The U.S. government on Thursday unveiled a pilot program to combat skyrocketing prescription drug costs in Medicaid by pegging prices to those in other developed nations. The plan could save billions for low-income Americans and taxpayers.

The Centers for Medicare & Medicaid Services (CMS) introduced the Generating Cost Reductions for U.S. Medicaid (GENEROUS) model, a voluntary program launching in January 2026 and lasting through December 2030.

State Medicaid programs participating in GENEROUS can buy select drugs at “most-favored-nation” rates in line with those in Canada or European countries. The goal is to cut expenses and ease access to vital treatments.

Medicaid, which provides health insurance for adults and children with limited income and resources, saw gross drug spending surpass $100 billion in 2024, representing a $10 billion increase from 2022. Despite manufacturer rebates, net expenditures hit $60 billion, which CMS says underscores “the urgency for reform.”

“Thanks to President Trump’s leadership and Dr. Oz’s bold direction at CMS, we’re expanding access to affordable medicines for millions of Americans,” said Health and Human Services Secretary Robert F. Kennedy, Jr. “By bringing most-favored-nation pricing to Medicaid, we’re driving down drug costs and protecting the future of care for our most vulnerable citizens.”

The plan sees CMS negotiating lower prices with participating manufacturers, who are required to apply through a Request for Applications (RFA), first made available Thursday.

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