What Is a Prescription Drug Subscription Model?

Subscription models are a new type of payment arrangement between payers and drug manufacturers.

The defining feature of a subscription model is a negotiated fixed amount to be paid by a payer to a drug manufacturer in exchange for access to one (or more) specific drugs. The model is generally patient-specific and use is set over a predefined period. In other words, unlike traditional payment arrangements, payment do not scale with volume.

By negotiating a fixed payment, payers and manufacturers essentially agree to pay to guard against risks in spending and revenue, respectively, similar to insurance premiums that people pay to protect their properties.

Medicaid programs in Louisiana and Washington and federal programs in Australia have turned to a subscription model — instead of the more traditional negotiation of a per-unit price — as a way to pay for hepatitis C drugs. 

As well, the UK is testing the world's first subscription style payment model to incentivize pharmaceutical companies to develop new drugs for resistant infections. The NHS and NICE have implemented a novel pilot reimbursement model which ‘de-links’ payment from volume of use. The pilot is aimed at making the market for novel antibiotics more predictable and sustainable.

In this 2020 Perspective via Rand, researchers examine the underlying mechanisms and motivations of model participants, describe scenarios in which subscription models may be applicable, and discuss potential challenges in their implementation.

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