Anti-Cannabis Coalition Appeals to Revive Medicare Hemp Lawsuit

The federal hemp program that gives Medicare providers a pathway to distribute hemp products to enrolled beneficiaries faces renewed legal pressure, as the coalition that challenged the initiative is taking the case to a higher court after a district judge threw out the suit two weeks ago.

Smart Approaches to Marijuana, biopharmaceutical company MMJ International Holdings and its subsidiaries, and a group of anti-marijuana advocacy organizations filed a notice of appeal on June 5, 2026, with the U.S. Court of Appeals for the District of Columbia Circuit. The filing asks the appellate court to reverse U.S. District Judge Trevor N. McFadden’s May 22, 2026, dismissal of Smart Approaches to Marijuana et al. v. Kennedy et al. — a case challenging the Centers for Medicare & Medicaid Services’ hemp product engagement program.

McFadden dismissed the suit on standing grounds, finding that none of the six plaintiffs had demonstrated a sufficiently concrete injury to bring the challenge. The program itself — the Substance Access Beneficiary Engagement Incentive — continues operating while the appeal is briefed. No injunction is in place, and the plaintiffs’ earlier efforts to pause the program before its April 1, 2026, launch were denied.

What the Program Does and What the Suit Challenges

The BEI runs through three CMS Innovation Center demonstration models: the ACO REACH model, the Enhancing Oncology Model, and the Long-term Enhance ACO Design model. Providers in the first two have been able to participate since April 1, 2026; the latter model is set to add the incentive on January 1, 2027.

Under the program, participating providers can furnish eligible hemp-derived products to aligned Medicare beneficiaries — up to $500 per patient per year — within a shared-savings framework. Medicare does not directly reimburse providers for the products. If the provider’s investment in hemp-derived supplementation reduces the patient’s total cost of care, the provider and CMS share in those downstream savings; if costs don’t fall, the provider absorbs the loss. Products must be oral only, with no more than 0.3 percent delta-9 THC and no more than 3 milligrams of total tetrahydrocannabinols per serving. Inhalables are excluded. A physician must document shared decision-making with the patient before any product is furnished. For earlier context on the FDA’s position on the program, see our analysis of the 2026 FDA and Medicare CBD policy.

The plaintiffs’ core legal theory — which the district court never reached on the merits — is that CMS launched the program without legally required notice-and-comment rulemaking, acted beyond its statutory authority, and created a framework that conflicts with federal drug law and agricultural spending provisions.

The Standing Arguments That Will Drive the Appeal

For the D.C. Circuit, the threshold question is standing. A plaintiff challenging a federal program in court must show concrete harm — not just policy disagreement. McFadden found none of the six plaintiffs cleared that bar.

SAM’s case for injury tracks its advocacy position: the organization argues that distributing non-FDA-approved cannabinoid products to a vulnerable senior population causes harm it has organizational standing to contest. “This fight is far from over, and we will not stand by while CMS allows for non-FDA-approved products to be given out to seniors,” SAM CEO Kevin Sabet said in the organization’s appeal announcement. Sabet also characterized the program as one that “puts American seniors at risk.”

MMJ International Holdings is pursuing a different and legally distinct standing argument. The company is developing cannabinoid-based pharmaceuticals through the FDA’s regulated drug-development framework — including a candidate for Huntington’s disease — and argues it has spent years and tens of millions of dollars complying with federal approval requirements. Its argument to the D.C. Circuit is that the district court’s standing ruling effectively penalizes companies that follow those requirements. Because MMJ has no product on the Medicare market yet, McFadden found it had no cognizable injury. MMJ argues that conclusion rewards regulatory shortcuts while locking out companies that followed the federal drug-approval pathway the program bypasses, asking the appellate court to decide whether that asymmetry constitutes actionable harm.

If the circuit reverses on standing, the case returns to the district court for full merits briefing — testing whether CMS exceeded its Innovation Center authority, skipped required public rulemaking, and built a program that conflicts with federal drug approval law.

What Comes Next

The BEI is not the only pressure point the program faces. A provision in the 2026 federal agriculture spending law, scheduled to take effect in November 2026, would tighten hemp THC limits well below what the BEI currently permits. CMS has acknowledged the conflict, saying it will update the program’s product definitions when that law takes effect. The White House has called on Congress to amend that provision and preserve access to hemp-derived CBD products — an outcome that would eliminate the compliance conflict if enacted.

SAM and MMJ are also co-plaintiffs in a parallel group of lawsuits challenging the Trump administration’s effort to move marijuana to a lower federal drug schedule. Those cases are working through the D.C. Circuit concurrently and are covered in detail in our recent report on legal challenges threatening to derail cannabis rescheduling.

The BEI dismissal and full background on the district court litigation appear in our earlier coverage of Judge McFadden’s ruling. The D.C. Circuit will now determine whether any of the six plaintiffs should have had their day in court in the first place — a decision that will either return the CMS hemp program to judicial scrutiny or close out this legal challenge for good.