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Complex Market Could Hinder Adoption of PGx Unless Stakeholders Abandon Current Models

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BOSTON — Molecular diagnostics and pharmacogenomics will enter the marketplace rapidly only if stakeholders — such as drug makers, diagnostics companies, and payors — can figure out how these new technologies meet their needs in a complicated marketplace, several speakers here at the IBC Molecular Diagnostics and Personalized Medicine conference said this week.

The demand for personalized medicine is very real, said Joe Ferrara, vice president of Boston Healthcare Associates and chair of the conference, during his opening talk. "We know payors are very interested in this concept — and therefore will broaden demand" when more effective, personalized medicines are available that will improve patient compliance.

But in a marketplace in which the interests of these major players do not always coincide, the rollout of personalized medicine is going to be bumpy. Pharma is heavily invested in the blockbuster model, even as that model is creaking under the drug market's strain. Molecular diagnostics companies are at the forefront of personalized medicine, but they face a reimbursement system created to address simpler and less expensive-to-create tests. At the same time, payors are ill-equipped to deal with the special needs of personalized medicine, even though it might mean significant savings in the long run.

In its adoption of pharmacogenomics, "very likely, big pharma is going to take both approaches," Ferrara said. "They're not going to abandon the blockbuster model."


"I would argue that flexible and value-based pricing reimbursement could provide the manufacturers [of combination products] with a stronger incentive to evaluate the business cases for development of diagnostic therapeutics."

Instead, big pharma companies will likely use molecular tools to reduce the time to drug discovery and development through shorter trials, quicker regulatory reviews, and the early removal of unpromising drugs from the pipeline. "They'll continue to pursue blockbusters more efficiently … and will likely take a parallel opportunistic approach to PGx," Ferrara said.

One problem that pharmacogenomic and personalized-medicine approaches pose for drug makers is that it is not easy to predict which drugs are best for pairing with a diagnostic. In the case of EGFR inhibitors, a class of drugs that is easily the most prominent example of personalized medicine, the co-development of diagnostics has been haphazard.

The availability of AstraZeneca's Iressa has been greatly diminished because the drug failed to show a survival benefit for a broad patient population, so the company is now investigating the possibility of identifying responders through the use of a diagnostic.

At nearly the same time, ImClone is engaged in trying to remove from Erbitux's label a statement indicating the drug for EGFR-positive patients, which the company views as a limitation to its potential market. "We have an ongoing study that may lead to removal, assuming positive data," said David Pitts, an ImClone spokesperson. The company also has "an ongoing study in EGFR-undetectable patients, which was a [post-market] commitment to the FDA, to remove" testing from the label, he said. Another study featuring EGFR-untested patients is currently under consideration by the FDA, Pitts added.

Smaller, nimbler pharma companies may stand to benefit from the market situation if big pharma won't give up on the eroding blockbuster model, said Ferrara.

In the case of diagnostic-therapeutic combination products, the market presents an uphill battle, said Lou Garrison, a professor of pharmacy at the University of Washington, during his talk. "There are limited incentives to develop a linked therapeutic-diagnostic at this time," and current examples, such as Herceptin, tend to be science driven rather than market driven, Garrison said.

Garrison presented five basic model Rx/Dx markets in which he estimated the gain in value for drug companies, diagnostics companies, payors, and patients under different intellectual-property and pricing rules. In the companion-product example, which is essentially the situation that exists today, diagnostics makers are saddled with a fixed price for a given test while drug makers can raise the price of the drug, and both are granted intellectual property rights. Under this model, Garrison noted that drug makers benefit greatly, while diagnostics companies benefit little. Another companion-product model that would allow diagnostics companies flexible pricing, however, essentially allows them to split the benefits with drug makers however the two parties see fit, Garrison said.

"I would argue that flexible and value-based pricing reimbursement could provide the manufacturers [of combination products] with a stronger incentive to evaluate the business cases for development of diagnostic therapeutics," said Garrison. However, that is only true if strong patent protection is allowed for diagnostics, because the early entry of competitors will lead to a situation in which prices eventually fall to near the cost of manufacture.

The reimbursement environment is also weighted against molecular diagnostics, said Ferrara. "Tests are brought to market for 510(k) clearance without the same lengthy FDA process for drugs, which therefore makes it difficult for payors to address coverage issues," Ferrara said.

The CPT code established for a new diagnostic determines the amount Medicare will reimburse for the test, a factor that generally underlies reimbursements by all payors, essentially setting their rates as well. In order to secure payment, CPT codes for molecular diagnostic tests are often borrowed from older, but only superficially similar procedures.

"CPT coding system and payment driven by generic analytical procedures do not take into account differing development costs for these tests," Ferrara said. "Payment for novel technologies is driven predominantly by payment for present technologies."

One tactic molecular diagnostics companies use to increase their relevance is to complement currently marketed drugs with tests offered in their own CLIA laboratories.

Ferrara said that the complicated healthcare-coverage situation greatly impedes payors from taking full advantage of personalized medicine. "Tomorrow you could have better targeted medicine based on more potent biomarkers," he said. "It is a challenge to draft coverage policy and to employ IT systems that address smaller and smaller percentages of payor memberships," and payors don't have the kind of infrastructures to keep track of and adapt to individualized healthcare, he said.

Without specific codes, such as gene-specific codes for screening tests, and in an environment where several employers and patients pay different amounts through various plans, payors have difficulty extracting value. Simultaneously, "diagnostics are a very small portion of the overall payors' bills, so for them to put a sophisticated system in place just to manage the diagnostics component would be challenging," said Ferrara.

— Chris Womack ([email protected])

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