CMS announces voluntary “GENEROUS” Medicaid most-favored-nation drug pricing model, planned to launch in 2026

To implement the model, CMS is relying on section 1115A of the Social Security Act (SSA), which authorizes the CMS Center for Medicare and Medicaid Innovation (CMMI) to develop and test innovative payment models to reduce program expenditures while preserving or enhancing the quality of care. Section 1115A permits CMS to waive various requirements under the SSA as necessary to test models, but CMS believes no statutory waivers are necessary to test the GENEROUS model.

This model is one of the latest developments in the Trump Administration's campaign to lower U.S. prescription drug prices. At least two other CMS drug pricing models are currently under review at the Office of Management and Budget (OMB) and are expected to be implemented via rulemaking. For background on the Administration's drug pricing measures, see our May alert on the MFN Executive Order (EO) and our April alert on the Administration's EO addressing drug pricing initiatives more generally.

CMS's press release on the GENEROUS model is available here, and more information can be found on the model webpage here. CMS released a Request for Applications (RFA) for manufacturers interested in the model, available here. CMS released the initial version of the RFA on November 6, 2025 (Version 1.0), and later released an updated version on November 10, 2025 (Version 1.1). A redline between the two versions is available here. The deadline for manufacturers to apply is March 31, 2026.

How does a manufacturer participate in the CMS GENEROUS model?

• Participation in the model is voluntary for manufacturers and states alike, but manufacturers may only participate if they are already participating in the Medicaid Drug Rebate Program (MDRP) and execute additional agreements (specified below) with CMS and state Medicaid programs.
• Interested manufacturers must respond to the RFA to participate in the model. CMS expects to release the state RFA in December 2025. CMS states that the model will require that the following documents be executed by model participants:

“(1) a CMS agreement with a manufacturer regarding the negotiated Key Terms of supplemental rebate agreements [(SRAs)] that the manufacturer will offer to states to effectuate MFN pricing;

(2) a CMS agreement with participating states wherein states enter into supplemental rebate agreements aligned with those CMS-negotiated Key Terms [executed through the state plan amendment process]; and,

(3) a CMS-authorized SRA between a state and a manufacturer, reflecting CMS-negotiated Key Terms for supplemental rebates.”

• CMS also expects manufacturers that have previously reached MFN deals with the Trump Administration to participate in the model once terms are finalized, indicating that the GENEROUS model will be the pathway for implementing those commitments.

What drugs and units are covered?

• CMS states that “[m]odel drugs are limited to all the single source drugs or innovator multiple source drugs of a participating manufacturer” under all associated labeler codes that are listed in the MDRP (emphasis added). This suggests manufacturers will be required to offer MFN pricing for all of their covered outpatient drugs (CODs) if they want to participate in the GENEROUS model, rather than being able to choose to participate as to some but not all of their products.
• States, however, have flexibility to decide for which drugs they will accept MFN pricing.
  • CMS says: “States may factor in their decision whether the drug price is cheaper after other manufacturer rebates, how it compares with prices of other drugs that they cover, and the length of the agreement they have with manufacturers for supplemental rebates on another drug.”
• Supplemental rebates are applied to units under both Medicaid fee-for-service (FFS) and managed care organization (MCO) coverage when Medicaid is the primary payer for the model drug.
• Covered outpatient drugs that are included in CMMI’s Cell and Gene Therapy model are excluded from the GENEROUS model.

How will MFN net prices be calculated and operationalized?

• Calculation: “The benchmark used to calculate the MFN price for a COD (at the NDC-9 level) would be the second lowest country-specific manufacturer-reported net price, adjusted by gross domestic product per capita using a purchasing power parity method” (emphasis added). This benchmark price would be calculated by CMS (not manufacturers).
  • Country-specific prices: For each country, the manufacturer-reported net price for a COD “would be calculated at the NDC-9 level as the average net price in each country for the previous twelve-month period, after all rebates, discounts, and other price concessions provided by the manufacturer are deducted from the list price.” CMS then will report the relevant international pricing data to participating states.
  • MFN countries: The list of countries “includes G-7 countries other than the United States (United Kingdom, France, Germany, Italy, Canada, and Japan), plus Denmark and Switzerland,” and “would be stable over the course of the five-year model test period.”
• Operationalization:
  • Agreements: As noted above, participating manufacturers will enter “negotiated” agreements with CMS to make MFN pricing available via supplemental rebates on model drugs. States then will select among those manufacturer offerings and execute a CMS-approved SRA with each manufacturer as to which the state agrees to CMS’s negotiated terms, with each state retaining discretion as to which drugs to include in the agreement.
  • Rebate calculation: The MFN net price will be set as a so-called Guaranteed Net Unit Price, or GNUP, which is already a common approach used by manufacturers and states to calculate Medicaid supplemental rebate amounts. The sum of the GNUP and the statutory Medicaid unit rebate amount (URA) would be subtracted from the wholesale acquisition cost (WAC) to calculate the supplemental rebate amount for a drug in a given quarter:

    Supplemental Rebate = WAC - (GNUP + URA)

    Note that in negotiating the MFN/GNUP with the manufacturer for a given drug, CMS states that it may “make allowances in the final GNUP price . . . to account for certain unique manufacturer costs relating to the storage, handling, or distribution of the [model drug].”

  • No supplemental rebate stacking: States participating in the model may not negotiate any additional supplemental rebates on model drugs for which the state is accessing MFN pricing. Whether and how existing SRAs may be impacted under the model remains unclear.
  • CMS monitoring: CMS will monitor payment accuracy and “will share in the rebates with states by reducing the federal share of Medicaid payments,” suggesting that the full amount of the rebates paid by the manufacturer will be shared between the states and the federal government, consistent with Medicaid statutory rebates.

What are the price reporting requirements?

• Initial year (2026): Participating manufacturers must provide data to CMS to determine MFN net prices, i.e., the average net price in each specified country, no later than 30 days after the Participation Agreement goes into effect. Participating manufacturers must also submit information on any supplemental rebates that are currently in place on its products prior to the beginning of the model.
• Subsequent years: Participating manufacturers must provide such data to CMS “no later than the end of the third quarter for the preceding calendar year, meaning the average net prices for the previous twelve months must be reported by September 30th.” CMS explains that: “[F]or calendar year 2027, the average net price in each specified country needs to be reported by September 30, 2026, and for calendar year 2028, data must be reported by September 30, 2027.”
• Certification: A manufacturer's RFA submission must be certified by its CEO, CFO, or other specified individual in a manner consistent with the standard applicable to existing Medicaid pricing data submissions.

What are the coverage terms and requirements for drugs subject to MFN pricing?

• General coverage terms: CMS will negotiate standard coverage criteria with manufacturers for each of their model drugs. Participating states will use these criteria to develop their Preferred Drug Lists (PDLs) as well as the utilization management criteria for each model drug.
  • CMS states it “will ask each manufacturer interested in participating in the model to propose uniform coverage terms for the manufacturer’s CODs. These may include suggested criteria for utilization management, such as step therapy, quantity limits, and other terms for prior authorization. Manufacturers suggested criteria should reflect the current criteria that they have negotiated with the states for their CODs. Manufacturers should describe how the proposed access policy compares to the FDA-approved labeling and pivotal clinical trial inclusion criteria and provide a rationale for any differences” (emphasis added).
  • Manufacturers will provide their “suggested criteria,” but “the final coverage terms would be negotiated between CMS and the manufacturer, with state input, and would become part of the model. These criteria would be adopted by the states if they choose to access the MFN pricing of the manufacturer’s drugs” (emphasis added). In addition, states “will be able to review pricing information and key terms before they commit to joining the model.”
• MCO coverage: States will be required to include in the model drugs furnished to both Medicaid FFS and MCO beneficiaries, and must implement management, operational, and system requirements to support the model and align requirements with Medicaid MCO coverage policies.
  • CMS will provide a contract template for Medicaid MCOs and/or pharmacy benefit managers (PBMs) addressing the use of standardized coverage criteria for the model drugs.
• Coverage uniformity: CMS clarifies that multiple manufacturers may offer MFN pricing for the same drug class. If a state selects multiple products with MFN pricing in the same drug class but from different manufacturers, the state cannot disfavor one manufacturer over the other and must apply the same coverage criteria.
• Value-based rebates: CMS is silent regarding whether and to what extent manufacturers may specify value-based rebate conditions to earning the MFN-based supplemental rebates.

What are the implications for Federal Price Reporting?

• Excluded from BP and average manufacturer price (AMP) and thus would not change 340B ceiling prices. Medicaid supplemental rebates paid under CMS-approved agreements are excluded from the BP calculation under section 1927(c)(ii)(I) of the SSA and 42 C.F.R. § 447.505(c)(7) and from AMP under 42 C.F.R. § 447.504(c)(19) or (e)(9). As the 340B ceiling price is ultimately calculated using the same data, offering supplemental rebates through the model would not impact the 340B ceiling price either. In FAQs on the model webpage, CMS confirms that the rebates manufacturers provide to states under model do not change BP and therefore do not affect 340B ceiling prices as well. Medicaid rebates are also excluded from average sales price under section 1847A(c)(3) of the SSA, and CMS has historically interpreted this to include supplemental rebates as well.

What is the time period for participation in the model?

• Pre-implementation window: The model pre-implementation application period for manufacturers runs from November 10, 2025, through March 31, 2026. CMS aims to execute participation agreements with manufacturers before June 30, 2026. CMS explains that manufacturers that respond to the RFA are not obligated to become model participants.
• State onboarding: States may participate by responding to the state RFA (expected to be released in December 2025), executing a participation agreement with CMS, and entering into an SRA with the manufacturer before August 31, 2026. States may join the model after that date subject to CMS’s discretion.
• Model term: The model will be tested for five performance years, beginning on January 1, 2026, through December 31, 2030. Manufacturer and state participation agreements with CMS are for a minimum one-year term with the option to have the agreement renewed annually for up to four additional years.
• Retroactive rebates: Participating manufacturers must agree to provide MFN rebates for the drugs in the model retroactive to January 1, 2026, upon entering the program.

Other components of the model

• Comparison to existing supplemental rebate agreements and processes: The process under the model seems largely consistent with existing SRAs, including the use of GNUPs, except that under the model: (1) it will be CMS, rather than the state, that is initiating solicitations, and (2) CMS will be leading the negotiation with each manufacturer and is seeking portfolio offers rather than focusing on a particular therapeutic class(es).
• State invoicing: States must submit invoices to manufacturers within 60 days after each quarter, based on state utilization and CMS-provided GNUP and URA values.
• Manufacturer payment: Manufacturers have 37 days from the date of receiving an invoice to pay the rebates to the state, after which interest will accrue, consistent with standard MDRP rebates.
• Rebate adjustments: States must provide updated data to manufacturers as soon as possible “so adjustments can be made to the rebates that the states have invoiced to effectuate MFN pricing.”
• Record retention: States and manufacturers must retain records consistent with MDRP requirements.
• Disputes: States and manufacturers may utilize state-based dispute resolution processes outlined in the SRAs, such as the MDRP Dispute Resolution program.
• Evaluation of the model by CMS contractor: Model participants are required to participate in any evaluation activities if requested by CMS. CMS plans to “engage a contractor which would, among other responsibilities relating to the effectuation of the model, assure appropriate rebate collection by the states, as well as audit the data reported by the manufacturer to CMS to assure that they are appropriately determining the international prices.”
• Performance monitoring: CMS will measure the impact of the model on patient care and health care expenditures by examining certain trends, including “[c]hanges in Medicaid FFS and managed care prescribing patterns;” “[c]hanges in state PDLs and utilization management criteria for model drugs;” and the “[i]mpact on hospital admissions, emergency room visits, and quality or length of life.”
• Confidentiality: CMS confirms that all manufacturer proprietary trade secret information and technology will remain confidential except to the extent the manufacturer has already made the information public. The RFA includes an Appendix B where the submitting manufacturer must identify examples of proprietary and confidential information that the manufacturer believes should be protected from disclosure.

Conclusion

We will continue to monitor for updates to the GENEROUS model and other developments from CMS and the Administration related to MFN pricing policies. As always, it is important that you carefully review the model to identify all issues relevant to your organization. If you have any questions about what these developments may mean in practice, please contact any of the authors of this update or the Hogan Lovells lawyer with whom you regularly work.  

Authored by Alice Valder Curran, Melissa Bianchi, Beth Halpern, Maura Calsyn, Kathleen Peterson, Samantha Marshall, Mahmud Brifkani, Caroline Farrington, and Sydney Fay