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Launching next year, the new CMS Innovation Center initiative—known as the GENEROUS Model—aims to align Medicaid drug prices with global standards, reduce prescription spending, and strengthen the program’s long-term sustainability through fairer state purchasing and transparent pricing rules.
The Centers for Medicare & Medicaid Services (CMS) will be launching an Innovation Center initiative next year with three goals in mind: to decrease Medicaid Rx drug spending, boost health outcomes by opening up move avenues for medication access, and bolster the Medicaid program as a whole.1
Known as the GENErating cost Reductions fOr U.S. Medicaid (GENEROUS) Model, the individual states whose Medicaid programs elect to join the pilot program will reportedly be able to buy meds at fairer, competitive prices that closely align to what is being paid in other nations.
“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,” commented 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.”
According to CMS data, the total gross Medicaid spending on prescription drugs was over $100 billion last year, representing a $10 billion increase over 2022 numbers.1
Even after one takes manufacturer rebates into account, Medicaid’s net drug spending still hit $60 billion, bringing to light an urgency for meaningful reform. The new model enables CMS to negotiate lower prices with manufacturers choose to participate, while simultaneously, states that join will be expected to follow criteria that is both standardized and transparent. By establishing uniformity, these rules are intended to give patients and providers a blueprint for consistent access.
“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 Dr. Mehmet Oz, CMS administrator. “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 officials could not stress enough that this new model is designed to make prescription drugs more affordable and accessible for Medicaid beneficiaries. As CMS Innovation Center Director Abe Sutton explained, “Drug prices in the US remain far too high. 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.”
The latest news comes after various pharma companies had agreed to invoke most-favored nation pricing, including Pfizer, who partnered with the White House. As part of the deal, it was also disclosed that Pfizer’s products will be exempt from tariffs for the next three years, contingent upon the company’s continued compliance with the agreement’s terms.2
“We are proud to join President Trump at the White House to celebrate this landmark agreement that is a win for American patients, a win for American leadership, and a win for Pfizer,” said Pfizer chairman and CEO Albert Bourla at the time. “By working closely with the Administration, we are lowering costs for patients and enabling greater investment in the U.S. biopharmaceutical ecosystem by ending the days when American families alone carried the global burden of paying for innovation. This is about putting all patients first and ensuring America remains the world’s leading engine of medical breakthroughs.”
Regarding the GENEROUS model, CMS has opened a request for applications (RFA) that invites drug manufacturers to join the initiative. The agency will also be requesting letters of intent from the state Medicaid agencies that are interested in participating. States that are interested will then have to chance to formally apply and opt in to the negotiated terms and pricing agreements that are established between CMS and approved drug manufacturers.
References
1. CMS Announces New Drug Payment Model to Strengthen Medicaid and Better Serve Vulnerable Americans. CMS.gov. November 6, 2025. Accessed November 10, 2025. https://www.cms.gov/newsroom/press-releases/cms-announces-new-drug-payment-model-strengthen-medicaid-better-serve-vulnerable-americans
2. Hollan M. Pfizer Announces Agreement with Trump Administration to Lower Prices, Join TrumpRx, and Avoid Tariffs. Pharmaceutical Executive. September 30, 2025 Accessed October 7, 2025. https://www.pharmexec.com/view/trump-announce-government-direct-patient-website-report
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