CMS launches new GENEROUS model to lower Medicaid drug prices

Amid growing momentum around the US government’s most-favored-nation (MFN) pricing reforms, CMS has unveiled the five-year, voluntary GENEROUS Model for Medicaid. Launching in January 2026, the initiative will tie drug prices to international benchmarks and aims to harmonize coverage policies across participating states to improve affordability and consistency.

The US Centers for Medicare & Medicaid Services (CMS) has announced a new pilot initiative aimed at curbing prescription drug costs within the Medicaid program. The GENErating cost Reductions fOr US Medicaid (GENEROUS) Model, announced on November 6, 2025, will tie Medicaid drug prices more closely to those paid in other developed countries.

The five-year voluntary model, set to launch in January 2026, brings together state Medicaid programs and pharmaceutical manufacturers to test new approaches to drug pricing. Administered through the CMS Innovation Center, the model is intended to address growing concerns over rising drug expenditures in Medicaid, which reached an estimated US $60 billion in 2024 after rebates, about US $10 billion higher than in 2022.

According to CMS’s manufacturer request for applications, the model will calculate MFN prices based on the average net price across other G7 countries (UK, France, Germany, Italy, Canada, and Japan), plus Denmark and Switzerland, adjusted for purchasing power parity. Participating manufacturers must guarantee states a net unit price at this level by paying supplemental rebates. This structure aims to ensure Medicaid pays prices comparable to those countries while maintaining rebate transparency.

In return, CMS will negotiate standardized coverage criteria for each participating drug, which states adopting the model must apply uniformly. This move could simplify access pathways for manufacturers while providing more consistent coverage for Medicaid beneficiaries.

“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,” CMS Administrator Dr Mehmet Oz said in the press release.

Participation will be voluntary for both manufacturers and states. Drug makers must already hold rebate agreements under the Medicaid Drug Rebate Program and apply through a formal request for applications to be issued by CMS. States must submit letters of intent before formally applying, with enrolment open until August 2026.

The GENEROUS Model is designed to complement the US Administration’s recently announced MFN agreements with major pharmaceutical manufacturers, including AstraZeneca, Pfizer, EMD Serono, Eli Lilly, and Novo Nordisk. Under these agreements, the companies will align US prices with those paid in other developed markets and are expected to participate in the GENEROUS framework once final terms are confirmed. Each manufacturer will complete an RFA and negotiate coverage terms with CMS before signing supplemental rebate agreements with participating states.

The model also builds on earlier CMS Innovation Center efforts, such as the Cell and Gene Therapy Access Model, which tested new payment structures for high-cost therapies. By introducing an international reference pricing structure, CMS aims to determine whether benchmarking can reduce Medicaid spending without compromising patient access or innovation incentives.

The GENEROUS Model forms part of a broader federal effort to reform drug pricing and strengthen access across public programs, complementing initiatives such as the Medicare Drug Price Negotiation Program and the TrumpRx purchasing platform.

CMS plans to publish further technical guidance for states and manufacturers in early 2026 ahead of the model’s launch.