Pay for Innovation Observatory

General Information
Example on implementation
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
Case of application
Case of application descriptions
Length/time horizon (i.e. extension of the scheme)
Product Category
If drug, drug type (on-patent, generics, vaccines, other)
Therapeutic area
Treatment type
Healthcare system
Reference for example on implementation
1DRG add-on payments: high-priced drugs and medical devicesAdd-on payments that top up to the DRG tariff for high-priced drugs, medical devices (MD), or combined used of drugs and MD. Hospital payments are based on national tariffs set per DRG, which include the costs of drugs/MDs. However, innovative therapies involving high-priced drugs and medical devices sometimes generate significant cost variability within a DRG, potentially leading some hospitals to deny patients access to these medical technologies. A common short-term solution is to use such add-on.To ensure that listed high-priced drugs/devices are reimbursed by the state, thereby imposing no cost on hospitals while drugs/devices are on the list. Payment/Reimbursement SchemeApplied--Add-on ListTo ensure funding of high-priced drugs, supplementary payments are made to hospitals beyond DRG-related tariffs. A drug can be included on the French add-on list if it has a high cost, a substantial impact on the homogeneity of the related DRG’s costs and is sufficiently innovative, which is assessed based on the benefit it brings compared to existing treatments. When the patent of a listed drug expires, its generic versions are subsequently included on the add-on list, to ensure fairness of treatment. Delistings generally occur when the technology becomes a routine part of treatment or when price decreases are such that the technology can be integrated into the DRG tariff. Though less common, drugs can also be delisted based on insufficient innovativeness or low prescription frequency. French hospitals purchase their drugs and negotiate their prices directly with pharmaceutical manufacturers, either by themselves or through a hospital purchasing group. Inpatient drugs are funded through DRG-related tariffs based on the average cost of stay and their cost is fully borne by the hospital. Listed drugs, for their part, are reimbursed up to a reimbursement tariff set nationally by the pricing committee (Comité Economique des Produits de Santé, CEPS) and revised downwards over time.France2004-Drugs + Devices---InpatientInsurance-based
2DRG add-on payments: new technology add-on payment (NTAP)Temporary payment in addition to the applicable DRG, providing payers with a temporary window to collect cost information to set future DRG payment rates (that are updated every 2-3 years typically). Technologies have to meet certain innovativeness criteria to be considered for NTAP. The scheme qualifies well for artificial intelligence algorithms, or technologies approved with "innovativeness pathways" (eg, FDA Breakthrough Device Designation).To support the adoption of new technologies ahead of periodic updates of DRG tariffs.Payment/Reimbursement SchemeApplied-Payers (should the innovative technology eventually prove to be ineffective)AI-based stroke triage algorithmThe CMS awarded the first new technology add-on payment (NTAP) for an AI system for stroke triage, that accelerates the time-sensitive detection and treatment of patients with stroke. The NTAP for this AI technology has provided additional reimbursement to support its use and to bridge the payment gap for the DRG until it was recalibrated.USA20201 year (between 1 October 2020 and 30 September 2021)AI-algorithm-Stroke management-InpatientInsurance-based
3Advance Market Commitment (AMC)Governments or purchasing consortia to commit to buying a certain amount of drug at a mutually agreed-upon price, before the product is available. In AMCs, pricing is typically tied to research and development costs with an assumed profit margin. AMC are therefore a pull mechanism offering a guaranteed market for products meeting preagreed specifications but not for any individual product, creating room for competition, as AMC offers a global market commitment but not a commitment to any particular manufacturer or product. AMC are often used to fund vaccines development, production, and distribution.To drive R&D and scale up manufacturing and delivery capacity.Payment/Reimbursement SchemeAppliedPopulation-levelFunders of innovation (eg, governments, international bodies, foundations, other donors)Late stage pneumococcal vaccineThe AMC for pneumococcal vaccine aimed at motivating manufacturers to invest in manufacturing capacity scale up and product introduction in low-income countries, shortening what was then a typical 10- to 15-year delay between first launch in high-income countries and introduction in low-income countries.Low income countries2009-DrugsVaccinesPneumonia, meningitesOne-off-Various
4Benefit-Based Advance Market Commitment (BBAMC)Model proposed for vaccines in which value-based advance market committments (AMC) are offered to manufacturers that meet the minimum effectiveness threshold, resulting in country-specific process for country-specific guaranteed volumes. The product that best meets the preferred product characteristics for a payer will both receive a higher price and a greater volume share of the total revenue commitment. The value-based price is only paid for a preagreed proportion of the guaranteed commitment, to a preagreed maximum volume or a preagreed time period; beyond this, manufacturers will receive a “tail-price,” ie. a heavily discounted price that mimics post patent expiration generic pricing. Poor countries would not pay a value-based price but the tail-price from day 1.To balance providing expected returns on investment with payers’ need to manage budgets.Pricing SchemeTheoreticalPopulation-levelManufacturers, payers/funders (eg, governments, international bodies, and donors), the guarantors (signing agreements with payers to provide credible commitments to the market).-----------
5Annuity-style payment modelModel in which the super-high cost of therapies is spread over a specified period. Payments could be conditional on the continued demonstration of clinical efficacy, in which case there would be a type of risk-sharing agreement between the payer and the manufacturer. This scheme is applicable to ultra-rare, genetic diseases.To reduce budget impact on payers deriving from high-cost, often one-off drugs.Payment/Reimbursement SchemeAppliedPatient-levelManufacturers, payers-----------
6Performance-based installment payment model (for ATMPs)Model proposed for Advanced Therapy Medicinal Products (ATMPs) that combines outcome-based instalment payments with aspects of the pay for performance and the annuity payment model. ATMPs will be paid in instalments, due when certain previously agreed treatment goals are achieved. It may be necessary to set up a fund for exceptional cases in which the chances of success of the therapy seem to be low, to mitigate the risk that cases for which treatment success is uncertain – and therefore payment cannot be expected – will be rejected in order to avoid uncovered costs. Thus, it would be necessary to combine the performance-based reimbursement with a risk-pool model to guarantee access to ATMPs for cases that fall through strict performance considerations.To allow tailor-made reimbursement for tailor-made therapies.Payment/Reimbursement SchemeAppliedCan be bothManufacturers, payersLuxturna® (voretigen neparvovec)Luxturna has been granted reimbursement in Denmark following an annuity model linked to outcomes. Regions in Denmark will pay in instalments, patients must check at set times, and if it turns out that the drug does not have the desired effect, the subsequent instalments are not paid.Denmark2020Yearly check-ins, until the drug ceases to perform well on individual patientsDrugsOn-patentRetinal dystrophy--Tax-based
7“Insurance-type” model for antibioticsModel proposed for antibiotics in which a global flat annual fee, apportioned to, and paid by, each healthcare system, is coupled with a price paid by healthcare providers to the manufacturer for each unit of drug used. It is a model where most of the revenues received by the manufacturer are not linked to the volumes of the drug used. The structure provides insurance in the following ways: 1) The manufacturer is insured against the commercial risk of both a low mean price and highly variable use (negative estimated net present values); 2) Health care systems are insured against a lack of availability of antibiotics to treat patients, as new antibiotics will be developed; 3) Health care systems financial obligations can be capped, so insuring against the financial risks of a resistant infection outbreak under a premium price model.To provide incentives to R&D in neglected areas like antimicrobial resistance.Payment/Reimbursement SchemeTheoretical-Manufacturers, payers-----------
8ATMP FundsAn approach for the payment of Advanced Therapy Medicinal Product (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 rulesPayment/Reimbursement SchemeApplied-------------
9Bundled pricing/payment (bundling)Drug bundling represents negotiated agreements combining multiple single agreements for pharmaceuticals from different clinical areas in one deal. Bundling might also relate to additional patient services offered by the manufacturers with the product.To secure a certain sales volume or market share for manufacturers, and to reduce costs or extend coverage for payersPayment/Reimbursement SchemeApplied-Manufacturers, payersPatented drugs in New Zealand“PHARMAC says to a manufacturer like X, 'well, based on your current pricing, your cost utility for this new drug is not going to make it, plus you’re not getting any priority for funding. But (..)if you can offer us a package of drugs we buy, so if you didn’t specifically reduce the price of that drug, but you reduce the price of the others, so that we get the cost shifted to offset of that price, then we will consider making it a higher priority for funding.’ And the big companies like x and y make good use of it (...). So PHARMAC has been able to, say yes, based on the overall package, if the price that we’re getting for the drug, is to us discounted and the cost utility looks better, we'll give it a higher priority.”New Zeland--DrugsOn-patent---Tax-based
10Portfolio packageFirst and second line combination product package are provided at an advantageous price.To increase financial certainty.Pricing SchemeAppliedPatient-level------------

General Information

Example on implementation

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