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Payors See 'Marginal' Return on Personalized Medicine Investment

WASHINGTON, DC — A new Deloitte Center for Health Solutions report has shown that payors reimbursing for genetic tests to guide treatment see a "marginal" return on their investment.

The study, called "The ROI for Targeted Therapies: A Strategic Perspective Assessing the Barriers and Incentives for Adopting Personalized Medicine," showed that "all stakeholder groups experience a positive ROI under certain conditions, although payors received only a marginal benefit and that is after six years."

By comparison, "the group that consistently experienced a positive ROI across all scenario conditions was the consumer," the report showed.

To arrive at their findings, which were unveiled this week at a conference here hosted by the Personalized Medicine Coalition, Deloitte investigators developed a return-on-investment framework using data from 75 published articles culled from among 300 papers. The report focuses on four stakeholders — consumers, biotechnology/pharmaceutical companies, diagnostic companies, and payors — and presents the potential costs and benefits they might see after investing in personalized medicine.

The authors specifically investigated stakeholders' ROIs under two scenarios: investing in diagnostic tests that alter the standard course of therapies, and in new drug/diagnostic combination product.

Under the first scenario, consumers are likely to see a return on investment within the first year, the report found. For patients, the ROI will increase "over time due to the alteration of the current course of therapy, either because no therapy is required, or because they are better informed about a high risk of disease recurrence," according to the study.

Diagnostic firms likewise stand to benefit by making "a sale for every customer tested."

In this scenario, however, payors and pharmas aren't likely to fair as well.

According to the report, this group stands to "consistently" experience a negative ROI since diagnostic tests that change the course of therapies will invariably segment the market for cash-cow drugs.

Payors, meantime, can expect to develop an ROI over a six-year period. "This is a substantial financial challenge for commercial payors, given the annual turnover rate in member populations," the Deloitte investigators state. "Public payors can realize a positive ROI if their members' average tenure is over 6.35 years."

At the PMC conference, James Utley, VP and medical director of the HMO provider Coventry Health Care, noted that payors take on additional risk by investing in DNA-guided medicine, and must account for tests that yield false results, for labs that have improper quality control, and for physicians ordering tests unnecessary or inappropriately.

Utley emphasized that in order to reimburse for a genetic test, payors need to see that the technology improves patient outcomes and is generalizeable in the "real world setting."

In the second scenario, in which stakeholders invest in interventions resulting in a new targeted therapeutic using a drug/diagnostic combination product, patients receive a positive ROI once the initial exposure to the therapy exceeds initial adverse events, life-course costs, and quality-of-life-year scores.

Biotech/Pharmas also benefit in this instance "due to the addition of the targeted therapy to the standard treatment, which produces new sales revenue," the report found. The study added that ROI to drug companies are particularly meaningful if using genomic technologies helps to reduce the length and expense of clinical trials.

Despite the limited ROI to payors, the report advises payors "to factor in personalized medicine products into the equation as the employer-sponsored model evolves into a retail health insurance model, providing the opportunity to include customized products.

"Plans may also benefit as personalized medicine may help slow the advancement of conditions and diseases that, left untreated, result in more expensive acute care interventions and institutional care," the report states. "Additionally, they may also desire government subsidies, premium tax reductions and abatements to make coverage of personalized medicine more profitable."

Ultimately, policymakers can help change the cost and benefits calculation for stakeholders and encourage investment in personalized medicine, the report concludes.

"Policy makers will need to consider incentives for commercial health plans to adopt personalized medicine by leading by example (for example, reimbursing these technologies)," the Deloitte authors state.


A more comprhensive version of this article appears in today's issue of Pharmacogenomics Reporter.

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