When Do Annuity-Based Payments Help to Address the Affordability Challenge of Funding Advanced Therapies? Insights from a Budget Impact Simulation.
Michelsen, Sissel Huys, Isabelle Luyten, Jeroen Simoens, Steven
Michelsen, Sissel
Huys, Isabelle
Luyten, Jeroen
Simoens, Steven
Publication Type
Journal article
Editor
Supervisor
Publication Year
2026
Journal
Journal of Market Access & Health Policy
Book
Publication Volume
14
Publication Issue
2
Publication Begin page
23
Publication End page
23
Publication Number of pages
Collections
Abstract
Spreading payments over time by means of annuities has been proposed as a means to address the affordability challenge of funding very expensive advanced therapies, especially within managed entry agreements. This study aims to examine when annuities (in contrast with a single upfront payment) offer a viable solution for both healthcare payers and manufacturers to fund one-time advanced therapies. We put forward four conditions under which annuity-based payments can be considered an acceptable payment strategy: (1) excessive budget impact, (2) cost equivalence with upfront payment, (3) compensation for financial risk and (4) a limited annuity period. We develop an exploratory model that simulates how the budget impact of annuity-based payments for advanced therapies meets these conditions across several economic and epidemiological scenarios. Given our model parameter values, results suggest that annuity-based payments are most suitable when the initial patient volume (prevalence) significantly exceeds annual new cases (incidence), and when the financial risk premium for the annuity-based payment scheme does not exceed the social discount rate. While further refinement of the model is needed, this study demonstrates that annuity-based payments can only help control the annual budget need when the focus is on a high-prevalence disease, and the therapy is financed through health impact bonds issued by a governmental payer. This arrangement ensures a low-risk premium, which is typically only available to public payers.
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Keywords
38 Economics, 3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 3 Good Health and Well Being