State Medicaid programs that choose to participate in the model will be able to purchase drugs included in the pilot at prices aligned with those paid in select other countries.
The agency said the five-year pilot, which launches in 2026, is designed around "allowing Americans to benefit from fairer, more competitive pricing."
The model will allow CMS to negotiate with participating manufacturers for lower prices, while states adopting the model will implement uniform, transparent coverage criteria, the agency said.
The launch follows the administration's earlier announcement of Medicare pricing deals with Pfizer and AstraZeneca. Novo Nordisk and Eli Lilly agreed earlier on Thursday to reduce the costs of their popular weight loss drugs. Medicare will also be able to cover the drugs for some beneficiaries.
Under the new Medicaid pilot, CMS said it will seek letters of intent from state Medicaid agencies interested in participating. States that express interest will later be able to formally apply and potentially opt in to the terms and prices CMS negotiates with participating drug manufacturers.
It's not clear immediately how deep the discounts will be. CMS said that total gross spending in Medicaid on drugs in 2024 was $100 billion, up by $10 billion from 2022.
But Medicaid already receives large rebates from pharmaceutical companies that keep the net price of prescription drugs very low, and experts have questioned whether a "most favored nation" model could end up increasing prices.
A 2021 Congressional Budget Office report found Medicaid obtained the lowest prescription drug prices compared to other federal programs and agencies, including the Department of Veterans Affairs.
According to data from the Medicaid and CHIP Payment and Access Commission (MACPAC), Medicaid rebates paid by manufacturers under the Medicaid Drug Rebate Program reduced overall gross federal and state Medicaid prescription drug spending by $53.7 billion in fiscal year 2023.
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