Forty States Have Joined Medicaid Drug Pricing Model

The CMS initiative aims to lower costs for essential treatments through international benchmark pricing.

Updated on Sept. 18, 2026 in Healthcare

Isometric editorial illustration of a pharmaceutical glass vial resting on a pedestal, representing healthcare policy and drug pricing structures. — Forty states have joined the Centers for Medicare and Medicaid Services' new drug payment model, which links Medicaid pricing to international benchmarks to lower costs. AI Illustration. Upload story photo >

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Forty states and Puerto Rico have formally joined a new CMS Medicaid drug payment initiative to secure lower prices for essential medications. The model seeks to improve value for taxpayers while providing states with supplemental rebates for drugs treating cancer, diabetes, and asthma.

Why it matters

By aligning Medicaid drug prices with international benchmarks, the model aims to curb rising healthcare costs and generate significant fiscal relief for state and federal programs. Officials expect the initiative to deliver billions in collective savings over the coming decade.

The federal government projects the five-year initiative will generate $5.2 billion in annual taxpayer savings. Total long-term estimates suggest $36.6 billion in federal savings and $27.6 billion in state savings over the next decade.

The players

Centers for Medicare & Medicaid Services

This federal agency oversees the Medicaid program and manages the administration of national healthcare payment initiatives.

Council of Economic Advisers

The agency provides the President with objective economic analysis and policy advice based on data and research.

The details

Participating manufacturers provide outpatient drugs to Medicaid programs at most-favored-nation prices, while states invoice these companies for supplemental rebates to reach international benchmarks. CMS supports this framework by adjusting the federal share of Medicaid payments to ensure fiscal alignment across jurisdictions.

The five-year initiative launched in January 2026.
CMS confirmed the participation of 40 states on September 18, 2026.
Remaining states have until September 30, 2026, to join the program.

Market Landscape

This initiative follows the pattern established by the Inflation Reduction Act to leverage government purchasing power for lower pharmaceutical costs. It represents a shift toward aggressive cost-containment strategies that challenge traditional pharmaceutical pricing models.

The initiative aims to lower the cost of essential therapies for oncology, diabetes, and asthma, which may reduce the fiscal burden on state Medicaid budgets. These savings are designed to preserve coverage access and free up resources within the Medicaid program for participants.

The takeaway

The broad adoption of this pricing model reflects a coordinated effort to standardize drug costs across the United States. Readers may see a long-term impact on how state programs manage pharmaceutical spending and allocate healthcare funds.