On 6 November 2025, the US Centers for Medicare & Medicaid Services (CMS) announced the GENEROUS (GENErating cost Reductions fOr US Medicaid) Model, a 5-year voluntary pilot starting in 2026. Its aim: peg Medicaid net prices for selected drugs to prices in a fixed group of comparable high-income countries.
For pharmaceutical companies, this development is far more than US domestic policy. Rather, it’s the latest signal that global pricing convergence is accelerating, with potential downstream impacts for Australia’s Pharmaceutical Benefits Scheme (PBS) and Health Technology Assessment (HTA) landscape.
What the GENEROUS model does
Under the model, participating manufacturers will:
- Provide supplemental rebates to states so Medicaid net prices align to an MFN-style benchmark
- Benchmark to G-7 countries other than the US (UK, France, Germany, Italy, Canada, Japan), plus Denmark and Switzerland
- Report NDC-9 level international net prices, adjusted by gross domestic product (GDP) through purchasing power parity
- Adopt standardised coverage criteria negotiated with CMS
- Participate voluntarily, alongside states that opt in
A brief look back: MFN v1.0 and Australia’s place in it
Before GENEROUS, the US pursued a more aggressive approach: the Medicare Part B Most Favored Nation (MFN) Model under the Trump Administration in 2020 (Rand and Kesselheim (2021).
What MFN v1.0 proposed
- Medicare Part B reimbursement would be tied to the lowest price (“most favoured nation”) in a global reference basket.
- The basket was defined as OECD countries with GDP per capita ≥60% of US levels and included:
Australia, Canada, France, Germany, Japan, UK, plus Austria, Belgium, Denmark, Finland, Iceland, Ireland, Israel, Luxembourg, Netherlands, New Zealand, Norway, Sweden, Switzerland. - The model applied to the highest-spend Medicare Part B drugs and was projected to save USD $85.5 billion over 7 years
Policy outcome
- MFN v1.0 was blocked by court injunction shortly after publication and never implemented
- CMS subsequently withdrew the rule.
- Thus, MFN v1.0 exists only in policy history, not in practice.
Why MFN v1.0 matters today
It set a clear precedent: US policymakers are willing to benchmark prices against OECD countries.
Where does this leave Australia in 2026?
1. Australia is not in the GENEROUS reference basket
This is confirmed. Australia’s PBS prices do not feed directly into the GENEROUS calculation.
2. But exclusion does not reduce global price pressure on Australia
The US is benchmarking to HTA-heavy systems like the UK, Germany and Canada, all of which share Australia’s characteristics for drug reimbursement processes. Sponsor Global headquarters may often view these systems as a group.
3. Launch decisions for Australia are still influenced by global price corridors
Pharmaceutical companies already report delayed or deprioritised Australian launches, driven by concerns about low PBS prices affecting other markets.
4. Downward pricing pressure continues despite exclusion
If Medicaid net prices move closer to EU norms, companies may remain cautious about offering even lower prices in PBS markets.
Will Australia’s exclusion ease PBS pricing pressure for Minister Butler and the Department of Health, Disability and Ageing?
Short answer: no. It may even reinforce current pricing discipline. Why?
1. Domestic budget pressure remains high
Australia’s exclusion does not change PBS budget settings or political appetite to control spend.
2. Global benchmarking narratives still include Australia
Even without formal inclusion, Government officials, PBAC and Sponsor Global Headquarters may view Australia within the “low-price OECD” group.
3. Australia still anchors global price expectations
Sponsor Global Pricing teams may use Australia informally as a “low bound” when modelling feasible net prices.
4. The real unlock is HTA Reform
If Australia wants to sustain or justify higher value-based prices, HTA Reform is far more important than whether the US references us.
Key levers include:
- Comparator selection reflecting real-world practice
- Modernised discount rate
- Fit-for-purpose requirements for surrogate endpoints
- Clearer pathways for rare disease and high-uncertainty technologies
All of these would allow PBAC to recognise value more fully.
Strategic actions for Global pharmaceutical market access teams
- Stress-test global price corridors under MFN-style scenarios
- Re-align launch sequencing and timing for PBS filings. Earlier US/EU launches remain more attractive under MFN-style logic
- Treat HTA Reform as a competitiveness strategy. Reform, not US policy, drives Australia’s future attractiveness
Bottom line
MFN v1.0 included Australia explicitly. GENEROUS does not.
But Australia’s exclusion does not relax PBS pricing pressure. The critical issue for faster access and value-appropriate pricing is HTA Reform, not whether Australia appears in the US reference basket. Pulse Economics will continue analysing these developments to support evidence-based pricing and launch strategies for the Australian market.
References
Centers for Medicare & Medicaid Services (2025) GENEROUS (GENErating cost Reductions fOr US Medicaid) Model. Available at: https://www.cms.gov/priorities/innovation/innovation-models/generous (Accessed: 13 November 2025).
Rand LZ, Kesselheim AS. International reference pricing for prescription drugs: a landscape analysis. J Manag Care Spec Pharm. 2021 Sep;27(9):1309-1313.
