The U.S. Centers for Medicare & Medicaid Services (CMS) recently unveiled a new payment model demonstration designed to lower medication costs and improve outcomes among Medicaid beneficiaries, including seriously ill patient populations.
Through the new Generating Cost Reductions (GENEROUS) model, pharmaceutical manufacturers will provide reduced supplemental rebates on drugs to participating state Medicaid programs. Recently announced by CMS Innovation Center, the GENEROUS model launches January 2026 and will run for five years.
The GENEROUS payment model demonstration allows for prescription drugs to be offered to Medicaid beneficiaries at lowered costs based on prices in certain other countries.
The new payment demonstration has a triple aim to improve and sustain access among patients and families in critical need, according to Abe Sutton, director of the CMS Innovation Center.
“Rising drug costs [are] a major issue for America,” Sutton said in an announcement. “GENEROUS will partner with manufacturers to lower drug costs to what other countries pay. We’re bringing fairer drug prices, increased sustainability of the Medicaid program and more flexibility in state budgets.Together we can tackle growing drug prices and ensure that our country’s most vulnerable populations continue to access the care they need.”
Drug costs in the United States are 3x higher compared to certain other countries, according to CMS. Medication expenditures reached more than $60 billion in 2024, representing a roughly $10 billion year-over-year increase, the agency reported.
Among the goals of the GENEROUS models is to reduce medication costs and help lower federal and state health care expenditures, according to CMS.
Through the GENEROUS payment demonstration, drug manufacturers will offer lower prices to state Medicaid programs based on average international rates among a variety of medications. In exchange for offering reduced rates on outpatient drugs, the manufacturers will receive standardized coverage criteria across all participating states.
Through the model, pharmaceutical manufacturers will report to CMS the international net unit price for a covered outpatient drug. Supplemental rebates will be invoiced to the manufacturers by participating states on a quarterly basis, which are consistent with the calculation of the statutory Medicaid rebates.
All territories in the United States that participate in the Medicaid Drug Rebate Program (MDRP) program are eligible to enroll in the GENEROUS model.
CMS has released a Request for Applications (RFA) for pharmaceutical manufacturers interested in participating in the GENEROUS payment model demonstration. Participating manufacturers thus far include AstraZeneca (Nasdq: AZN), Pfizer (NYSE: PFE) and EMD Serono, part of the Germany-based science and technology company Merck KGaA.
