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Health Industry Insights Analyst Outlines Economic Options for PGx

Name: Alan Louie
Position: Research director at Health Industry Insights, 2005 – the present
Background: Senior manager in charge of applied biotechnology laboratories at Arthur D. Little, 1997–2004
Education: PhD in biochemistry, University of California Riverside, 1984

Market research firm Health Industry Insights examines the healthcare landscape for developments affecting the efficiency of the pharmaceutical industry, major payors, and major healthcare providers, as well as firms in the information technology field.
This month, HII released a report that assesses how “personalized health” — HII’s term, which includes pharamacogenomics — will eventually fit into the broader healthcare market.
Pharmacogenomics Reporter spoke to Alan Louie, lead author of the report, The Personalized Health Paradigm: Transforming the Pharmaceutical and Healthcare Industries for the 21st Century, to find out what he and his colleagues believe will be important to the field.
The report says that personalized medicine cannot meet traditional clinical development metrics. What are the options for the economics of personalized medicine?
The nature of personalized health is differentiated from personalized medicine, because personalized medicine is largely framed within the pharmaceutical or life-science part of the value chain … We’ve coined the term ‘personalized health’ because we feel that the knowledge base actually goes across to the hospital information systems area, as well as in the payor reimbursement area.
Interestingly enough, as it really gets going, a lot of the key drivers that are making [personalized healthcare] happen are actually going across those areas. I mention profiling [in the report] as a new way that the discovery scientists are figuring out ways to try to connect things like dosing on a personalized basis.
But to some extent, this is getting pulled forward by the payors, who are recognizing the value, and so even though some of the profiling diagnostics are not yet FDA approved, they’re still occurring because of the fact that they’re being paid for — they’re being reimbursed. And so, that’s why it goes across the entire value chain from our perspective, and that, to some extent, differentiates us.
To answer more directly, the fundamental aspect of the clinical side, or essentially the pharmaceutical development side, is the issue that with personalized health or personalized medicine, the number of people that would be associated with the disease goes down. It starts to look more like orphan drugs, it starts to look like populations [of patients] which don’t, on an annual basis, have the potential to generate $1 billion-plus in revenue, which is the blockbuster model.
Because of that, the fundamental nature of segmenting people into smaller groups means that it doesn’t fit the traditional model. To some extent, there may be an offset in costs, based on improved efficiencies, and possibly more directed submissions into the FDA. But it’s still not proven yet that the model works based on conventional metrics.
If it still costs $800 million to $1 billion, but now the market, instead of $1 billion, is only $300 million to $500 million, it says that your return on money is going to be a lot slower. [That] may decrease the amount of investment that supports it. So there are going to have to be a lot of interesting things that have to change in order for it to happen effectively.
Will the economics ever work out to become competitive with the blockbuster model?
Right now, we actually see that in some things like orphan drugs, where there’s a high degree of efficacy, and [that] therefore justifies premium pricing. And so, in the near term you’re going to see more of that.
The problem with that is that it’s unsustainable over the broader industry. Providers and payors can’t afford to pay for that. And interestingly enough, within the United States, the government is becoming a fairly major payor in the space, approaching 50 percent — I think they’re at 40 percent at this point. It eventually could result in a shift relative to nationalized medicine that you see in other countries. So there are some interesting areas there that haven’t been worked out, as to whether they’re effective tools.
[L]ook at countries like Canada, with their national healthcare service — one, it’s a two-tiered system, but two, they have the access and [the] availability of technology, which provides better care, is somewhat limited. [In the United States,] the technology is accessible, people have fairly reasonable access to cutting-edge technologies and drugs because they have proven value, or at least differentiated value, and they get asked for.
Eventually, it should work out. The pathway to it, I think, is going to be very interesting, in part because I still see a lot of the risks being borne by the biotechs, as compared to the pharmaceutical companies. So, they’re going to take a lot more of the riskier approaches, and then once it gets proven, they’ll get swallowed, and then the model will be transformed.
When will personalized medicines become sustainable?
Things are coming. The infusion of knowledge is always going to be progressing, so you’re seeing information that begins to differentiate patients from a therapeutic standpoint — essentially, it is a thing that it will not be possible to go backwards from, because we’re getting more and more knowledge. Things like SNPs are enabling very straightforward differentiation of patient status — the access and better understanding of the genetic sequences from the Human Genome Project are essentially enabling us to figure out what the genetic basis is for many differences.
We’re looking at developments in Alzheimer’s research, which looks very directly at specific interventions that are based on knowledge that you can [gather from] look[ing] non-invasively in the human brain using things like molecular imaging.
So, we’re looking at the infusion of knowledge across the board. The question as to whether it will all fall into a single model — I doubt it. There are going to be a few more blockbusters out there. There aren’t as many gross unmet needs in the healthcare industry — they’ve got drugs for a lot of things, and some of the more rare things are fairly aggressive, and that’s where things like cancer are now being responded to.
As a result, when you look at cancer, you start to recognize that cancer is not a disease. It’s a conglomeration of many different things that are going on in the body that go wrong at one point or another. So, that differentiates it within the framework of a personalized paradigm.

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