Republican governors and the Trump administration both suffered a serious setback on Friday when a federal judge blocked Kentucky's version of Medicaid work requirements from taking effect.

Why it matters: Work requirements are among the most significant changes the Trump administration has made so far in health policy. The new rules are also a critical part of conservatives' effort to frame Medicaid as a welfare program.

The catch: That's exactly why the policy ran into trouble in court.

Driving the news: U.S. District Judge James Boasberg ruled Friday that the Health and Human Services Department had not sufficiently demonstrated that work requirements would further Medicaid's goals as a health care program.

• That's a requirement of the waiver process under which HHS has been approving work requirements.
• "The Secretary never once mentions the estimated 95,000 people who would lose coverage, which gives the Court little reason to think that he seriously grappled with the bottomline impact on healthcare," Boasberg wrote.

What to watch: Boasberg's ruling only applies to Kentucky, not the other states where HHS has approved work requirements. But this will not be the last legal challenge, and if more judges follow Boasberg's lead, the administration's effort to redefine Medicaid could end up backfiring.

• In Kentucky, Gov. Matt Bevin has said he will back out of the Medicaid expansion entirely if he ultimately loses this litigation.
• In the meantime, Boasberg gave HHS another chance to come back with a stronger justification for the new rules.

Meanwhile:

• Maine Gov. Paul LePage has, unsurprisingly, vetoed the latest effort to implement the state's expansion, which voters approved last year.
• Republicans in Idaho are hoping to formally cement the party's opposition to an upcoming ballot initiative on Medicaid expansion.
• The Tennesseean asks why Tennessee has not joined the expansion ranks.

The Trump administration is considering even more cuts to Affordable Care Act enrollment outreach, The Hill reports.

• Federal funding for “navigators,” who help people make sense of their coverage options, dropped from $63 million for 2017 to $36 million for 2018. And the administration may cut all the way down to $10 million for next year, per The Hill.

Between the lines: ACA enrollment dipped only slightly this year despite the cut to navigator funding, which was only part of a broader rollback of federal outreach efforts.

• Democrats see all of this as sabotage, while the administration argues it has simply found a more cost-effective way to deliver basically the same results as the Obama administration.

Emergency rooms are facing severe shortages of commonly used drugs, in part because of problems at Pfizer plants, The New York Times reports.

The details: Shortages of pain medications like morphine are especially severe.

• Pfizer is the country's largest manufacturer of generic injectable drugs, and these shortages have gotten worse as the Food and Drug Administration uncovered serious safety concerns at multiple Pfizer facilities.
• The FDA has loosened some of its restrictions in the face of growing shortages, allowing Pfizer to sell some products that normally would have to be recalled.

The issue: These drugs' low profit margins are part of the reason more companies don't manufacture them, FDA Commissioner Scott Gottlieb told the Times.

• “We are still in the position of trying to put a Band-Aid on a market that fundamentally hasn’t changed,” he said. “Today it’s one drug, tomorrow is going to be another drug. We’ve got to think of something more holistic and comprehensive.”

Health and Human Services Secretary Alex Azar has said a couple of times now that some drug companies wanted to voluntarily lower their prices, but have faced resistance from pharmacy benefit managers.

The big question: Democratic Sens. Elizabeth Warren and Tina Smith want to know whether that’s true.

The latest: Warren and Smith sent letters late last week to nine PBMs and drug distributors, asking them whether any drugmakers have tried to pursue price cuts, and how they responded.

What they’re saying: “If they are true, these allegations suggest that PBMs and drug distributors are acting to maintain high list prices in order to maintain high profit margins, potentially raising antitrust concerns,” the letters state.

• “In addition, if PBMs were acting to keep drug prices high, it would directly contradict the public statements that PBMs have made about their actions and their interest in securing lower list prices from drug companies.”

Go deeper: How PBMs can benefit from high list prices.

• The Washington Post rounds up states' efforts to stabilize their own ACA insurance markets, including reinsurance programs and state-level individual mandates.
• A not-insignificant number of HHS employees have spread conspiracy theories and/or echoed President Trump's political attacks on their personal Twitter accounts, Politico reports.
• Most doctors who prescribed Acthar Gel received payments from its manufacturer, as part of a marketing push that helped drive a 10-fold increasing in Medicare spending on the drug, according to an investigation published in the Journal of the American Medical Association.
• A federal judge sided with the Federal Trade Commission in a case against AbbVie, ruling that the drugmaker "used sham litigation to illegally maintain its monopoly over the testosterone replacement drug Androgel" and ordering it to pay $448 million in penalties.