State Medicaid programs are navigating rapid change in prescription drug pricing and payment. Rising drug costs are straining state budgets and can negatively affect Medicaid enrollees’ access to care and health outcomes. At the same time, breakthrough treatments, like GLP-1s and cell and gene therapies, offer significant potential benefits for Medicaid populations, but are increasingly difficult to finance within current program structures.

New federal drug-pricing demonstrations from the Centers for Medicare & Medicaid Services’ (CMS) Innovation Center are designed to generate prescription drug savings in Medicaid. Before participating, however, states will need to weigh a range of operational, financial, and strategic considerations to determine whether each model aligns with their goals and capacities.

This Center for Health Care Strategies (CHCS) tipsheet, co-authored with Jennifer Strohecker, former Utah Medicaid director and pharmacist, provides an overview of the Innovation Center’s new pharmacy models. It highlights key considerations for states and offers a practical framework to help state Medicaid leaders assess participation, agency capacity, and strategic alignment.