Pay for Innovation Observatory
Search:
Expand | General Information | ||||||||
|---|---|---|---|---|---|---|---|---|---|
Id | Scheme name/identification | Scheme description | Scheme objective (if given) | Type of scheme (payment, pricing) | Theoretical vs. Applied | Perspective (patient-level, population-level) | Distribution of risk, if any (stakeholders involved) | General reference | |
| 1 | Adjusted Cost-Effectiveness Threshold Framework for Orphan Drugs | This model provides a structured approach to determining reasonable pricing for orphan drugs, ensuring that the expected return on their development remains in line with industry norms. The framework is based on the principle that orphan drug developers should not achieve a rate of return exceeding the pharmaceutical industry average. Key components of this approach include: 1) Cost-Effectiveness Threshold (CET) Adjustment: The standard CET for non-orphan drugs is modified to reflect the unique cost and revenue structure associated with orphan drug development; 2) Incorporation of R&D Costs and Revenue Expectations: The adjustment process considers research and development (R&D) expenditures alongside expected market revenues to balance incentives for innovation with affordability for healthcare payers; 3) Ensuring Industry-Standard Rate of Return: Pricing is calibrated to ensure that orphan drug developers achieve a return on investment comparable to that of non-orphan pharmaceutical products, preventing excessive profit margins while maintaining sustainability. | To account for specificities of orphan drugs when setting their prices (ie, lower sales volumes and lower R&D costs) | Pricing Scheme | Theoretical | - | - | ||
| 2 | Advance Market Commitment (AMC) | Governments or purchasing consortia commit to procuring a specified quantity of a drug at a mutually agreed-upon price prior to the product's availability. In Advance Market Commitments (AMCs), pricing is typically linked to research and development (R&D) costs, with an assumed profit margin. AMCs function as a pull mechanism, offering a guaranteed market for products that meet predefined specifications, without favoring any specific product or manufacturer. This approach fosters competition by providing a global market commitment rather than exclusivity. AMCs are commonly employed to support the development, production, and distribution of vaccines. | To drive R&D and scale up manufacturing and delivery capacity. | Payment/Reimbursement Scheme | Applied | - | Funders of innovation (eg, governments, international bodies, foundations, other donors) | ||
| 3 | ATMP Funds | An approach for the payment of ATMPs is the creation of specific “ATMP funds”, dedicating specific pool of resources to reimburse high-cost ATMP. Similar approaches are the Cancer Drug Fund in the UK or a specialist fund for “expensive innovative drugs” in Italy. | To ensure patient access to disruptive innovations even when these do not dall under traditional cost-effectiveness rules | Payment/Reimbursement Scheme | Applied | - | - | ||
| 4 | Benchmark-based sales-delinked payment model for antibiotics | The benchmark-based sales-delinked payment model is designed to incentivize antibiotic development by decoupling manufacturer revenues from sales volume. Under this model, manufacturers receive predefined payments over a fixed period, based on factors other than the quantity of antibiotics sold, such as the therapeutic value or achievement of specific milestones. The structure of these delinked payments may include a base payment upon regulatory approval of a new qualifying antibiotic, supplemented by incremental benchmark payments linked to demonstrated clinical efficacy, resistance mitigation, or other predefined criteria. This approach provides developers with a predictable revenue stream while aligning incentives with public health priorities. Unlike the insurance-type model, which combines a fixed annual fee with a per-unit payment, the benchmark-based model fully decouples revenue from usage by linking payments solely to innovation milestones and clinical performance. Additionally, while the Netflix model provides a fixed subscription fee granting unlimited access to an antibiotic, the benchmark-based approach emphasizes rewarding specific drug characteristics rather than ensuring broad, unrestricted availability. This model is particularly suited for encouraging targeted innovation in antimicrobial resistance (AMR) while maintaining financial sustainability for manufacturers. | To stimulate antibiotic development by offering manufacturers structured, performance-based incentives that align financial rewards with innovation, clinical effectiveness, and public health needs. | Payment/Reimbursement Scheme | Theoretical | - | Manufacturers, payers | ||
| 5 | Benefit-Based Advance Market Commitment (BBAMC) | This variant of the AMC (Advance Market Commitment) is designed to incorporate a value-based pricing model, grounded in Health Technology Assessment (HTA). Under this framework, value-based AMCs are offered to manufacturers that meet a specified minimum effectiveness threshold. This results in a country-specific process for determining guaranteed volumes based on local needs. The product that most closely aligns with the preferred characteristics of a payer will receive both a higher price and a larger volume share of the total revenue commitment. The value-based price is applied only to a preagreed proportion of the guaranteed volume, either capped by a maximum volume or a specific time period. Beyond this, manufacturers will receive a “tail price,” a significantly discounted price that approximates the pricing structure observed after patent expiration for generic drugs. For low-income countries, the model stipulates that they will not pay the value-based price but instead will pay the tail price from the outset. This pricing structure has been proposed primarily within the context of vaccines. | To balance providing expected returns on investment with payers’ need to manage budgets. | Pricing Scheme | Theoretical | Population-level | Payers/funders (eg, governments, international bodies, and donors), the guarantors (signing agreements with payers to provide credible commitments to the market), manufacturers (supplying products at the preset value-based prices). | ||
| 6 | Blended Discount Model | A medium-to-long-term outcome-based model where manufacturers provide partial rebates annually, combined with a final rebate based on the treatment’s clinical outcome at the end of the agreement period. Designed for outcomes that require longer evaluation periods (e.g., gene therapies). | To provide financial predictability through partial rebates while linking final payment to outcomes. | Payment/Reimbursement Scheme | Theoretical | Patient-level | Manufacturer, payers | ||
| 7 | Bundled pricing/payment | Drug bundling is a strategic approach in which multiple separate pharmaceutical agreements, often covering products from different clinical areas, are grouped together into a single, comprehensive contract. This bundling may involve not only the core pharmaceutical products but also extended services, such as patient support programs, adherence monitoring, or other value-added services offered by the manufacturer. | To secure a certain sales volume or market share for manufacturers, and to reduce costs or extend coverage for payers | Payment/Reimbursement Scheme | Applied | - | Manufacturers, payers | ||
| 8 | Combination-based pricing | Combination-based pricing addresses the challenge that the value of drugs used in combination is not simply the sum of the individual values of the medicines when used separately. This pricing model seeks to resolve the complexities in assigning value and negotiating prices when different marketing authorization holders are responsible for the individual drugs in the combination. The manufacturer of the backbone product (A) typically has a vested interest in ensuring the combination therapy is covered, as it is expected to increase sales of product A. Therefore, the manufacturer may be willing to reduce the price of product A for the combination, provided this reduction does not affect the price of product A in other indications. However, if the price of product A is reduced across all indications due to the payer’s inability or unwillingness to implement indication-based pricing, the manufacturer may be reluctant to accept a lower price that is not fully compensated by the anticipated increase in sales from the combination therapy (A + B). This approach aims to balance the interests of all stakeholders involved in the pricing and reimbursement process for combination therapies. | 1) To maximise access for every patient that might benefit from a treatment regardless of the approved indication or type of therapy used. 2) To develop new medicines in the full set of indications that address unmet need, whether as mono-therapy or used in combination, based on advancing scientific knowledge. | Pricing Scheme | Applied | Population-level | 1) Healthcare providers within a country may try to obtain the drug for treatment of higher-value indications for the price of lower value indications. 2) The manufacturer of the anchor drug will not agree to lower the price when used in combination with the newer drugs. The manufacturer may fear that such a price drop may spread from the lower-value combination therapy to other indications where the drug is used as monotherapy. 3) If manufacturers do agree to combination pricing of products, there is a potential legal challenge as manufacturers may be accused of having pricing cartels. Therefore,in order for this payment model to be successful three-party agreements with payers are needed. | ||
| 9 | Conditional treatment continuation (Risk Sharing) | Coverage of the treatment is continued only for patients who achieve a pre-specified response to treatment. Typically, continuation of coverage is conditioned upon meeting short-term treatment goals (e.g., tumor response or lower cholesterol). Manufacturers provide products free of charge or discounted for patients who do not achieve results. | To ensure that only patients that benefit from the treatment will remain on treatment coverage | Payment/Reimbursement Scheme | Applied | Patient-level | Manufacturers, payers | ||
| 10 | Cost Sharing | The pharmaceutical company provides a discount on the price of the initial cycles of therapy for all eligible patients | To improve patient access to innovative treatments while managing healthcare costs by offering discounts on early treatment cycles, ensuring timely access, controlling budget impact, and promoting appropriate use. | Payment/Reimbursement Scheme | Applied | Patient-level | Manufacturers, payers | ||