The Center for Medicare and Medicaid Innovation (CMMI) will begin a voluntary, 5-year payment model in January called Generating Cost Reductions for U.S. Medicaid, or GENEROUS, under which state Medicaid programs will be able to buy drugs included in the pilot program at prices that align with what other countries pay.
According to CMS, total gross Medicaid spending on prescription drugs in 2024 exceeded $100 billion, up $10 billion from just two years earlier. Even after manufacturer rebates were collected, net Medicaid spending was still $60 billion, the agency noted.
The GENEROUS model will allow CMS to negotiate lower prices on outpatient drugs with participating manufacturers. States that adopt the payment model must implement “uniform, transparent coverage criteria,” CMS said in a press release, adding that the consistent standards would “give patients and providers predictable access across participating states.”
Manufacturers will receive invoices from participating states for supplemental rebates to align with international prices. CMS will receive a share of rebates through lower federal spending on Medicaid programs.
CMS released a request for applications for drug manufacturers interested in participating in the model. Along with negotiation prices with the manufacturers, CMS will calculate rebates and ensure payments are accurate.
The regulator is also seeking letters of intent from interested state Medicaid agencies. Those that express an interest will have the opportunity to review pricing information and key terms before committing to participate in the model.
States that decide they want to participate in GENEROUS will need to submit a request for application and be able to enroll on a rolling basis through Aug. 31, 2026, CMS noted.
Additional details about the model and a link to the request for applications can be found here.
OUR TAKE:
Since the end of September, Pfizer, AstraZeneca, Eli Lilly, and Novo Nordisk have entered into most-favored-nation (MFN) pricing agreements with the White House. In return for offering significant discounts on drugs sold directly to consumers through the TrumpRx platform, the manufacturers are exempt from certain tariffs for three years.
All four drug companies were among the 17 drugmakers who were given 60 days, as of July 31, to take steps to match MFN prices. One of the steps outlined in the notice the White House sent to the drugmakers was “to provide MFN prices to every single Medicaid patient.”
Participating in the GENEROUS model would, presumably, fulfill that step for the companies that have yet to reach a separate agreement with the White House.
Dr. Mehmet Oz, CMS’ administrator, said in the announcement about the new model that GENEROUS “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.”
While CMS may be trying to preserve funds for the country’s most vulnerable, stakeholders across the health care industry are attempting to prepare for cuts to Medicaid that were included in the reconciliation bill Congress passed this summer. Those cuts will be the deepest in the safety-net program’s history.
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Editor’s note:
The news brief above was provided by Darwin Research Group.
Republished with permission.