On Thursday, November 6, the Centers for Medicare & Medicaid Services (CMS) announced a new drug payment model aimed at strengthening Medicaid. The new model, called the GENEROUS (GENErating cost Reductions for U.S. Medicaid) Model, is expected to lead to reasonable drug prices for Medicaid through negotiations between CMS and drug manufacturers.

Under the GENEROUS Model, manufacturers will provide supplemental rebates to participating states for drugs included in the model, aligning Medicaid net prices with those paid by certain other countries, as explained by CMS. This would allow Americans to benefit from fairer and competitive prices.

CMS reported that total gross Medicaid spending on prescription drugs surpassed $100 billion in 2024, marking a $10 billion increase from 2022. After accounting for manufacturer rebates, net Medicaid drug spending remained at $60 billion.

The model is set to launch in January 2026 and will operate for five years. Participation is voluntary for manufacturers and states. CMS has issued the Request for Applications (RFA) to invite interested manufacturers to join the program.