After 17 drug companies received threatening letters to lower US drug prices or face the introduction of most-favored nation (MFN) price controls, Pfizer and AstraZeneca were the first two companies that made an agreement with President Trump. On Nov. 10, the Centers for Medicare & Medicaid Services (CMS) published a “GENEROUS” model¹ that is describing the methodology used for MFN pricing arrangements that seems consistent with the Medicaid price concessions in the two deals.

Both deals involve:

1. Medicaid pricing to match prices of other developing countries, presumably corrected for per capita income
2. Use of a TrumpRx website to provide links to direct-to-patient discounts programs (important for Medicare Part D and Obamacare, where patient co-pays sometimes exceed net drug cost)
3. A three-year exemption from import tariffs on pharmaceutical ingredients in return for expanding US manufacturing operations

MFN pricing

Both Pfizer and AstraZeneca committed to offer prices comparable to other developed countries (known as MFN pricing) to state Medicaid programs. The CMS GENEROUS model is referencing the United Kingdom, France, Germany, Italy, Canada, Japan, Denmark, and Switzerland to calculate the second lowest country-specific manufacturer-reported net price, adjusted by gross domestic product per capita using a purchasing power parity method. Net prices are calculated at the NDC-9 level as the average net price in each country for the previous 12-month period, after all rebates, discounts, and other price concessions provided by the manufacturer are deducted from the list price.

The second lowest calculated price will dictate US pricing for Medicaid. All of the referenced countries have government-dictated drug prices, often referencing the lowest prices they can find in other countries to get the best deal.

State Medicaid programs already have significant discounts, as by law, they essentially pay the lowest price available to any US customer with only few exceptions. However, for recently launched drugs, where Medicaid discounts are often limited, the deal may result in significant price reductions for Medicaid programs.

Implications

In contrast to the original MFN pricing proposals in 2020, the impact of the two deals and the GENEROUS model is limited to Medicaid pricing and does not affect Medicare Part B or Part D drug pricing. The Inflation Reduction Act of 2022 (IRA) has initiated price controls for Medicare Part D and Part B drugs seven years post launch for chemical drugs and 11 years post launch for biologics, thus skimming profits from the most profitable years prior to generic or biosimilar competition but leaving pricing uncontrolled for the first seven to 11 years.

Under the Pfizer and AstraZeneca deals, drugs with a heavy Medicaid population will be less attractive to develop. Drug prices in the referenced countries can potentially slash US market potential due to MFN pricing. It takes only two countries with prices much below the US to substantially hurt US return on investment. Particularly, European countries usually insist on long-term patient outcomes data before they approve premium pricing, forcing companies to choose between a lower price and long launch delays. With competition on their heels and limited patent life, companies often choose speed. Given the impact on US market pricing, companies will need to consider tighter global pricing policies and options for a later launch (with stronger data) in foreign countries.

Future scenarios

Drug price controls have been in place in many countries for many years. History in those countries has taught us that price controls often don’t deliver the promised savings and are then usually followed by more price controls. Since Medicaid drugs already receive sometimes substantial discounts, we can expect future disappointments over the savings achieved with MFN pricing. A natural next step could be to extend MFN pricing to Medicare Parts B and D, as was the plan in the original Trump administration plans.

The implication of this scenario is that international pricing will be even more critical than today. Careful analysis of the impact of various drug development options on prices across countries will become more important than ever, particularly since most of these decisions are made five or more years before US launch.

About the Author

Ed Schoonveld is a value & access advisor for Schoonveld Advisory, LLC and author of The Price of Global Health.

Reference

1. GENEROUS Model Request for Applications from Applicable Manufacturers. Centers for Medicare & Medicaid Services. November 14, 2025. https://www.cms.gov/files/document/generous-rfa.pdf