The Trump administration said Friday that every state Medicaid program, along with the District of Columbia and Puerto Rico, has applied to join a new federal effort to bring down what Medicaid pays for prescription drugs. But the Centers for Medicare & Medicaid Services’ own release draws a distinction: applying is not the same as signing on.
According to a CMS press release issued Sept. 18, “all 50 states, plus the District of Columbia and Puerto Rico, have applied to participate” in the initiative, while “forty states and Puerto Rico have already signed agreements to participate.” The remaining states have until Sept. 30 to finalize their paperwork. A White House fact sheet released the same day described the announcement more broadly, saying “all 50 States’ Medicaid programs will benefit” from the arrangement — language that does not distinguish between states that have applied and those that have actually signed.
How the model works
The program is called GENEROUS — GENErating cost Reductions fOr U.S. Medicaid — and it is run through the CMS Innovation Center. It is voluntary for both drugmakers and states, launched in January 2026, and is scheduled to run for five years, according to CMS.
Under the model, participating manufacturers agree to sell certain outpatient drugs to participating state Medicaid programs at “most-favored-nation” pricing, meaning prices aligned with what “certain other countries pay,” per CMS’s description. States invoice manufacturers for supplemental rebates — a payment back from the drugmaker to the state after the drug is bought, which lowers the net price to that international benchmark — and CMS will monitor pricing accuracy. CMS shares in the resulting savings with states by reducing the federal government’s share of Medicaid payments.
The savings claim, and the caveats around it
The administration is citing a projected $64.3 billion in savings over the next 10 years, split between roughly $36.6 billion for the federal government and $27.6 billion for states, according to the White House fact sheet, which attributes the estimate to the Council of Economic Advisers. That figure has not been independently scored — there is no Congressional Budget Office estimate cited in the CMS or White House materials — and it is the administration’s own projection rather than a verified outcome.
KFF, the nonpartisan health policy research organization, flagged two caveats in an analysis published in May, before Friday’s announcement. First, “it is unclear what assumptions were made” to arrive at the $64.3 billion figure — a figure that, by KFF’s own arithmetic, would average $6.43 billion a year, or approximately 14% of annual Medicaid prescription drug spending. Second, Medicaid already extracts substantial rebates from drug manufacturers through existing federal law: rebates “reduced gross Medicaid spending on prescription drugs by 53% on average from FY 2019 to FY 2024,” KFF found, which the organization said is “likely limiting the impact” of any additional most-favored-nation pricing layered on top.
What changes for people on Medicaid — and what doesn’t
For Medicaid enrollees themselves, the model does not change what they pay at the pharmacy counter. KFF notes that “while these models aim to address high drug costs for the Medicaid program, they do not affect out-of-pocket costs for Medicaid enrollees, which are limited to nominal amounts under federal law.” The savings the administration is promoting are budgetary — they flow to state and federal treasuries, not to patients’ wallets directly.
There is a tradeoff, however. Under the model, CMS and participating manufacturers will also negotiate uniform coverage criteria that states must adopt to access the supplemental rebates for a given drug, according to KFF’s review of the model. Those criteria can include utilization controls such as prior authorization — meaning the plan must approve a drug before it is covered — or step therapy, meaning trying a different drug first. Some enrollees could face those extra steps before a covered drug is dispensed.
CMS Innovation Center Director Abe Sutton said in the release, “By reducing even a fraction of drug spending in Medicaid, GENEROUS allows states to invest more in education, infrastructure, and other ways to support Americans with Medicaid.” HHS Secretary Robert F. Kennedy Jr. said in the same release, “Americans should pay the same low prices for prescription drugs that other countries pay.” CMS Administrator Dr. Mehmet Oz said the model means “Medicaid programs will get the best possible price for drugs, delivering better value for taxpayers and freeing up funds to give vulnerable Americans the high-quality care they deserve.”
What it means for you
- If you’re on Medicaid, your copay or out-of-pocket cost at the pharmacy is not expected to change — those costs are already capped by federal law.
- Your state’s Medicaid program could add prior authorization or step-therapy requirements for some drugs as part of adopting the model’s uniform coverage criteria.
- The projected savings — $64.3 billion over 10 years — are an administration estimate, not an independently verified score, and the money is intended for government budgets, not direct payments to enrollees.
What’s next
States that have applied but not yet signed have until Sept. 30 to finalize their agreements with CMS. CMS’s announcement did not name the states that have signed.