Unique Business Opportunities with Promise and Risk

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.

Pure model

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.

Performance

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.

Bolus market evolution

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.