Pricing and Volumetric Forecasting for an Orphan Drug

Abstract

BioMarin engaged RG+A to help them determine the “right” launch price for their orphan drug, Kuvan — $0.10/mg or $0.15/mg. RG+A developed a pricing and volumetric forecasting model using a Qualitative-to-Modeling® (QTM®) approach based on patient flow models developed with BioMarin and triad interviews with geneticists, dieticians, and caregivers or patients. The study revealed that BioMarin needed to conduct extensive market development work, but that Kuvan could sustain a substantially higher price of $0.29. Announcement of the higher price caused a 20.2% leap in the price of BMRN stock, while the incremental revenues supported a range of market development activities.

Background

As BioMarin prepared to bring Kuvan to market in late 2007, an intense debate raged internally about whether to charge $0.10/mg or $0.15/mg. Both groups believed that the entire market would appreciate that the drug was a revolutionary breakthrough that would change the lives of patients.

Methodology

RG+A executed a QTM® project to test multiple price points. We collaborated with BioMarin to build a patient flow model for patients treated in regional genetics centers. We worked with BioMarin’s and our own KOLs to estimate how much Kuvan successful patients at higher and lower doses would purchase, and how much every patient would purchase as part of the personal testing necessary to determine whether Kuvan would work.

For our qualitative inputs, we interviewed triad consisting of treating physician, dietician, and patient or caregiver. The goal of these triads was to determine interest in Kuvan and the role price would play in the decision whether to take the product. Separately, we conducted telephone interviews with pharmacy and medical directors at insurers and PBMs.

Finally, we built a market flow model and populated it at four price points: $0.10, $0.15, $0.20, and $0.30.

RESULTS

The study revealed the need for a tremendous amount of market development. Most geneticists would leave the treatment decisions in the hands of dieticians, who distrusted medications and pharmaceutical manufacturers. Caregivers and patients were reticent to expand their diets until they trusted the medicine and manufacturers, which they felt would take years.

No one was sensitive to price, except for a handful of KOLs. Once they understood market development needs, they were amenable to any price that would cost the healthcare system less than $100,000 per patient year.

GUIDANCE

We determine that for a 100 lb. child with 80% compliance, annual cost at $0.29/mg would be slightly over $99,000. We recommended this price to BioMarin, and supported commercial management in selling it all the way to the Board of Directors.

ACTION

BioMarin set the launch price at $0.29/mg, but did not make the pricing decision public until after approval. On the day of approval, BMRN stock increased 6.7% based on news of the approval. It increased another 20.2% in the after market once the price was announced.

The incremental revenue from the higher price supported creation of a patient registry, extensive education, and an array of market development activities.