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Courts Pause Most Favored Nation Drug Model Rule

Two federal courts have halted implementation of the Centers for Medicare & Medicaid Services (CMS) most favored nation model interim final rule.

The seven-year model, which was set to begin Jan. 1, 2021, will phase in a reduced payment rate for 50 Medicare Part B drugs over four years and then pay Medicare providers the fully reduced rate for the remaining years of the model. The new payment rates would be based on the lowest price for a given drug offered in any Organisation for Economic Co-operation and Development country that has a gross domestic product per capita at least 60 percent that of the United States. In issuing an interim final rule instead of a proposed rule, CMS bypassed soliciting public input through a notice-and-comment period, as required by the Administrative Procedure Act (APA). This procedural deficiency, in addition to other flaws with the model, have led to legal challenges against the rule.

The one case against the rule, in a federal court in Maryland, the court granted the plaintiffs’ request for a two-week temporary restraining order (TRO) prohibiting implementation of the rule. While this case was not a decision on the merits of the lawsuit, the court found the plaintiffs had a significant likelihood of succeeding on the merits of their claim that CMS violated the APA’s procedural requirements.

A few days after the Maryland decision, a federal judge in California cited the reasoning in that decision to grant a nationwide preliminary injunction. The California court is broader in scope and duration, vacating the final rule and prohibiting its enforcement until CMS goes through the notice-and-comment process. The judge in this case noted the plaintiffs are “virtually certain” to succeed in their argument that CMS violated the APA’s requirements.

The two court orders effectively halt implementation of the rule until CMS takes further legal or regulatory action. CMS could appeal either case, which could lift the TRO or the injunction.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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