U.S. Government Unveils Medicaid Drug Pricing Overhaul to Lower Drug Costs

(The Epoch Times)—The U.S. government on Thursday unveiled a pilot program to combat skyrocketing prescription drug costs in Medicaid by pegging prices to those in other developed nations. The plan could save billions for low-income Americans and taxpayers.

The Centers for Medicare & Medicaid Services (CMS) introduced the Generating Cost Reductions for U.S. Medicaid (GENEROUS) model, a voluntary program launching in January 2026 and lasting through December 2030.

State Medicaid programs participating in GENEROUS can buy select drugs at “most-favored-nation” rates in line with those in Canada or European countries. The goal is to cut expenses and ease access to vital treatments.

Medicaid, which provides health insurance for adults and children with limited income and resources, saw gross drug spending surpass $100 billion in 2024, representing a $10 billion increase from 2022. Despite manufacturer rebates, net expenditures hit $60 billion, which CMS says underscores “the urgency for reform.”

“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,” said 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.”

The plan sees CMS negotiating lower prices with participating manufacturers, who are required to apply through a Request for Applications (RFA), first made available Thursday.

Interested states submit letters of intent and then formal applications on a rolling basis through Aug. 31, 2026. States must enforce uniform, transparent coverage rules to provide consistent patient and provider access across state borders.

“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,” CMS Administrator Dr. Mehmet Oz said, highlighting that the model will help ensure state Medicaid programs pay fair and reasonable prices for prescription drugs.

CMS Innovation Center Director Abe Sutton said drug prices in the United States remain too high.

“GENEROUS aims to ensure that Medicaid pricing will be on par with those in other developed nations,” Sutton said. “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 goal of GENEROUS is similar to existing CMS programs, such as the Medicaid Drug Rebate Program and the Cell and Gene Therapy Access Model. All of these programs use rebates and novel payment arrangements for costs and to improve patient access.