US government announces new Medicaid drug pricing program

(Reuters) -The U.S. government on Thursday unveiled a new program to cut prescription drug costs for Medicaid patients by tying prices to those paid in other countries.

The program, called the Generous Model, will launch in 2026 and allow participating state Medicaid programs to purchase drugs at internationally aligned prices, the Centers for Medicare and Medicaid Services (CMS) said. The program is voluntary for both states and drug manufacturers.

States that choose to participate will be able to buy certain medications at prices similar to those paid in select other countries. CMS will negotiate directly with drugmakers, aiming to bring down costs, while ensuring patients still have access to essential treatments.

Medicaid is a public health insurance program, which provides coverage to low-income Americans, including children, pregnant women, elderly adults and people with disabilities.

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Total Medicaid spending on prescription drugs topped $100 billion in 2024, up $10 billion from 2022. Even after manufacturer rebates, the program spent $60 billion, underscoring the need for reform, according to CMS.

“Drug prices in the U.S. remain far too high,” said Abe Sutton, director of the CMS Innovation Center. The program aims to ensure Medicaid pays prices on par with other developed nations, he said.

CMS is now inviting drugmakers to apply to join the program and asking state Medicaid agencies to submit letters of intent. States that express interest will later be able to formally opt in to the negotiated prices and terms.

The announcement follows previous agreements between the White House and pharmaceutical companies to reduce drug prices for Americans.

(Reporting by Kamal Choudhury in Bengaluru; Editing by Shilpi Majumdar)