Judge Hears Landmark Hemp-Marijuana Challenge to Medicare Medicaid Reimbursing Payment Program
Oral argument heard Friday, May 1, 2026 in Smart Approaches to Marijuana v. Kennedy — with Ilya Shapiro arguing for plaintiffs and Matthew Zorn for the government — centered on whether CMS had authority to create a new physician reimbursement incentive for clinically unvalidated hemp derived products covering up to $500 per Medicare beneficiary per year without notice-and-comment rule making, public input, or FDA involvement. The court signaled a ruling is expected soon.
WASHINGTON, DC / ACCESS Newswire / May 2, 2026 / A federal district court judge in Washington, D.C. signaled significant concern Friday over whether the Centers for Medicare & Medicaid Services (CMS) exceeded its statutory authority when it launched a hemp-marijuana incentive program reimbursing cannabinoid products for Medicare beneficiaries without public rule making or FDA involvement. The program took effect on April 1, 2026.
The challenge, Smart Approaches to Marijuana v. Kennedy, Civil Action No. 1:26-cv-01081, targets the CMS Substance Access Beneficiary Engagement Incentive (BEI) – a government payment model component under NIH allowing participating organizations to furnish hemp-derived cannabinoid products and receive up to $500 per beneficiary per year through the CMS Innovation Center shared-savings structures.
During oral argument, the court emphasized four separate times that any decision issued must withstand appellate review – language courtroom observers interpreted as signaling the judge is actively evaluating a procedural path allowing the case to proceed rather than dismissing it under the Innovation Center statute’s jurisdictional shield.
A ruling is expected soon.
MMJ International Holdings’ FDA Pipeline Emerges as Central Standing Issue
A key portion of Friday’s argument focused on whether MMJ International Holdings, Inc., a clinical-stage cannabinoid pharmaceutical developer with two active Investigational New Drug applications and FDA Orphan Drug Designation and a final dose form soft gel capsule for Huntington’s disease, qualifies as a directly affected market participant under federal administrative law.
Government counsel argued the company lacks standing because it does not yet have an FDA-approved product on the market.
Plaintiffs’ counsel responded that MMJ’s development record includes:
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FDA Orphan Drug Designation
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two active IND programs
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defined botanical dosage formulation
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stability program development
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regulatory reliance on the FDA Botanical Drug Development pathway
The court returned repeatedly to the question:
Does MMJ have a product?
That inquiry goes directly to whether pipeline pharmaceutical developers can challenge federal reimbursement-adjacent policy shifts that affect therapeutic categories still moving through the FDA approval process.
Recognition of pipeline injury in this context would represent a meaningful precedent for clinical stage drug developers across multiple therapeutic areas.
Case Tests Whether CMS Can Support Cannabinoid Access Outside FDA Approval Channels
The BEI operates within three CMS Innovation Center demonstration models:
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ACO REACH
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Enhancing Oncology Model (EOM)
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Long-Term Enhanced ACO Design (LEAD)
Participating organizations may furnish eligible hemp derived cannabinoid products to aligned Medicare beneficiaries following documented shared decision making and medication review.
Medicare does not directly reimburse the products themselves, but furnishing occurs within Innovation Center shared savings structures funded through federal program dollars.
Plaintiffs argue the agency created a new federally supported cannabinoid furnishing pathway for medically complex populations without notice-and-comment rule making, without FDA validation, and without independent clinical review prior to implementation.
Why the Outcome Matters to Investors in Cannabinoid Drug Development
The case represents more than a dispute over a single CMS demonstration model component.
It tests whether federal healthcare payment structures may:
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support cannabinoid furnishing outside FDA approval pathways
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shift therapeutic adoption incentives ahead of clinical validation
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affect market expectations for IND-stage botanical drug developers
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influence capital allocation decisions across cannabinoid therapeutics
For companies pursuing FDA-validated cannabinoid medicines – including MMJ International Holdings – the decision could help define whether federal reimbursement policy remains aligned with the traditional approval-before-coverage framework that governs pharmaceutical development.
Court Signals Decision Coming Soon
During argument, the court indicated a ruling would be forthcoming shortly.
If the case proceeds beyond dismissal, it would mark the first time a federal court has permitted a procedural APA challenge to a CMS Innovation Center model component to move forward, potentially defining new limits on how demonstration authority interacts with federal drug-approval policy.
About MMJ International Holdings, Inc.
MMJ International Holdings, Inc. is a clinical-stage biopharmaceutical company developing cannabinoid-based therapeutics for serious neurological disorders including Huntington’s disease and multiple sclerosis. The company holds FDA Orphan Drug Designation for its Huntington’s disease program and maintains two active Investigational New Drug applications with the U.S. Food and Drug Administration.
CONTACT:
Madison Hisey
MHisey@mmjih.com
203-231-8583
SOURCE: MMJ International Holdings
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