CMS Gives Most-Favored-Nation Pricing for Drugs a New Platform in Its Pilot “Generous Model” Program

In May 2025, President Trump issued Executive Order No. 14297, titled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” calling on the pharmaceutical industry to eliminate discrepancies in drug pricing between the United States and other advanced countries. The White House followed up on July 31, 2025, with letters urging pharmaceutical giants to stop “shifting blame and requesting policy changes that would result in billions of dollars in handouts to the industry” and offer most-favored-nation (MFN) pricing within 60 days, or face action from the federal government. Subsequently, several pharmaceutical giants entered into agreements with the administration in which pricing discrepancies were addressed, at least with regard to Medicaid, along with direct-to-consumer sales at lower prices.

In conjunction with the White House initiatives, agencies have also launched programs favoring manufacturers offering MFN pricing. For example, in August 2025, the FDA launched a new Commissioner’s National Priority Voucher (CNPV) pilot program, which promised to reduce the review time for drug applications to one to two months, down from 10 to 12 months. Criteria listed for selection included the applicant’s compliance with onshoring drug production and offering MFN pricing.

In the latest agency action to incentivize MFN pricing, the Centers for Medicare and Medicaid Services (CMS) launched a voluntary initiative called the Generating Cost Reductions for U.S. Medicaid (GENEROUS) Model. Under the GENEROUS Model, manufacturers must provide supplemental rebates to participating state Medicaid programs for covered outpatient drugs (CODs), where the rebates would align drug prices with international benchmarks. The CMS would hold centralized negotiations for key terms of the supplemental rebate agreements. Under the GENEROUS Model, state Medicaid programs may benefit from the lower prices negotiated by the CMS, while manufacturers may benefit from a centralized negotiation process for uniform pricing terms, and uniform coverage for CODs and exceptions from utilization controls across diverse state Medicaid plans.

Determination of MFN Pricing

While the administration has repeatedly called for MFN pricing, it has not articulated clearly which countries fall within that definition, or how pricing would be determined. On May 20, 2025, the Department of Health and Human Services announced that the MFN price was to be the “lowest price in an OECD country with a GDP per capita of at least 60 percent of the U.S. GDP per capita.”

For the GENEROUS Model, the CMS has proposed a smaller “country basket,” which includes six other G-7 countries: the United Kingdom, France, Germany, Italy, Canada, Japan, plus Denmark and Switzerland. Further, “[t]he 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.”

The CMS also disclosed that the companies that have already entered into agreements with the administration to offer MFN pricing will participate in the GENEROUS Model “after certain terms are finalized.”

Application and Implementation Process

Manufacturers with an active Medicaid National Drug Rebate Agreement (NDRA) are eligible to apply and, if accepted, will negotiate with the CMS to set the key terms of supplemental rebate agreements to be offered to state Medicaid programs. The key terms include standard coverage criteria and utilization management policies, such as prior authorization criteria and preferred drug list (PDL) placement. On completion of negotiations, the manufacturer and the CMS will enter into a participation agreement (PA) for the GENEROUS Model.

Following the manufacturer’s entry into the PA, the CMS will communicate the agreed-upon key terms to the states. States may review the terms before electing to participate. If a state elects to participate, it must execute its own PA with the CMS. Participating states must adopt the key terms negotiated by the CMS through a supplemental rebate agreement (SRA) with participating manufacturers. States have some flexibility to negotiate certain provisions in the SRAs, provided that revised terms are not more restrictive than the standardized access terms negotiated by the CMS. States may further determine the CODs for which to seek pricing similar to what other countries pay with respect to the participating manufacturers.

The CMS will share in the supplemental rebates received by the states through a reduction in the federal share of Medicaid payments. The agency will also monitor compliance, including the accuracy of payments made under individual SRAs.

Further, the CMS will evaluate the model’s impact on drug spending, quality of care, access to medications, and health care costs over the five-year trial period.

Takeaways

The present administration has issued several executive orders directed at the pharma industry, calling for MFN pricing and investment in domestic manufacturing capacity, among other things. The orders are silent on the practicalities of implementing the policies and did not announce rulemaking or legislative changes in support of the policies. Rather, the administration appears to be relying on private agreements with key manufacturers and initiatives by agencies to implement its policies. The GENEROUS Model offers the first substantive insight into the contours of MFN pricing policies and provides valuable takeaways for the pharmaceutical industry.

• For the first time, the CMS has provided clarity on how MFN pricing is likely to be calculated by agencies. While the MFN pricing offered is in the context of the GENEROUS Model, the fact that manufacturers that have already entered into agreements with the White House will also be part of the GENEROUS Model suggests that this pricing framework may be generally applicable to other initiatives. Notably, while the HHS had initially identified a broad range of OECD countries as possible benchmarks, the CMS’ list is much smaller and benchmarks the price to the “second lowest” rather than the lowest prices in this subset of countries.
• The framework purports to offer benefits to both state Medicaid programs and to manufacturers. State Medicaid programs potentially benefit from lower prices, indexed to the MFN. Manufacturers benefit from efficiencies, as they do not have to negotiate with individual states, and may be able to negotiate favorable placement and utilization terms that are applicable across all participating states.
• The CMS’ program offers the industry insight into how this administration is likely to move toward implementation of its policy goals. Rather than engage in sweeping rulemaking or legislative changes, it appears that the administration may seek to achieve its goals through piecemeal initiatives and direct negotiations with target manufacturers.