Forty states and Puerto Rico have signed agreements to participate in the “Generous Model,” a new Medicaid drug payment initiative designed to reduce prescription drug costs by linking prices to those paid by other developed countries.

The Centers for Medicare & Medicaid Services (CMS) announced Sept. 18 that 40 states and Puerto Rico had signed agreements to participate in the Medicaid drug payment model.

The five-year model, which launched in January, aims to allow participating Medicaid programs to obtain certain outpatient prescription drugs at prices linked to international benchmarks.

All 50 states applied to participate

All 50 states, the District of Columbia and Puerto Rico applied to participate in the model. States that have not yet signed agreements have until Sept. 30 to join.

Under the model, participating manufacturers will make covered outpatient drugs available to state Medicaid programs at “most-favored-nation” prices.

States will invoice manufacturers for supplemental rebates designed to bring drug prices in line with international benchmarks. CMS will monitor pricing accuracy and share in the rebates through a reduction in the federal share of Medicaid payments.

CMS Administrator Mehmet Oz, MD, said the model is intended to help Medicaid programs obtain better drug prices, improve value for taxpayers and free resources for healthcare services for vulnerable Americans.

Hundreds of drugs included

The model covers hundreds of drugs across several major therapeutic categories, including treatments for oncology, diabetes and asthma.

A White House fact sheet released Sept. 18 said the initiative is designed to bring drug prices paid by Medicaid programs closer to international price benchmarks.

Billions in projected savings

CMS estimates that the model could save taxpayers approximately $5.2 billion annually. The agency, however, did not provide details on the methodology used to calculate the estimate.

The White House fact sheet cited projections from the Council of Economic Advisers, which estimated that the initiative could generate approximately $36.6 billion in federal savings and $27.6 billion in state savings over the next decade.

The actual financial impact of the model will depend on participation by states and manufacturers, implementation of the agreements and how drug prices compare with the international benchmarks used under the program.

Kaynak: Becker's Hospital Review