Ira Studin, PhD

Ira Studin, PhD, President, Stellar Managed Care Consulting

Industry experience points to a type of market that I believe can best be described as “bolus.” Bolus markets are markets for new drugs where unmet need is extremely strong and clinical benefit from the new drug dramatically improves standard of care. Since bolus markets have an intense and high velocity dynamic, conditions demand business discipline because right and wrong moves can have a disproportionate effect on a brand. For that reason, the suggestion here is that bolus markets deserve to be carved out and understood in their own terms.

For purposes of this discussion, the 2013 Sovaldi launch for hepatitis C best illustrates a pure model of bolus markets. Four key business factors (KBFs) that took shape in that payer landscape can be considered foundational for bolus markets and product performance:

Efficacy sufficiently compelling that payers have little choice but to cover

Population size for the treatment having a budget busting effect

Medical cost offsets being central to pricing

To the degree products align with the first two factors—unmet need and efficacy—it should be easier to find an equilibrium with the second two factors: budget impact and medical cost offset. Weaker alignment with the first two factors requires the manufacturer to take extra care in its pricing, which is at the risk of causing significant payer pushback. While payers are notoriously skeptical of manufacturers’ pharmacoeconomic messaging, medical cost offsets are central to bolus market pricing because of the magnitude of the population size and the impact coverage has on the financial health of the insurance enterprise. For that reason, bolus markets have a single payer quality that elevates cost/benefit in coverage policy.

Despite all four KBFs being foundational for bolus markets, budget impact can be considered “first among equals.” Budget impact is always a consideration with payers, but the dynamic propelling bolus markets creates a fault line for budgets that differs from the budget strains that often occur with product launches.

When product characteristics lay claim to bolus markets but don’t fully align with unmet need and efficacy, if medical cost offsets and pricing do not adequately address budget impact, market behavior can be punishing. If we take Aduhelm for Alzheimer’s disease, for example, while it checked the box for extreme unmet need, it did not rise to the compelling standard for efficacy. Significantly, the manufacturer did not price its product to forge an equilibrium around medical cost offset and budget impact. The adverse reaction from Medicare had a powerful ripple effect on the brand and the manufacturer. The lesson here is price to efficacy, not unmet need.

Where products align with extreme unmet need and compelling efficacy, premium price tolerance is likely. Nevertheless, pricing still needs to factor in medical cost offset to adequately address budget impact. To the degree medical cost offset data are strong–or weak–pricing and discounts need to be adjusted accordingly. This is something manufacturers of weight loss products can be expected to grapple with currently.

In bolus markets, the initial market represents a huge prevalence while subsequent growth is limited to incidence. In addition, as competitors enter the market and comparability assumptions take hold, payers are willing to advantage and disadvantage products.

Once this step in market evolution emerges, the natural tug of market forces takes shape and bolus markets disappear. In their pure form, bolus markets belong to first movers.

Bolus markets with treatments that are one and done are richest at the beginning of their product lifecycle with declining new starts and, depending on competitive factors, possibly declining revenue per script over time. For treatments that are ongoing, the economics are more favorable.

From a payer POV, the contribution of products that meet the bolus market standard promises clinical benefit for a huge population that is transformative. From the manufacturer POV, pricing the molecule demands discipline that balances revenue on the one hand with medical cost offset and budget impact on the other hand.

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Conditions require a disciplined approach to drug pricing.

‘Bolus’ Markets: Unique Business Opportunities with Promise and Risk

The value deficit in orphan drugs does not apply to patients or physicians. It applies to payers. The extreme disproportion between the annual cost for orphan and ultra-orphan drugs and medical cost offsets is the payer value deficit.

That extreme disproportion makes the “payer value” argument in brand messaging inherently problematic.

From my experience in discussions with medical and pharmacy directors, there is a broad consensus that health plans see virtually no payer value from particularly ultra-orphan treatments.

As one pharmacy director put it: “You have to treat rare conditions, but these do not return value to the health plan.” This is not to say, “no value;” just no “payer value.” Payer value equates to reduced events, medical cost offsets, and lower health resource utilization.

Since value from treatments for rare disease does not align with payer value, what does? The answer is clinical benefit.

While health plans would like to see payer value, what they need to see to ensure optimal access is that treatment has clinical benefit.

The stronger the clinical benefit, the weaker the pressure to introduce prior authorization restrictions beyond what might be considered appropriate. Also, the greater the potential for premium pricing to be accommodated without increasing risk of limiting coverage.

The messaging challenge many treatments for orphan and ultra-orphan conditions face is that they are super expensive but not curative. Typically, clinical benefit sits on a continuum at a point best described as “somewhat effective.” Consequently, the payer message around clinical benefit gravitates to quality of life (QoL) terms. For payers, this is weakens the message.

There are two parts to the barrier QoL poses for payer messaging. First, it is axiomatic that payers have little interest in QoL arguments. A medical director put it this way: “Quality of life is probably a bad term. It can mean anything. I don’t think payers necessarily understand what manufacturers are talking about with QoL.”

Second, it is self-evident that if treatment has some measure of success, QoL improves. What payers want to know are the metrics behind the improvement; numbers behind symptom improvement; numbers behind function improvement; numbers behind physiological improvement; and (if possible) numbers behind a biomarker improvement.

Anterior to the messaging challenge brand teams face with treatments for orphan and ultra-orphan conditions is that the low hanging fruit in biopharma R&D has long been addressed. What remains is extremely complicated. Drawing from interviews for various market research studies, payers are not expecting cures. They know success is incremental and, perhaps most important for manufacturers, they know they have to provide access. What they want to know are the metrics on clinical benefit they are paying for.

QoL is everyone’s goal, but for payer messaging to be optimal, brand teams need to unpack morbidity from QoL and repack morbidity in clinical benefit. This means isolating multiple individual slices of morbidity in the orphan condition and providing a number that captures the benefit for each of those endpoints.

The more the total clinical benefit is broken into its constituent parts and presented empirically, the more value payers will see—even if it’s not “payer value.” In addition, if there is competition, potentially, there is a greater competitive advantage.

While validated instruments are essential for demonstrating the impact of an orphan treatment on patients, they are also seen by payers as obtuse because they present composite scores. A strong score on one or two effects, for example, can cover up weak or no benefit in dozens of others.

Since biopharma R&D is well into penetrating a new frontier of breakthrough science targeting once untreatable conditions, brand teams would be well served working with scientific colleagues during trial planning and after to develop next-generation methods for payer messaging to convey the broadest possible number of clinical benefits their treatments produce.

president of Stellar Managed Care Consulting. He can be reached at

Shift focus in orphan and ultra-orphan messaging to clinical benefit.

The Payer Value Deficit in Orphan Drugs

Industry data suggests that orphan spend accounted for greater than 12% of total drug spend in 2020. As orphan drug approvals increase, it’s axiomatic that they will capture a growing share of the total drug spend.

With this trend putting its stamp on health plan economics, payers can be expected to gravitate to the 80/20 rule, where a growing concentration of costs involve a small percentage of drugs.

Indeed, one respondent I recently interviewed for a market research study noted that his organization has a separate unit responsible for orphan drug approvals, denials, and appeals.

This landscape dictates that orphan drug manufacturers align launch planning with payer needs on product launches. Comments below draw on recent discussions with payers to highlight their key business factors (KBFs), supporting the alignment theme.

. A term used for pre-launch discussion is “PIE,” or pre-approval information exchange. Providing information around the indication is one part of PIE. Payers’ reflexive concern is that an indication might be too broad and, at orphan prices, will instinctively think about limiting coverage to patients expected to benefit the most. The more manufacturers understand this issue from pre-launch discussions, the less risk for unanticipated restrictions after launch.

. A second part of PIE is disease education. Pharmacy decision-makers are almost certain to have little expertise on the orphan condition. As one respondent in a study put it: “The more I’m able to learn about the orphan disease in advance, the easier it is to start planning from a budget impact perspective and get an early start on pharmacy and therapeutics (P&T) review preparation.”

 The third main piece of pre-launch information for payers involves distribution. What issues stand out if the drug falls under the medical vs. pharmacy benefit? Are there unique aspects to the distribution model? Will it be limited distribution? If it is limited, plans will need an agreement with the specialty pharmacy provider before a drug claim can process.

 Typically, a medical science liaison reviews trial design plus efficacy and any safety/side effect issues along with dosing and administration. It is at this point that the actual FDA label is discussed and questions addressed. It is also at this point that discussion of inclusion/exclusion criteria occurs and why they should not be part of the prior authorization criteria.

 At launch, the manufacturer tells the payer the price. If part of the business model, this is when the manufacturer also introduces contracting.

Two points bear emphasis. First, based on my conversations with payers, the priority is to have a simple rebate-lowering net cost rather than a more complex outcomes contract. Where outcomes contracting appears to meet payer needs is with one-time-only, million-dollar-plus treatments where, rather than the full payment, reimbursement is tied to well-defined outcomes over time.

Second, payers flinch at the “few lives have minimal impact” message. There are signs, for example, that health plans treat orphan products as one market basket. As a respondent put it, “When you look at orphan drugs as a single market basket, they’re having a huge impact. Probably the top 10 spend for pharmacy in general.”

Health economics and outcomes research (HEOR).

 Payers want to see orphan manufacturers’ HEOR game plan. They’re also interested in seeing real-world evidence in future years.

 Guidelines vary in being authoritative. Evidence behind guidelines may not be top level. Language can be equivocal (“may” use). There can be a conflict of interest with a specialty society. There can also be an explosion of guidelines. Consequently, payers are likely to benefit from an expert, arms-length guideline review.

Payers need detail and data to support their own internal reviews and financial modeling. The more effectively manufacturers meet that standard, the more likely the two stakeholders will be on the same page at product launch.

Supporting health plan clinical preparation and financial modeling.