New Lawsuit Claims CMS Medicare Cannabis Program Undermines FDA-Approved Drug Development

A new lawsuit filed by Burke Law Group on behalf of multiple plaintiffs targets a U.S. government agency and a controversial healthcare program seeking to change the way cannabinoid products are reaching patients nationwide.

The program, dubbed the Substance Access Beneficiary Engagement Incentive (BEI), is set up by the Centers for Medicare & Medicaid Services (CMS) and would introduce certain cannabinoid consumer products into Medicare, bypassing the traditional FDA drug approval process, according to the press release.

The court filing stipulates that as long as the BEI program is active, “unvalidated cannabinoid products gain market access in the Medicare population, undermining the commercial viability of the FDA-approved products MMJ is developing.”

MMJ International Holdings, alongside other plaintiffs, claim the program works against their interests because they’ve already invested millions of dollars in the cannabinoid-based drugs’ development.

Furthermore, they argue they are already complying with the U.S. Food and Drug Administration’s drug approval pathway, which is often lengthy and costly. In contrast, this program could allow competing products to reach patients significantly faster, without the same level of regulatory requirements.

The filing argues that CMS created the BEI program without going through the required federal rulemaking process, including public notice, comment, and a full safety and legal review.

It also asks the court to stop Medicare from distributing THC-containing products under the program, claiming CMS approved items with up to 3 mg of delta-9 THC per serving. Plaintiffs say this could conflict with federal law, including a forthcoming rule that would set a 0.4 mg total THC limit per container starting in November 2026.

According to the April 24 Reply Brief filed with the court, the plaintiffs have requested the court to:

• Immediately block (enjoin) the BEI program;
• Pause the program, while the case is reviewed; and
• Allow the lawsuit to proceed despite the government’s motion to dismiss.

The plaintiffs are required to prove they are directly harmed. To that end, the brief details that MMJ is “a current competitor in the cannabinoid therapeutics market,” having invested over $10 million, holds Orphan Drug Designation, maintains a DEA Schedule I analytical laboratory registration, and holds active Investigational New Drug (IND) submissions.

The legal action comes on the heels of a recent introduction of the Marijuana Impact on Medicaid Act of 2026, a bill from a Republican senator duo that focuses on tracking how much marijuana-related healthcare is costing Medicaid.

The new piece of legislation from U.S. Senator Ted Budd and Pete Ricketts requires the Secretary of the Department of Health and Human Services to gather data on federal and state Medicaid spending. The focus is on marijuana-related inpatient and outpatient hospital care, as well as emergency room visits.