Supply Chain Signal: PhRMA’s GLOBE Lawsuit and the New Economics of Pharma Supply Chains

The fourth episode of Supply Chain Signal, featuring pharmaceutical supply chain expert Thanigavelan Jambulingam, Ph.D., of Saint Joseph’s University’s Haub School of Business, connects earlier discussions of tariffs, reshoring and most favored nation (MFN) pricing to look at how manufacturers can make long-term manufacturing and supply chain decisions while policy keeps shifting.

The episode opens with the Pharmaceutical Research and Manufacturers of America’s (PhRMA) Oct. 7 lawsuit challenging CMS’ Global Benchmark for Efficient Drug Pricing (GLOBE) model. Finalized Sept. 30, GLOBE tests an alternative Medicare Part B drug inflation rebate formula built on international price benchmarks, and it will run for five years starting Jan. 1, 2027, in geographic areas covering about 25% of Original Medicare beneficiaries.¹

PhRMA argues that CMS is using its demonstration authority to impose price setting Congress never authorized, with rebates that effectively hold Part B prices to benchmarks drawn from 19 OECD countries.² Jambulingam says the core issue is precedent: the industry does not want a CMS demonstration project to become the template for future pricing policy made without Congress. GLOBE’s expected impact is small for now, he notes, and the final rule bears that out. Over time, though, he says the impact could become significant, with trickle-down effects on pricing, innovation, investment and how companies manage uncertainty, which makes the suit a preemptive step.

Jambulingam traces the current policy stack to post-COVID-19 pandemic concerns over supply chain security, which broadened into resilience and affordability and led to tariffs, MFN, reference pricing and the IRA. As a result, pricing and manufacturing investment are now tied together. In the short term, companies face a choice about whether to take the short-term gain of participating in pricing programs, hoping manufacturing incentives will help. The industry, he says, is playing it safe with the information it has, and the long-term trade-offs are not yet fully understood. With some manufacturers drawing more than 45% of their business from the U.S., he says a U.S. presence is necessary, leaving companies to manage uncertainty across conflicting policies.

He is also skeptical that lower costs and greater resilience can be achieved through the same program. Efficiency means producing reliably wherever costs are lowest, while resilience from a U.S. perspective means a higher cost structure, so reshoring carries a premium. That cost, he argues, should be shared across the supply chain, though some stakeholders will absorb a disproportionate share. Efficiency gains also do not automatically reach patients, since the manufacturer’s price is not what the patient pays and different stakeholders control different aspects of access. Patient affordability requires its own set of initiatives, such as covering copays and keeping drugs available when patients need them, while efficiency is a separate effort at the manufacturer level. Companies first need to decide which they are trying to achieve. Pursuing both is not impossible, he says, but it requires trade-offs at every level and a collective approach that is difficult given each stakeholder’s risks and rewards.

Asked what pharmaceutical leaders should do differently, Jambulingam says the supply chain can no longer be treated as a cost center that moves product. Its linkage to global pricing, tariffs, manufacturing incentives and local pricing policy has made it integral to business strategy. Companies must optimize revenue and profitability against an aggregation of fast-changing, sometimes contradictory policies. That means tough choices in the short run, he says, while the long run will depend on whatever government policy is in place at the time, so companies are moving forward and watching what comes next. Large manufacturing investments take years, he notes, and companies that see U.S. manufacturing as a core part of their business will make them while others hesitate to commit fully.

He describes this as the new economics of the pharmaceutical supply chain, one with a built-in contradiction: investments that raise the industry’s cost structure are expected to deliver cheaper drugs. Even if pricing policies lower costs for Medicare beneficiaries, he says, questions remain about what they mean for commercially insured patients and for the uninsured, who numbered 26.7 million in 2025.³

Stay tuned for next month’s installment of Supply Chain Signal.

References

1. CMS finalizes new mandatory drug payment model to deliver lower drug prices for beneficiaries in Original Medicare Part B. News release. Centers for Medicare & Medicaid Services; September 30, 2026. Accessed October 23, 2026. https://www.cms.gov/newsroom/press-releases/cms-finalizes-new-mandatory-drug-payment-model-deliver-lower-drug-prices-beneficiaries-original
2. PhRMA challenges CMS’ MFN policy as unlawful overreach. News release. Pharmaceutical Research and Manufacturers of America; October 7, 2026. Accessed October 23, 2026. https://phrma.org/resources/phrma-challenges-cms-mfn-policy-as-unlawful-overreach
3. Health insurance coverage in the United States: 2025. Report P60-291. U.S. Census Bureau; September 2026. Accessed October 23, 2026. https://www.census.gov/library/publications/2026/demo/p60-291.html