Orphan Drug Pricing Sustainability

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Project ThumbDue-Diligence: Orphan Drug Pricing Sustainability
Private Equity Firm, Life Science Division

VOI Consulting was contacted by a private equity firm that was in the process of evaluating a major investment in a specialty pharmaceutical company. This pharmaceutical company had recently received FDA approval for an orphan drug aimed at a serious rare disease with a combined developed market population base of fewer than 50,000 patients. In order for the company to recoup its R&D investment and reach profitability, this drug carried a price of well over $100,000 for an annual course of treatment. The private equity firm needed to determine whether this price would be acceptable to private insurance companies in the U.S. and government reimbursement authorities in other major markets.

As part of this due diligence process, VOI identified analogous high-price orphan drugs and analyzed their formulary penetration rates, patient copay requirements and reimbursement status around the world. In addition, we interviewed high-level executives in major insurance companies and key government agencies in the relevant countries regarding their stances on orphan drugs in general and this new drug in particular.

We found that the severity of the disease, the lack of alternative treatments and the relatively small population affected would lead to coverage among the majority of major payers. Notably, however, we identified “soft denial” tactics such as delays in reimbursement review and increased coinsurance rates. After incorporating these tactics into forecasts, we found that sales growth would be both lower and slower than had been projected by the private equity firm or the potential investment target.


Our client proceeded with the investment but used our revised forecasts to obtain more favorable terms from the target company.


Competitive intelligence, market research, payer/reimbursement assessment, brand drug pricing, orphan drug pricing.

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