CMS Announces New Drug Payment Model to Strengthen Medicaid and Better Serve Vulnerable Americans

The Centers for Medicare & Medicaid Services (CMS) is tackling high drug prices and protecting the American taxpayers through a landmark Innovation Center initiative designed to lower prescription drug spending in Medicaid, improve health outcomes by increasing access to critical medications, and strengthen the Medicaid program overall. State Medicaid programs that choose to participate in the GENErating cost Reductions fOr U.S. (GENEROUS) Medicaid Model will be able to purchase drugs included in the pilot at prices aligned with those paid in select other countries, allowing Americans to benefit from fairer, more competitive pricing.

“Thanks to President Trump’s leadership and Dr. Oz’s bold direction at CMS, we’re expanding access to affordable medicines for millions of Americans,” said Health and Human Services Secretary Robert F. Kennedy, Jr. “By bringing most-favored-nation pricing to Medicaid, we’re driving down drug costs and protecting the future of care for our most vulnerable citizens.”

Total prescription drug spending in Medicaid exceeded $100 billion and $60 billion after existing rebates in 2024, a $10 billion increase from 2022, underscoring the urgency for reform. Launching in 2026, the model allows CMS to negotiate with participating manufacturers for lower prices, while states adopting the model will implement uniform, transparent coverage criteria. These consistent standards will give patients and providers predictable access across participating states.

“Under the leadership of President Trump and Secretary Kennedy, CMS is making a historic commitment to driving down the cost of drug prices and ensuring Americans have access to life-saving medications,” said CMS Administrator Dr. Mehmet Oz. “The GENEROUS Model will help ensure state Medicaid programs are paying a fair and reasonable price for prescription drugs—furthering our efforts to preserve funds for our most vulnerable.”

“Drug prices in the U.S. remain far too high,” said CMS Innovation Center Director Abe Sutton. “GENEROUS aims to ensure that Medicaid pricing will be on par with those in other developed nations. My hope is that all eligible Medicaid programs choose to participate in the pilot to help ensure that their Medicaid dollars can go further to support those in need.”

This announcement follows successful agreements between the White House and pharmaceutical companies to lower drug prices for Americans to prices that other countries pay.

In announcing the pilot, CMS will release a Request for Applications (RFA) later this fall for drug manufacturers interested in participating in the GENEROUS Model. The agency will also seek letters of intent from state Medicaid agencies interested in participating. States that express interest will later have the opportunity to formally apply and potentially opt in to the terms and prices CMS negotiates with participating drug manufacturers.

For more information on the GENEROUS Model, visit: https://www.cms.gov/newsroom/press-releases/cms-announces-new-drug-payment-model-strengthen-medicaid-better-serve-vulnerable-americans.