate in the price-setting model, according to the rule. Trump has already signed deals with more than two dozen drugmakers, including many of the world’s largest, such as Pfizer, Eli Lilly and Novo Nordisk.
The pricing regime may ultimately apply to as few as four drugmakers after exempting those companies.
The final rule also sharply reduced the government’s projected savings from the model. HHS now estimates the program will reduce Medicare Part B spending by about $440 million over the 7-year model period, compared with roughly $11.9 billion projected in the proposed rule published last year.
In 2020, PhRMA successfully sued to block a previous incarnation of most-favored-nation pricing, but that rule was invalidated on procedural grounds because the administration had rushed it out without giving the public a chance to comment.
Also named in the suit were CMS Administrator Dr. Mehmet Oz, the agency’s innovation center that is running the most-favored-nation pricing pilot and the director of that division, Abe Sutton.
(Reporting by Michael Erman and Jonathan Stempel in New York; Editing by Bill Berkrot)
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