Warranties could smooth path for gene therapies, other high-priced medicines

Octaviant partnering with Marsh to offer transferrable warranties


Published online May 9, 2023 at BioCentury
By Steve Usdin, Washington Editor
Download PDF

Octaviant Financial partnering with Marsh to offer transferable warranties

Gene therapies and other expensive medicines should come with warranties that provide compensation, including for patients’ out-of-pocket costs, if they don’t perform as anticipated. That’s the idea behind a line of business that Octaviant Financial, a financial services company, and Marsh, a multinational insurance brokerage, launched this week.

The two companies have negotiated a warranty program with a gene therapy manufacturer that could be rolled out this year, if the company’s product is approved, Emad Samad, president and CEO of Octaviant Financial Inc., told BioCentury. Information about the therapy and the warranty will be disclosed after approval, he said.

A warranty could help overcome one set of barriers that have limited uptake of transformational therapies: uncertainty about how well and how long advanced therapies will perform.

Even if a therapy that costs over a $1 million was completely effective for 95% of patients, payers could balk at the notion that they may have to pay for one of the 5% of patients who doesn’t benefit. And while gene therapies and other advanced therapies may be priced based on the assumption that they will provide durable benefits to patients, they are approved based on relatively short trials and there hasn’t been enough experience with the technology to know how long benefits will persist.

Aspects of the warranty model might fit into the U.S. commercial and regulatory landscape better than alternatives such as performance-based rebates or discounts that are typically negotiated separately with each payer.

Warranties, if they are signed with the end-payers, such as employer-provided health plans, comply with a rule CMS issued in 2020 that allows companies to avoid running afoul of the Medicaid best-price requirement, Samad said. “A warranty has nothing to do with the price. It’s not a concession in price like a rebate.”

The warranty for a specific product will be crafted on a bespoke basis and will be offered with each sale, Samad said.

Octaviant and Marsh, a business of Marsh McLennan (NYSE: MMC), work with manufacturers to define three key elements: how long the warranty will last, the circumstances that will trigger payment, and the amount of the payment. Marsh acts as a broker, not as the insurer of the warranties.

While each warranty will be different, in general Octaviant recommends a three- to five-year term.

Defining the outcomes that define success or failure is one of the most difficult aspects of the process, Samad said. To ensure that the necessary data is collected, the company encourages its pharmaceutical clients to embed in the warranty a clinical protocol.

The benefit trigger needs to be meaningful to all parties, Eddie Albers, U.S. life science industry practice leader at Marsh, told BioCentury.

“It needs to be meaningful to the payer or the employer group because if you’re providing a piece of paper that ultimately is never going to be used, then what’s the point? With Octaviant, we help define, price and model the benefit trigger to make sure it’s meaningful to both the end user and the manufacturer.”

The warranties, Albers and Samad said, will be transferrable.

They can be coupled with schemes that spread payment for high-cost therapies over time which can also be transferred among payers.

If the warranty concept is successful, it could be applied outside of gene and cell therapies, including to high-cost specialty drugs, Samad said.

BioCentury Inc.

BioCentury’s mission is to provide value-added business intelligence & analysis for life science companies, investors, academia and government on the strategic issues essential to the formation, development and sustainability of life science ventures.
+1 650-595-5333; Fax: +1 650-595-5589
+1 312-755-0798; Fax: +1 650-595-5589
+1 202-462-9582; Fax: +1 202-667-2922
+44 (0)1865-512184; Fax: +1 650-595-5589

BioCentury®; Because Real Intelligence is Hard to FindTM; BCIQTM; The BioCentury 100TM; and The Clear Route to ROITMare trademarks of BIOCENTURY INC. All contents Copyright © 2023, BIOCENTURY INC. ALL RIGHTS RESERVED. No part of BioCentury’s Publications or Website may be copied, reproduced, retransmitted, disseminated, sold, distributed, published, broadcast, circulated, commercially exploited in any form or used to create derivative works without the written consent of BioCentury. Information provided by BioCentury’s Publications and Website is gathered from sources that BioCentury believes are reliable; however, BioCentury does not guarantee the accuracy, completeness, or timeliness of the information, nor does BioCentury make any warranties of any kind regarding the information. The contents of BioCentury’s Publications and Website are not intended as investment, business, tax or legal advice, and BioCentury is not responsible for any investment, business, tax or legal opinions cited therein or for any decision made or action taken in reliance upon such information.

All use of BioCentury and its contents by current subscribers is governed by the BioCentury User Agreement and by all

others is governed by the BioCentury Terms of Use, unless a written agreement to the contrary has been executed by BioCentury Inc.

USE OF IMAGES: Certain Images used in BioCentury Inc.’s Publications, Video Content, Websites, Services, Notices and/ or Marketing Materials are licensed from Getty Images (US), Inc. Any such image of a person or object so displayed is being used for illustrative purposes only and any such person or ob- ject depicted, if any, is merely a model. For more information see “Use of Images” found under the “Legal” section on the footer of the homepage at

PRIVACY & ADVERTISING: In accordance with its Privacy Policy, BioCentury does NOT sell its customer information or usage data to third parties. BioCentury sells advertising in its BioCentury product emails and on its website. BioCentury is pleased to acknowledge its conference and events partners and sponsors through promotional announcements, on our web site, at our events and in our product emails. BioCentury also provides advertising opportunities to partners, sponsors, and advertisers through stand-alone emails to our community.