CMS is launching a pilot program aimed at lowering prescription drug costs in Medicaid by aligning prices with those paid in other developed countries. The program is set to begin in January.

“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 Mehmet Oz, MD, said in a Nov. 6 news release. “The Generous model will help ensure state Medicaid programs are paying a fair and reasonable price for prescription drugs— furthering our efforts to preserve funds for our most vulnerable.”

Eight things to know:

1. The program allows participating drug manufacturers to offer Medicaid programs drug prices similar to those in select other countries, such as those in Europe or Canada. This “most-favored-nation” pricing model aims to curb the high cost of medications in the U.S., according to the agency.

2. CMS said the pilot targets rapidly rising Medicaid drug spending. In 2024, gross Medicaid spending on prescription drugs exceeded $100 billion, with net spending at $60 billion after manufacturer rebates. The program is designed to reduce this burden on state and federal budgets.

3. Participation is voluntary. Drug manufacturers must submit applications and negotiate pricing agreements with CMS. States must submit letters of intent followed by formal applications to join the model and receive the discounted pricing. States that opt into the model must implement uniform, transparent coverage criteria for drugs in the program to ensure consistent access for patients and predictability for providers.

“Generous aims to ensure that Medicaid pricing will be on par with those in other developed nations,” CMS Innovation Center Director Abe 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.”

4. CMS said it will negotiate prices with participating manufacturers, calculate rebates and ensure accuracy in payments. States will invoice drugmakers for supplemental rebates to bring costs in line with the international benchmarks.

5. The initiative builds on other CMS efforts such as the Medicaid Drug Rebate Program and the Cell and Gene Therapy Access Model, both of which seek to improve affordability and access to breakthrough treatments for vulnerable populations.

6. The five-year model begins in January 2026 and concludes in December 2030. States can apply to join on a rolling basis through August 31, 2026.

7. In 2026, Medicare will also cover weight-loss drugs for the first time under a separate pricing agreement with Eli Lilly and Novo Nordisk. Drugs including Ozempic, Wegovy, Mounjaro and Zepbound will be available for $245 per month, with patients paying a $50 copay. State Medicaid programs will also have access to the same pricing.

8. The agreement applies most-favored-nation pricing to drugs for obesity, diabetes and related conditions, and includes commitments from manufacturers to repatriate foreign profits, expand U.S. manufacturing, and extend discount pricing across all state Medicaid programs.

Click here for more information on the Generous program.