Belgium: Regulatory Insights For Life Sciences And Health Care Investments: Drug Pricing And Reimbursement

Investing in the life sciences industry without an understanding of the key regulatory factors that could determine a product's success or failure could cost you millions of dollars.

As the industry readies itself for the 2019 edition of the annual pilgrimage to the J.P. Morgan Healthcare Conference in San Francisco, our market-leading Global Regulatory Team has prepared a series of updates covering the following topic areas that we hope will help guide your 2019 investment decisions.

  • Drug pricing and reimbursement
  • Regulatory changes in Europe
  • Digital health and medtech
  • Data privacy and cybersecurity
  • Value-based purchasing
  • Cell and gene therapies

In this first edition, we explore the pre-commercial drug investment risks related to pricing and reimbursement.

Pre-commercial drug investment risks: Will insurers pay for this product?

Investors continue to be drawn to the pharmaceutical industry, particularly as novel therapies like gene and cell therapies and potential blockbuster treatments for cancers and Alzheimer's disease proceed through U.S. Food and Drug Administration (FDA) approval. It may be tempting to focus primarily on a drug's clinical trial results and expected market value when making investment decisions. Yet, the value of the projected market is entirely dependent on the product's coverage, reimbursement, and pricing profile. The specifics will differ by product, but an investor ignores such matters at their own peril. The following three key questions can help to get the conversation started.

1. Does the drug have multiple possible indications?

A pre-commercial product often has multiple possible uses in development. Where that is the case, it is important to think through each possible indication's coverage, reimbursement, and pricing profile, and the order in which the uses are expected to be commercialized. The first indication approved and launched can lock in and limit the coverage, reimbursement, and pricing options available for subsequent indications. Investors need to consider whether subsequent uses can be commercialized using different FDA approvals or different product presentations (different concentrations, strengths, or routes of administration, for example) to generate the possibility for market differentiation and flexibility down the road.

Why it matters: If the product under consideration is being valued based on the possibility of multiple indications, you need to test whether your market valuation of the follow-on indications takes into account any coverage, reimbursement, and pricing constraints that the first or other earlier indications may create.

2. Is the drug going to be self-administered, physician-administered, or both?

The Medicare program has different rules regarding the coverage and reimbursement of drug products, which generally depend on whether a drug is going to be physician-administered or self-administered. And even if you don't expect a large Medicare market, the Medicare rules tend to drive how Medicaid and the commercial markets approach a product.

Physician-administered drugs are more likely to be covered under the Medicare Part B benefit and reimbursed at a rate based on average sales price (ASP); in general, the average commercial price in the quarter, as calculated and reported by a product's manufacturer to the Centers for Medicare and Medicaid Services (CMS). The market for physician-administered drugs generally consists of physicians and other health care providers, who "buy" the drug and then "bill" the relevant payer for the drug, and in the case of Medicare, get reimbursed at a rate based on the product's ASP. The Department of Health and Human Services (HHS) is seriously considering reforms to this approach in the Medicare program, including a mandatory demonstration project that would link payment rates to international prices, which could create additional uncertainty about reimbursement over the next few years.

Medicare assigns a billing and payment code to each drug product, and all versions of the product marketed under a given New Drug Application (NDA) or Biologics License Application (BLA) are assigned to that code and reimbursed using a weighted average of the ASP for those versions. If different presentations of that product are not parity-priced at the milligram level, for example, that means that the reimbursement rate for the code will be higher relative to market price for some versions of the drug and lower for others. That is why, as noted above, it is important to think about whether a given product will have different uses and prices, as in the case of a Part B drug, which can wreak havoc on its reimbursement, with a knock-on effect to customer demand.

Self-administered drugs, in contrast – such as drugs dispensed by a retail, mail, or specialty pharmacy – are more likely to be covered under the Medicare Part D benefit. For most classes of drugs, Part D plans have considerable discretion with respect to which drugs they cover, meaning that a pharmaceutical manufacturer may need to negotiate with Part D plans to obtain coverage for its drug, typically by offering a rebate. Even when a Part D plan covers a drug, for most classes of drugs, the plan has flexibility to impose utilization management restrictions on the drug, potentially creating access barriers. Each Part D plan has its own payment and patient cost-sharing structures, subject to annual CMS approval.

Both? Occasionally, a product can have one version that is a Part B drug and another that is a Part D drug. In that case, the drug may be reimbursed at distinct rates under the Part B and Part D programs. The prices that the manufacturer has to report to CMS (which, in turn, impact drug reimbursement under the Medicare and Medicaid programs) may, in some instances, reflect a "blend" of the pricing in the two programs. Additionally, the drug will likely be subject to distinct patient cost-sharing and utilization management rules in the two programs. This all presumes a manufacturer can maintain coverage for a drug under both Part B and Part D; if utilization of the Part D-covered version of the drug surpasses the Part B-covered version among Medicare beneficiaries, the drug could lose coverage under Part B.

Why it matters: The status of the drug as Part B or Part D, as well as CMS coding decisions, may impact Medicare payment, patient cost sharing, and overall access to the drug. These considerations are relevant for any evaluation of a target and its drug candidates.

3. Does the pricing strategy account for Medicaid, Medicare, and other governmental program pricing requirements?

There are multiple governmental health care programs – including Medicaid, Medicare, the Secretary of Veterans Affairs Federal Supply Schedule (VA/FSS) program, and the 340B Drug Pricing Program – and the coverage and pricing requirements in these programs are interlinked. For instance, many manufacturers participate in the Medicaid drug rebate program (MDRP) – a program under which manufacturers pay a rebate on all units paid for by state Medicaid programs, and state Medicaid programs must cover the drug for Medicaid enrollees – because participation in the MDRP is a condition for coverage of a drug under the Medicare Part B program.

Manufacturers that join the MDRP are also required to participate in the Secretary of Veterans Affairs Federal Supply Schedule (VA/FSS) program and the 340B Drug Pricing Program. Under the 340B program, a manufacturer agrees to sell its products to certain safety-net providers at no more than a statutorily-defined "ceiling price." This ceiling price, like the Medicaid drug rebate amount and the Medicare ASP-based reimbursement rate, is determined based on commercial pricing data that manufacturers must report to CMS. The VA/FSS program imposes a different type of ceiling price on certain sales to the federal government and has its own set of price reporting requirements.

Why it matters: While a pre-commercial target company is not likely participating in these government health care programs, the coverage and price reporting requirements under each of these programs will significantly impact a drug's reimbursement rates and overall commercial strategy. Advance planning and financial modeling of these impacts is critical to accurately evaluating the profitability of the target.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions