GENEROUS (GENErating cost Reductions fOr U.S. Medicaid) Model

The GENEROUS (GENErating cost Reductions fOr U.S. Medicaid) Model aims to ensure fair and reasonable drug prices for Medicaid through CMS-led negotiations with drug manufacturers. Under the GENEROUS Model, manufacturers will provide supplemental rebates to participating states for drugs included in the model to align Medicaid net prices with what certain other countries pay.

The model will launch in January 2026 and run for five years and is voluntary for manufacturers and states. CMS has released the Request for Applications (RFA) for manufacturers interested in participating in the model.

Key Points
Problem: America pays more for prescription drugs compared to the rest of the world, which costs states and the federal government billions of dollars. Solution: Under GENEROUS, for drugs included in the model, participating drug manufacturers will offer prices based on what other select countries pay for prescription drugs covered by the Medicaid program. Outcomes: GENEROUS aims to reduce Medicaid spending for drugs included in the model and may improve access to these drugs in participating states for people with Medicaid. Strategy: GENEROUS supports the Innovation Center’s commitment to improve patients’ lives and health, while simultaneously increasing the sustainability of the Medicaid program — providing greater flexibility in state budgets to invest in other resources — through fairer drug prices and securing greater coverage of needed medications that support our most vulnerable populations.

Key Points

Problem: America pays more for prescription drugs compared to the rest of the world, which costs states and the federal government billions of dollars.
Solution: Under GENEROUS, for drugs included in the model, participating drug manufacturers will offer prices based on what other select countries pay for prescription drugs covered by the Medicaid program.
Outcomes: GENEROUS aims to reduce Medicaid spending for drugs included in the model and may improve access to these drugs in participating states for people with Medicaid.
Strategy: GENEROUS supports the Innovation Center’s commitment to improve patients’ lives and health, while simultaneously increasing the sustainability of the Medicaid program — providing greater flexibility in state budgets to invest in other resources — through fairer drug prices and securing greater coverage of needed medications that support our most vulnerable populations.

Model Details

Medicaid drug spending is significant and increasing, with net spending of $60 billion in 2024, an increase of $10 billion from 2022. To address rising costs, CMS will facilitate interested manufacturers’ offering of lower drug prices to state Medicaid agencies based on international prices for a variety of life-saving drugs in exchange for standardized coverage criteria across all participating states.

Aims

The model aims to:

Ensure prescription drugs are accessible to people with Medicaid and affordable to states, improving patient outcomes and preserving quality of care.
Lower what federal and state governments spend on prescription drugs, providing savings to state Medicaid programs and federal taxpayers over time.
Enhance Medicaid coverage of medications by CMS-led negotiations with manufacturers regarding supplemental rebates and coverage criteria.

Innovation

GENEROUS builds on the work the states have done to manage Medicaid drug costs through the Medicaid Drug Rebate Program (MDRP), in which states receive rebates from manufacturers in exchange for coverage of manufacturers’ covered outpatient drugs. The model also builds on the Cell and Gene Therapy Access Model in which CMS-led negotiations with manufacturers have extended access to innovative cell and gene therapies to people with Medicaid.

Design

Under GENEROUS:

Participating manufacturers whose applications are accepted will enter negotiated agreements with CMS to provide set pricing on their portfolio of covered outpatient drugs. Pricing to participating state Medicaid programs will be calculated based upon select international pricing data.
Under agreements with states, participating manufacturers will be invoiced by states for supplemental rebates to effectuate international prices. CMS will monitor accuracy of the payments. CMS will share in rebates with states via a reduction in the federal share of Medicaid payments.
By participating in GENEROUS, drug manufacturers whose applications are accepted will have standardized coverage criteria for their drugs in state Medicaid programs as negotiated between CMS and the manufacturer.
CMS also will seek letters of intent from state Medicaid agencies interested in being part of the model. Interested state programs will be able to review pricing information and key terms before they commit to joining the model.
Beyond the Letter of Intent, states also will have to submit a “request for application” to CMS and be able to enroll on a rolling basis in the model through August 31, 2026.

Participant Information

Frequently Asked Questions

How has drug pricing in Medicaid changed over time, and how will the model address the overall drug pricing landscape in Medicaid?
States collect rebates from drug manufacturers under the MDRP, and many states also negotiate additional supplemental rebates with drug manufacturers. These rebates help lower the net cost of drugs for Medicaid programs. However, Medicaid drug spending also continues to rise, with net spending on prescription drugs topping $60 billion in 2024, a $10 billion increase from 2022. This model will help further reduce the cost of drugs for state Medicaid programs by allowing them to access even lower international drug prices.
How will drug manufacturers benefit from participating in the model?
Participating manufacturers would offer lower prices to state Medicaid programs, which would make these drugs more affordable to states. In addition, manufacturers and CMS would negotiate suggested coverage criteria for the covered outpatient drugs. The development of these criteria would reduce a manufacturer’s burden of negotiating criteria in every state and could lead to greater access to their medications. Additionally, the manufacturer would not be required to negotiate additional supplemental rebates for covered outpatient drugs with prices similar to what other countries pay.
How does the model connect to the Administration’s recently announced agreements with drug manufacturers?
The Trump Administration has announced agreements with major pharmaceutical companies — including AstraZeneca, Pfizer, and EMD Serono — to bring American drug prices in line with the lowest paid by other developed nations. As a result of these agreements, these manufacturers will participate in the GENEROUS Model after certain terms are finalized, and state Medicaid programs will pay lower prices on drugs made by those manufacturers. The manufacturers that have entered into these agreements, plus any additional manufacturers that choose to participate in GENEROUS, would complete an RFA document and then negotiate the coverage terms for their drugs with CMS. The manufacturer would then sign a supplemental rebate agreement with each state that is interested in participating, as well as a participation agreement with CMS.
How will pricing and supplemental rebates be calculated?
Manufacturers would report to CMS the international net unit price for the covered outpatient drug and supplemental rebates would be invoiced to manufacturers by states on a quarterly basis, consistent with the calculation of the statutory Medicaid rebates.
The state would bill the manufacturer for supplemental rebates for the total units of the covered outpatient drugs paid for in that quarter for the covered outpatient drug, and the supplemental rebate amount would reflect the international pricing for the covered outpatient drug.
What flexibility do states have? Will agreements apply to all drugs?
GENEROUS is voluntary for state Medicaid agencies. In addition, states can determine for which (if any) covered outpatient drugs they would like to obtain a price similar to what other countries pay with respect to a participating manufacturer, providing additional flexibility for states to make the choices that align with their fiscal and coverage priorities. States may factor in their decision whether the drug price is cheaper after other manufacturer rebates, how it compares with prices of other drugs that they cover, and the length of the agreement they have with manufacturers for supplemental rebates on another drug.
How does GENEROUS affect the Medicaid Best Price and the 340B program?
The supplemental rebates provided to states by manufacturers under GENEROUS does not change Medicaid Best Price and therefore does not affect ceiling prices offered under the 340B Drug Discount Program. Under the MDRP, states obtain statutory rebates from manufacturers for branded covered outpatient drugs that are estimated using the calculated Medicaid Best Price, which is effectively the lowest price at which the manufacturer sells its drug in the United States to certain purchasers. Supplemental rebates do not affect the calculation of Medicaid Best Price.
What medications will be covered?
Included in the model will be the single source and innovator multiple sources covered outpatient drugs of voluntarily participating manufacturers.
What states are eligible to participate in the model?
All states and U.S. territories that participate in the MDRP are eligible to apply to participate in the model. CMS will review the state’s RFA to ensure that they have all the necessary authorizations to participate in the model.
Does this model qualify as an Advanced or MIPS Alternative Payment Model (APM)?
No, health care providers are not participants in the model and thus it does not qualify as an Advanced or MIPS APM under the Quality Payment Program.

Additional Information

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Contact the GENEROUS team at GENEROUSModel@cms.hhs.gov.
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