In late February, the Obama administration announced a number of actions designed to accelerate the development of precision medicine in the US, following the launch of the country’s dedicated Precision Medicine Initiative (PMI) launched last year. The announcement centered on the award of a number of PMI contracts involving collaborations between government agencies and the private sector, many of them focused on expanding the infrastructure for digital health. At the Whitehouse PMI Summit convened for the announcement, President Obama spoke to precision medicine’s potential to both reduce costs and improve care, suggesting that in future, there may be a role for the government to subsidise drugs effective in small populations.

The sentiment that precision medicine holds the potential to dramatically evolve healthcare is one echoed by many stakeholders, including most of the payers that we spoke to as part of our in-depth multi-client study, “Pathways to precision medicine: Navigating payer needs and healthcare systems through molecular diagnostics.” From the US to the UK and beyond, there is a general consensus that precision medicine will deliver value by increasing treatment options, improving actual outcomes, and indeed strengthening access.

At the same time, payers that we spoke to are very cognizant of the fact that with these improvements will come clear cost implications. The question as to whether and how quickly precision medicine will pay for itself is a little more complex.

In our conversations, some payers expressed the sentiment that the concept of precision medicine, particularly in oncology, has been abused in order to justify what they perceive as exorbitant pricing. This has led them to view the entire arena more skeptically, questioning to what extent existing and pipeline biomarkers positioned as being predictive truly differentiate high responders. In part, this reflects the emergence of data on the first generation of targeted therapies suggesting benefit in biomarker-negative patients. This belated discovery has occurred in HER2/neu-negative patients for trastuzumab in breast cancer, and EGFR-negative patients for cetuximab in metastatic colorectal cancer, for example.

By the same token, most payers see the greatest potential value in precision medicine in its ability to predict responders to high-cost therapies – as opposed to other applications of molecular diagnostics, such as in biomarker testing that monitors disease activity in response to therapy, or prognostic testing. This underscores the extent to which the existence of robust predictive biomarkers is likely to determine market access conditions in future.

The potential future cost savings resulting from precision medicine will hinge in part on the landscape for biomarker testing. The first generation of targeted therapies have generally relied on the “one-drug, one-test” model, requiring healthcare systems to absorb multiple testing platforms. Over time, laboratories have integrated common biomarkers into their own panels where possible, helping to contain costs. In a number of countries, however, it is still routine for manufacturers to subsidize the costs of biomarker testing associated with their targeted therapies.

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We have also seen market entry of multi-gene panel testing, facilitated by the rise of next-generation sequencing (NGS). Payers commonly express their anxieties in this arena, focused first and foremost on the potential onslaught of incidental findings – in other words, mutations of unknown significance and hence lack of actionability – associated with testing across a large selection of genes. In the US, the fact that the American College of Medical Genetics and Genomics has recommended that all labs conducting genome sequencing analyse and report any incidental findings from a published list of 56 genes has added to payer concerns. The payer fear is that reporting of this information will cause patients psychological distress and trigger multiple rounds of follow-up testing, with the attendant cost implications.

Ironically, multi-gene testing – given their desire to move on from the expensive and impractical one-drug, one-test model – is also where many payers see the most value in precision medicine, indicating a potential “catch-22” characterising the landscape for molecular diagnostics.

Many US payers have responded to the emergence of NGS and panel testing with the formulation of coverage policies declaring these tests to be investigational and hence not eligible for reimbursement. Among those payers who are early adopters of panel testing, there is a great deal of uncertainty surrounding the clinical utility of these technologies. As a result, where they have chosen to cover panel tests, payers have restricted usage to narrow population groups. Eligible patients are typically those with late-stage disease who have failed all standard treatment options.

Part and parcel of the challenge is how to actually demonstrate clinical utility from a methodological standpoint. In the UK, some payers anticipate that these diagnostics will be evaluated on an integrated technology basis, as opposed to focusing on characterisation at the individual marker level. This is in contrast to some of their counterparts at certain health plans in the US, who have formulated coverage policies specifying that analytical and clinical validity are in theory required for each biomarker and indication.

What is clear is that healthcare systems are gradually evolving to align themselves around the concept of precision medicine. How exactly it will become entrenched, and how quickly it will lead to cost savings, are less clear. In the meantime, the field is associated with a variety of opportunities depending on the particular application of molecular diagnostics, with receptivity to and market access pathways for particular technologies varying by country and healthcare system.