CMS Announces New Medicaid Drug Payment Model

The Centers for Medicare & Medicaid Services (CMS) announced a new Medicaid drug payment model on Nov. 6 to lower Medicaid drug prices through CMS-led negotiations with drug manufacturers. The GENEROUS model (GENErating cost Reductions for U.S. Medicaid) applies most-favored-nation pricing policies to lower drug prices to those charged to other wealthy nations.

Under the model, drug manufacturers will enter negotiated agreements with CMS to provide set pricing on their covered outpatient drugs. Pricing will be calculated based on select international pricing data. The manufacturers will then be invoiced by states for supplemental rebates on a quarterly basis. States will be able to determine which covered outpatient drugs they purchase under this model.

The supplemental rebates provided to states by manufacturers under the GENEROUS model do not change Medicaid Best Price and therefore do not affect ceiling prices offered under the 340B program.

Interested states will be able to review pricing information and key terms before they commit to joining the model. States will need to submit a letter of intent to CMS and eventually complete a request for application (RFA). States can enroll in the model through Aug. 31, 2026.

States that participate in the Medicaid Drug Rebate Program (MDRP) and secure CMS authorization to enter the necessary supplemental rebate agreements (via the state plan amendment process) will be eligible to participate in the model. Drug manufacturers must complete a RFA and have an active rebate agreement in the MDRP.

GENEROUS will launch in January 2026, run for five years, and is voluntary for manufacturers and states.

Contact Policy Manager Julie Kozminski at [email protected] or 202.585.0113 with questions.