On November 6, 2025, the Centers for Medicare & Medicaid Services (CMS) announced a new Center for Medicare and Medicaid Innovation (CMMI) model to implement pricing agreements with two drug manufacturers — Pfizer and AstraZeneca — which the White House has recently announced. The Trump Administration has claimed these agreements will result in significant prescription drug cost savings for state Medicaid programs but until the announcement of the CMMI model, it had provided virtually no detail and left many unanswered questions. That made it impossible to assess whether these agreements could lower Medicaid drug costs or even potentially increase costs, as I previously wrote.
A new Request for Applications (RFA) directed to drug manufacturers for a new “GENEROUS” CMMI Model finally provides some detail about how these pricing agreements would be implemented, including how they would interact with the existing Medicaid Drug Rebate Program (MDRP). The MDRP currently ensures that Medicaid obtains the lowest prices, net of rebates, of any federal program or agency. Some key questions, however, remain unaddressed.
The GENEROUS Model. Under this CMMI model, participating drug manufacturers would provide supplemental rebates, on top of the rebates now required to be paid by drug manufacturers under the MDRP, to ensure that state Medicaid programs receive a net price equal to a Most Favored Nation (MFN) price based on average net international prices in the United Kingdom, France, Germany, Italy, Canada, Japan, Denmark, and Switzerland (adjusted for each nation’s Gross Domestic Product). In exchange, state Medicaid programs would have to agree to institute “uniform coverage terms” negotiated between CMS and participating manufacturers, such as aligned Preferred Drug Lists (PDLs), prior authorization rules, and other utilization management requirements across both fee-for-service and managed care. States would also be barred from pursuing other supplemental rebates. Participating states, however, would be able to choose which of a manufacturer’s drug products would be subject to these supplemental rebates.
Participation would be voluntary for both drug manufacturers and Medicaid programs in all states and in territories like Puerto Rico that are currently participating in the MDRP. States and manufacturers would agree to participate for at least one year, with potential annual renewals thereafter. State Medicaid programs would have until August 31, 2026 to complete three steps required by CMS: responding to a State Request for Applications, executing a participation agreement with CMS, and executing supplemental rebate agreements with participating manufacturers. Additional states could be allowed to participate after this deadline at CMS discretion. The model would begin on a rolling basis starting on January 1, 2026 and be in place for five years (through December 31, 2030).
Key Question Addressed. The biggest question about these pricing agreements was whether they would substitute for the existing rebates that manufacturers are now required to pay under the MDRP. Because these rebates are so substantial, as I have explained, replacing them with a MFN-based rebate could result in higher net prices, especially since MFN-based rebates would not incorporate inflation-related rebates under the MDRP. Moreover, as a condition of the MDRP, state Medicaid programs are subject to an open formulary protection under which nearly all FDA-approved drugs must be covered except for a very limited number of drug classes. The GENEROUS model, however, would only involve manufacturers paying additional supplemental rebates on top of the federally required rebates. As a result, the model would not undermine the MDRP and lower the current, substantial rebates required under the MDRP. It also would not weaken the current open formulary protection and reduce existing beneficiary access. To the extent that the model reduces coverage barriers like prior authorization and restrictive clinical coverage criteria, it could increase access for individuals covered by Medicaid.
Key Questions Remaining Unanswered. The most important, unanswered question is whether this GENEROUS model would actually result in significant prescription drug cost savings. CMMI only acknowledges that “there may be the potential for significant savings on some [covered outpatient drugs] if states’ net costs for [drugs] could be set at MFN pricing.” But there is no explicit guarantee to states that any supplemental rebates using MFN prices would be larger than what are currently being negotiated by states and would thereby result in lower net prices for a manufacturer’s drugs than what are now obtained by state Medicaid programs. Moreover, for drugs that have competitor drugs with similar or greater clinical effectiveness in the same drug class, the net cost for drugs in that class may end up higher if existing supplemental rebates for those competitor drugs are higher and net prices of such competitor drugs are lower. As noted, while states can continue to negotiate separate supplemental rebates for drugs not part of the GENEROUS model, they must institute uniform PDLs and less restrictive prior authorization, and utilization management requirements for drugs that are part of the model in both fee-for-service and managed care. That would likely result in non-participating manufacturers of competitor drugs substantially reducing their supplemental rebates in response, as those rebates are often provided in exchange for placement on PDLs and no or minimal prior authorization.
Moreover, as the GENEROUS RFA indicates, state participation is voluntary. As a result, another key question is whether there will be widespread participation among state Medicaid programs. It is unclear whether states will be able to receive detailed pricing information including the estimated MFN-based supplemental rebate for applicable drugs they would receive before agreeing to participate in the GENEROUS model. While a CMMI Frequently Asked Questions document indicates states “may factor in their decision whether the drug price is cheaper after other manufacturer rebates, how it compares with prices of other drugs they cover, and the length of the agreement they have with manufacturers for supplemental rebates on another drug,” there does not seem to be any explicit requirement that CMMI and manufacturers must share all relevant pricing and rebate information with states in order to fully inform state decisionmaking on whether to participate. The RFA argues that states will be encouraged to participate because it will make it easier to obtain supplemental rebates from manufacturers of high-cost brand-name drugs who are currently unwilling to provide large supplemental rebates or any supplemental rebates at all. But that is usually the case for very high cost, breakthrough “first-in-class” drugs for which states have little leverage. The lack of leverage would likely still be an issue under the GENEROUS model even with CMS negotiating on behalf of all participating states.
Another key unanswered question is whether there will be significant participation by drug manufacturers beyond those already announced by the Trump Administration. As with states, participation by manufacturers is entirely voluntary. The RFA notes that manufacturers would be encouraged to participate because they would no longer have to separately negotiate supplemental rebates and negotiate separate PDL placement, prior authorization rules, and other utilization management requirements with individual states (or multi-state purchasing pools). But that would be weighed against having to provide MFN-based rebates. If such MFN-based rebates end up being far larger than the supplemental rebates now being negotiated (as the Trump Administration is claiming), most manufacturers would likely be unwilling to participate. Manufacturers would likely participate in large numbers only if the increases in rebate amounts are modest enough and thereby more than offset by gains in drug utilization resulting from uniform PDLs and no or less prior authorization (though Trump Administration promises to separately adjust tariff rates for individual manufacturers may also play a significant role).
One other question is whether participating manufacturers would have to offer MFN-based rebates for all of their drug products or whether, like states, they could apply MFN-based rebates only to select drugs. If manufacturers can pick and choose among their drugs —for example, only applying MFN-based rebates to drugs for which they already offer very large rebates and exempting their newer, very high-cost drugs — any cost savings for state Medicaid programs would be more limited than they otherwise would be if the GENEROUS model applied to all of a manufacturer’s drugs.
Finally, there is an unanswered question about how MFN-based prices would be specifically calculated by manufacturers and how the accuracy of such data would be verified. According to the RFA, CMS will use a contractor to evaluate the model and also “audit the data reported by the manufacturer to CMS to assure they are appropriately determining the international prices” but the RFA provides no further detail. Historically, there have been serious issues where some manufacturers have been determined to be out-of-compliance with MDRP requirements and to have reported inaccurate pricing data in order to reduce their rebate liability. If the MFN-based prices end up not as low as promised as CMS provides more detail how manufacturers would specifically calculate MFN-based prices, or if manufacturers inappropriately inflate their MFN-based prices (and thereby lower the supplemental rebates they owe), that would further reduce any Medicaid prescription drug cost savings accruing to participating states.