Medicaid Could Save from Most-Favored-Nation Drug Pricing, but the Amount is Uncertain
A group of researchers recently estimated that the Centers for Medicare & Medicaid Services’ (CMS) proposed Generating Cost Reductions for US Medicaid (GENEROUS) payment model could save the federal government $5 billion in one year, but their analysis comes with uncertainties. The GENEROUS model is intended to implement Most-Favored-Nation (MFN) prescription drug price deals within Medicaid. These deals are agreements the Trump Administration has signed with several pharmaceutical companies in which they agree to set certain drug prices at the lower prices offered in some other countries. The Administration has released limited public information about these deals, so prices and potential savings are unclear. The researchers made assumptions and estimated savings, but the results are subject to change as details emerge.
CMS launched the GENEROUS model in January of 2026, and states currently have until September 2026 to apply. The model is set to run for five years. The researchers estimated what Medicaid could have saved in one year if it had been in effect in 2025. According to their calculations, applying MFN pricing instead of the existing Medicaid rebate system could have generated over $8 billion in savings between states and the federal government. The federal government pays for roughly 65% of the Medicaid program, and thus would have retained about $5 billion of the total savings. As GENEROUS is a temporary model, policymakers could increase these federal savings by making it permanent.
However, the researchers caution that this estimate is uncertain in both directions. States could selectively apply MFN pricing and existing rebates to maximize savings, but drug manufacturers could also make their international drug prices appear higher by changing the timing of their price announcements. The researchers also noted that similar savings could be achieved by substantially increasing the current rebates that Medicaid obtains from drug manufacturers. Under statute, Medicaid already receives the “best price” among payers for prescription drugs, so the savings opportunities are smaller than in other programs such as Medicare or commercial insurance.
MFN pricing is among several ideas Congress and the administration have available to reduce prescription drug costs and achieve savings for the federal government. Acting on these reforms and making them permanent can help stabilize our fiscal situation as the national debt continues to reach unprecedented heights.
