U.S. Pharma Lobby Group Sues Federal Government to Block Medicare Most-Favored-Nation Drug Pricing Policy
nashnova research
PhRMA, the largest US pharma lobby, sued the federal government to block a policy tying Medicare drug prices to averages from 19 countries — the lawsuit will determine whether America's drug-pricing overhaul can take effect in 2027.
What does the "most-favored-nation" drug pricing policy actually do?
The core change: shift Medicare's drug-pricing benchmark from US market prices to the average selling price across 19 countries, set to take effect January 1, 2027.
This means → the US government wants to use what other countries pay as a ceiling on domestic drug prices, cutting costs for Medicare beneficiaries.
In plain terms = drugmakers used to charge whatever the US market would bear; this policy says "you can only charge what others pay."
Why is PhRMA suing?
PhRMA (Pharmaceutical Research and Manufacturers of America) represents 34 drugmakers including Pfizer and Sanofi. It filed suit in Washington federal court on October 7.
The central argument: CMS (Centers for Medicare & Medicaid Services) relied on an "obscure statutory provision" that does not grant the authority to rewrite Medicare's pricing rules.
PhRMA CEO Stephen Ubl called the policy "unlawful and clearly beyond CMS's authority," warning it would jeopardize future medical innovation and patient access to medicines.
What is the government's defense?
CMS cited provisions of the Social Security Act, arguing it has the statutory power to adjust drug pricing.
The sharper point: CMS noted that parts of the statute explicitly state certain pricing adjustments are not subject to judicial review.
This means → the government's defense is essentially "the law itself says courts can't touch this" — if the court agrees, PhRMA's case may never get past the threshold.
Has this fight happened before?
Yes — and the industry won. During Trump's first term, PhRMA sued over an earlier version of the most-favored-nation rule. A federal judge issued a temporary injunction, ruling in the industry's favor.
After Biden took office, the rule was withdrawn entirely.
This reflects a pattern: these policies live and die by judicial rulings — executive orders move fast, but a single court injunction can stop them cold.
What does this mean for the market?
Trump has already struck deals with dozens of drugmakers — Pfizer, Merck, GSK among them — in 2025, declaring that Americans will buy medicines at the world's lowest prices.
Whether PhRMA can win another court order is the key variable determining if the policy lands on schedule.
In plain terms = the president signed deals and set a date, but one more injunction from a federal judge could replay the last round's outcome — policy shelved.
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