A pilot program aimed at reducing Medicaid drug spending has limitations, according to a multi-institutional research team including faculty from Weill Cornell Medicine.
Launched November 2025, the GENEROUS (GENErating cost Reductions fOr U.S. Medicaid) program asks drug manufacturers to voluntarily reduce Medicaid’s prices to those paid by a group of seven peer nations including Canada, France, and the United Kingdom — a model known as Most Favored Nation pricing. States would then decide whether or not to accept the Most Favored Nation prices. In a perspective published on May 2 in The New England Journal of Medicine, Dr. Pragya Kakani, an assistant professor of population sciences at Weill Cornell Medicine, and her colleagues share the potential benefits and drawbacks of GENEROUS.
Dr. Pragya Kakani
The program has some promise. “There is potential value to having the federal government negotiate on behalf of Medicaid, instead of having those negotiations happen state by state,” Dr. Kakani said. A centralized authority could do more to innovate in drug pricing negotiations and contracts, which can be hard for individual states to do alone, and might have more leverage.
But the researchers argue that Most Favored Nation pricing in Medicaid is not the best way to implement centralized Medicaid drug price negotiations. Prices paid in other countries may not be a good benchmark. Additionally, Medicaid already receives uniquely low prices relative to other payers in the United States because of statutory discounts that manufacturers must provide to the program. As a result, international drug prices may not be much lower or could be higher than the current Medicaid price for many drugs. Any savings may also be further reduced if manufacturers fail to report all discounts offered in international markets or strategically increase prices or delay launches in other countries.
The researchers argue that the design of the GENEROUS pilot will make it difficult to offer lessons for future policymakers. Participation is voluntary for manufacturers. But several manufacturers have reported receiving exemptions from tariffs and Most Favored Nation pricing models in Medicare in exchange for participating in GENEROUS, making it unclear how voluntary the program is in practice.
A better approach, Dr. Kakani and her colleagues said, would be to harness GENEROUS’s promise of centralized negotiations to inspire creative drug pricing models, such as the subscription-based model Louisiana and Washington negotiated for Hepatitis C drugs. These medications, which became available in 2013, cure most patients and are generally cost-effective, but cost tens of thousands of dollars per patient up front. The subscription-type plans provide the states fixed annual fees in exchange for access to the drugs.
The authors said it would be helpful to have the Centers for Medicare and Medicaid Services (CMS) assist in designing such contracts, which might be complex for many states to manage on their own. Separating prices from an international benchmark would also allow federal authorities to better set prices to align with value, they said.
“Having CMS assist states in Medicaid drug price negotiations makes sense, but we think tying those negotiations to Most Favored Nation prices is not the best long-term approach,” Dr. Kakani said. “We hope that CMS instead moves towards a more flexible and value-based approach to Medicaid drug pricing in the future.”
