WASHINGTON — Forty states and Puerto Rico have signed agreements to participate in a new Medicaid prescription-drug pricing model, while all 50 states, the District of Columbia and Puerto Rico have applied, the Centers for Medicare & Medicaid Services said Friday. The agency estimates the program could save taxpayers $5.2 billion annually, making the nationwide response a consequential expansion of a five-year effort to link selected Medicaid drug prices to prices paid abroad.
The announcement converts what had been advance reporting into an official enrollment milestone, but it does not mean every jurisdiction has completed participation. The 10 states that have not yet signed, along with any other unfinished applicants, have until Sept. 30 to finalize agreements; CMS said every state program, Washington, D.C., and Puerto Rico submitted an application.
How the model works
The program, formally named the GENErating cost Reductions fOr U.S. Medicaid Model, or GENEROUS, began in January and is scheduled to run for five years. Under the model details, participating manufacturers agree to make selected outpatient drugs available at net prices calculated from what certain other countries pay, while states use supplemental rebates to reduce their effective cost.
The process operates through rebates rather than a federally imposed retail price. States invoice participating drugmakers quarterly, CMS monitors the pricing calculations, and the federal government shares in the rebates through reductions in its share of Medicaid payments. Participating states may decide which eligible drugs to include, and manufacturers receive standardized coverage criteria instead of negotiating separate rules with every state.
CMS says net Medicaid prescription-drug spending reached $60 billion in 2024, up $10 billion from 2022. The agency says lower prices could preserve access to medicines while freeing state and federal funds for other services; whether those results materialize will depend on which products states select, how the international benchmarks compare with existing rebates and how many pending agreements are completed.
Large projected savings, limited public detail
A separate administration estimate cited by Reuters projects $27.6 billion in state savings and $36.6 billion in federal savings over a decade. Reuters reported that more than two dozen manufacturers have reached pricing agreements with the administration, including Pfizer, Eli Lilly and Novo Nordisk, although the model remains voluntary for both states and drugmakers.
The projections require caution because the underlying manufacturer contracts and many product-level prices are not public. The Associated Press reported that Medicaid beneficiaries generally already pay only nominal prescription copayments, so the most immediate financial effect would fall on state and federal budgets rather than uniformly lowering what patients pay at the pharmacy counter.
Kathy Hempstead, a senior policy adviser at the Robert Wood Johnson Foundation, told the AP that more granular data are needed to evaluate the savings claims and determine what Congress could codify. Drugmakers have also argued that international reference pricing could reduce investment in future treatments, while the administration says the approach will expand access and correct the gap between U.S. and overseas prices.
What happens next
CMS must now complete the remaining state agreements and the state-plan approvals needed to administer supplemental rebates. State agencies also must align applicable coverage rules with Medicaid managed-care organizations, and each state must compare the new prices with rebates it already receives before choosing which drugs to place in the model.
The confirmed development is therefore nationwide willingness to enter the program, not a guarantee that every drug price or every beneficiary’s costs will fall. The first measurable test will come after the Sept. 30 deadline, when the final roster, covered medicines and implemented rebate terms show how much of the projected savings can actually be delivered.
