Master Alliance Provisions Guide (MAPGuide)

Payment Structures

This issue refers to provisions setting out the payment structure for an agreement. Payment structures could include royalties under a license agreement, price per unit amounts for supply agreements, cost-sharing arrangements under a collaboration agreement, or a development budget under a funding agreement. Detailed royalty rate, pricing and budget data is often redacted in publicly available copies of agreements, therefore there are limitations on the information that is available in the MAPGuide. The MAPGuide does not include general provisions around payment methods, invoicing arrangements, or late payment interest.

Questions to consider when developing a royalties and payments provision

  • What is an appropriate payment structure for this agreement?

  • What are the potential mechanisms to control or limit potential exposure to additional payments or expenses?

  • If there is a royalty-based payment structure, what are the applicable royalty rates and term for the royalties?

Example approaches found in the MAPGuide

  • Supply agreements
    • An upfront, lump sum payment will be made for an initial contracted volume, with per dose payments to be calculated for any additional supply. Payments may be reduced or recovered if the supplier does not deliver in accordance with the terms of the agreement.
    • The price of the product will be set at the supplier’s Cost of Goods (an agreement-specific definition), which may be adjusted during the term of the agreement. The supplier will use its best reasonable efforts to mitigate costs.
    • There is an estimated total cost for the total supply volume, based on the supplier’s estimated Cost of Goods. If this cost is exceeded by less than a certain percentage, then the purchaser will pay the full additional cost. If the cost is exceeded by more than that percentage then the purchaser will agree either an additional payment, or another mechanism (increased price per unit or decreased volume) to protect the supplier from any loss.
    • The price will be calculated on an open book basis (i.e. the supplier provides some transparency over its cost of goods calculations). Under- or over-payments identified through an audit of the open book costs will be reimbursed by the appropriate party.
  • Royalty payments
    • No additional royalties are payable for Pandemic Products (i.e. products sold for a pandemic indication to government purchasers) supplied at cost by the licensee.
    • Royalties rates depend on the country of sale and whether the sale is to a public or private sector purchaser. No royalties are payable for low-income and least developed countries, or for sales to the public sector in lower-middle income countries.