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Personalized Medicine in 2011: Some Successes, Slow Progress, Continued Economic Woes


This article has been updated to correct a typographical error.

By Turna Ray

In the past year, the personalized medicine field continued to advance amid growing challenges from naysayers that the discipline is overhyped.

Difficulties that have long hampered the field – such as regulatory ambiguity, reimbursement challenges, and economic pressures – don't show signs of dissipating any time soon. Still, the year had its bright spots, with Roche and Pfizer both successfully launching oncology drugs – Zelboraf and Xalkori – with companion tests that the US Food and Drug Administration approved simultaneously and in record time (PGx Reporter 8/17/2011, 9/7/2011).

These personalized medicine products that successfully employed the ideal drug/test codevelopment model came more than a decade after the FDA approved Herceptin alongside its companion test HercepTest in 1998. While encouraging, many industry observers feel that much will have to change in terms of regulatory and reimbursement criteria to incentivize more drug/test combination products in the future.

On the regulatory front, the FDA made some headway in laying out a strategy for personalized medicine products by releasing two key draft guidelines: one on the development of companion diagnostics (PGx Reporter 7/13/2011) and another on the development and marketing of research-use-only and investigational-use-only in vitro diagnostics (PGx Reporter 6/8/2011).

Both guidances stand to significantly impact how drug, diagnostic firms, and labs work together to develop and market personalized treatments. As such, there are plenty of industry objections to the proposals in these draft documents (see related Q&A, in this issue).

Going forward, the agency has its work cut out in terms of developing additional regulation that brings together disparate stakeholders that are growing more fractious. In particular, the FDA has yet to lay out its plan for bringing laboratory-developed tests under its oversight. Although the agency has said it plans to issue multiple guidances on the subject, lab groups have banded to together to torpedo the FDA's plans with help from Congress.

With support and input from lab industry groups such as the American Clinical Laboratory Association, Texas Congressman Michael Burgess introduced a bill in October that would amend the Public Health Service Act to expand the Centers for Medicare and Medicaid Services' ability to oversee tests developed and used at a single lab. CMS has traditionally been responsible for oversight of LDTs, while FDA has practiced "enforcement oversight" over such tests. Burgess's bill seeks to keep LDT regulation under CMS, using lab fees to fund the agency's increased oversight responsibilities (PGx Reporter 10/19/2011).

On the reimbursement front, the Centers for Medicare and Medicaid Services and the American Medical Association made slow progress this year toward advancing a system that identifies performed tests more accurately through a new system of codes. In parallel, CMS and AMA are butting heads over the government payor's decision to require McKesson's Z-Codes in addition to AMA's proprietary current procedural terminology codes (see related story, in this issue).

Industry players, payors, and, perhaps most importantly, the venture capitalist community believe that more clarity and standardization of molecular diagnostics is paramount to the advancement of the personalized medicine field.

"If you have invested in bringing a molecular diagnostic test to market, you're stapling dollar bills to your product and sending it out on the market, because you have no idea if that test is going to be reimbursed," Susan Siegel, general partner at the venture firm Mohr Davidow, said at a meeting in November (PGx Reporter 11/16/2011). According to Siegel, the reimbursement uncertainty for molecular diagnostics is one of the main reasons venture capital funding for new personalized medicine products is running dry.

Unfortunately, the ingrained interests and complexities of the reimbursement system mean that the challenges for personalized medicine developers will likely get worse before they get better. And the implementation of new molecular diagnostics and the payment-setting process will likely get increasingly politicized in the coming election year.

On the economic front, the year saw its share of layoffs and restructuring among pharmas to make better use of limited resources. Amgen laid off 380 people from its R&D division; Pfizer made more cost cuts and layoffs amid the loss of patent exclusivity for its mega-blockbuster Lipitor; and Novartis announced it would cut 1,100 jobs in Switzerland and 900 in the US due to "governments around the world … pushing down prices of pharmaceutical and other healthcare products." Meanwhile, Abbott split itself into two separate companies – a diversified medical products business and a research-based pharmaceutical firm.

The threat of revenue losses as a result of the so called "patent cliff" may be a motivator for pharmas to invest in pharmacogenomic strategies to identify best-responder populations to drugs. Although pharmas aren't yet ready to develop companion diagnostics based on whole-genome sequencing, they are using such advanced tools in the discovery setting. Drug developers are also starting to realize the benefits of investing in molecular diagnostics that improve disease prognosis and that may directly or indirectly drive use of their treatments.

For example, after opening an integrated diagnostics division several years ago, Novartis has recently highlighted as one part of its strategy so-called "complementary diagnostics" for improving management of disease, early diagnoses, risk stratification, and therapeutic drug monitoring. Complementary diagnostics can also be companion diagnostics developed and marketed alongside a drug, or they can be drugs that improve the diagnoses and prognoses of patients in certain disease areas for which Novartis markets drugs or is developing treatments (PGx Reporter 12/7/2011).

However, as payors are coming under pressure to reduce healthcare costs, there has been an upsurge of interest in conducting comparative effectiveness research to figure out whether new medical products are truly an improvement over standard treatments. Many drug developers are working with pharmacy-benefit manager Medco or CER arms of insurance companies to identify opportunities where developing personalized medicine will be economically feasible and profitable. It is currently an open question, however, whether CER assessments will only provide naysayers with more reasons to shun new, often costly, molecularly targeted treatments.

Notably, CER conducted by the non-profit, non-governmental Patient-Centered Outcomes Research Institute has been an ongoing point of concern among personalized medicine stakeholders. While there are several personalized medicine advocates on PCORI's board of governors, none of the representatives in the institute's methodology committee are experts in the discipline. And although the integration of personalized medicine with CER has support in high places, such as National Institutes of Health Director Francis Collins, some fear that the CER mechanisms funded by the government will primarily support treatments for the general population (PGx Reporter 10/5/2011). It remains to be seen whether many of the 40 projects to be funded by PCORI will feature personalized medicine products.

Finally, this year, the patentability of genes – a legal question that stands to broadly impact the personalized medicine field – was taken up by the Court of Appeals for the Federal Circuit. In August, the appeals court ruled in Association of Molecular Pathology et al. v. US Patent and Trademark Office et al. that isolated gene sequences claimed in patents held by the University of Utah and licensed to Myriad are not products of nature and are therefore patentable — a decision that overturned a 2010 ruling by the federal district court. The court determined, however, that several of Myriad's method claims that describe "comparing" and "analyzing" gene sequences were invalid (PGx Reporter 8/3/2011).

Following that decision, in December, the American Civil Liberties Union and the Public Patent Foundation, representing researchers, patients, and healthcare providers challenging the validity of Myriad's patents, petitioned the US Supreme Court to take up the question of when genes isolated from the body to make treatment decisions are patentable. The outcome of this could significantly impact public access to genetic tests and the development of new tests.

If the courts limit gene patenting, it could allow patients to get genetic tests from multiple vendors and increase competition in the space. However, some fear that a broad invalidation of gene patents could deter investment in new personalized medicine products or force companies to depend more heavily on trade secrets – a strategy Myriad appears to be moving toward.

Top Read Pharmacogenomics Reporter Stories in 2011

1. Roche Says FDA-Approved BRAF Test Is Better Than Sanger-based LDTs, but is it Enough to Sway Labs?

2. FDA Draft Guidance on RUO/IUO Products Proposes Tough Changes for Industry Players

3. Next-Gen Sequencing: Hot as a Research Tool; Not for Qiagen's Companion Dx Strategy

4. Pfizer, Abbott Plan Parallel Filing for FDA Approval of NSCLC Drug Crizotinib, FISH Test

5. Medco to Compare Effient vs. PGx-Guided Plavix in Heart Patients on Prevacid

6. 2010 in Review: Genomic Medicine Experiences Growing Pains of Regulation, Economics, and Litigation

7. At Appeals Hearing, Myriad Outlines Stance on BRCA IP Rights for Whole-Genome Sequencing

8. Prostate Cancer Prognostic Test Maker Aureon Biosciences Closes Shop

9. Oncotype DX Study Underscores Challenges for Patients, Doctors in Interpreting Genomic Test Results

10. Adding Alzheimer's Risk Option, 23andMe Revives Questions on Utility of DTC Genomics

Have topics you'd like to see covered in Pharmacogenomics Reporter? Contact the editor at tray [at] genomeweb [.] com.