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In 2004, Genomic Health finally got what it wanted. It took an experienced managed care team, several published studies in prestigious journals, and evidence which demonstrated that physician treatment decisions were changing because of the diagnostic 25 to 30 percent of the time. More than three and a half years after the product’s launch, the company now has acceptance from payers representing more than half of the covered population in the United States.
“We were maybe a little naive and stubborn,” says Popovitz, who argues that to develop these tests requires investment similar to a new drug and, as a result, deserves margins to those enjoyed by drugs. “Everybody said, ‘You’re crazy. You are never going to get CMS and payers to accept a $3,500 price for a diagnostic assay.’ We sat back and said, ‘We have to,’ because the future of the whole space and the industry is predicated upon the world accepting that these tools will deliver enough clinical value.”
Despite the demonstrated promise, many still remain skeptical about the future of personalized medicine. While Oncotype DX offers a striking example of the economic benefit a diagnostic can offer, economists say personalized medicine has yet to definitively show that it can deliver the financial payoff proponents claim awaits. As more high-priced diagnostics are introduced, skeptics say it’s unclear whether they will reduce wasteful spending on one-size-fits-all therapeutics that actually don’t benefit certain patients. The new approach might just end up shifting costs now going to drugs to diagnostics, say those who remain unsure that personalized medicine will be able to deliver savings.
It’s certainly true that for personalized medicine to take hold, the payers—both government and healthcare insurers—will have to sign on. And before insurers are willing to cover the cost of new diagnostics, they will need to be convinced not only of their clinical benefit but also of their economic utility. “There have actually been very few economic studies,” says Kathryn Phillips, professor of health economics and health services research at the University of California, San Francisco’s School of Pharmacy. She has reviewed the literature and says outcome studies on Herceptin and HER2, along with studies on gene expression profiling for breast cancer, are ambiguous. “What I tell people all the time, whether they are industry people or payers, is we really need to build the evidence base regarding diagnostics,” she says.
Though Genentech can point to Herceptin as a financial success, some suggest that it may prove to be the exception unless insurance payments for molecular diagnostics are resolved. The Deloitte center’s Keckley concedes that Herceptin has been able to find a broad enough population of patients to make it economically viable. But as targeted therapeutics move further down the line toward personal customization, smaller market segments will make it more difficult to recover the R&D expense invested in companion diagnostics, he says. The government may end up having to help subsidize R&D costs in some cases, he concludes.
But despite the many obstacles, personalized medicine continues to advance. The FDA’s approval in September of a new genetic test that will help physicians determine how a patient may respond to the widely prescribed blood-thinning drug warfarin, used to prevent potentially fatal clots in blood vessels, is another step forward. One-third of patients receiving warfarin metabolize it differently than expected and experience a higher risk of bleeding. Some of the unexpected response to the drug has been tied to the presence in patients of two gene variants.
“We are moving from one-size-fits-all trial and error to ‘who is the patient and what does the patient bring to the equation’ so therapies can be targeted and health outcomes maximized” says the Personalized Medicine Coalition’s Abrahams. “That’s where the science is pushing. That’s the excitement coming out of the clinical labs. This is not controversial. What is controversial is how fast this is going to happen and how to facilitate it happening.”
In the end, how quickly personalized medicine’s day comes depends on how long it takes makers of diagnostics, their pharmaceutical partners, and the payers for their products to agree on a new calculus. In any case, the result will have to be a system that factors in both the benefits to patients and the savings created by more effective therapies with fewer side effects, when determining the value of these tests.
