In a new report, consulting company McKinsey says diagnostics companies will have to combine advanced analysis of genomic data with electronic medical records, effective reimbursement strategies, and full data-regulatory compliance in order to make the most out of a personalized medicine market that is expected to reach $140 billion in value by 2026.
The costs of DNA sequencing are dropping and the technology is becoming more and more accurate, the report notes. Further, precision medicine is being bolstered by the development of a growing number of targeted therapies and the recognition that diseases are heterogeneous. Despite the advent and rapid growth of whole-genome sequencing, McKinsey expects multi-gene NGS to remain the largest segment of the market over the next five years, with WGS likely to catch up in the next 10 years.
With that in mind, providers of diagnostic testing services can create value in many ways, McKinsey says. "Revenues from pharmaceutical companies, consumers, or payers are clearly tangible, while the potential value of additional insights from collected data is intangible. In this era of bioinformatics, the wealth of data that diagnostic tests generate has become a new option value, like oil-exploration leases, to power the value and strategy of businesses," the report adds, citing companies such as 23andMe as an example.
In the US, the revenues of genetic testing service providers come primarily from reimbursements by public and private payers.
McKinsey cites three major market trends that it believes will affect the market for genetic testing. "Data integration and analytics to realize the value of data have become increasingly important for the healthcare-delivery value chain," the firm notes. "Payers are facing increasing pressure on costs and looking for new opportunities to control them. The US reimbursement landscape, which drives the profitability of most diagnostics players, is gradually evolving."
Given those trends, the report adds, and given McKinsey's view that genetic testing is one of factors that will continue to drive the pace of precision medicine, diagnostics companies looking to gain first-mover advantages will have to integrate existing big genetic or molecular data with electronic medical records — in accordance with data privacy laws — to validate tests clinically and analytically through real-time advanced analytics.
The report further adds, "What does it take for a diagnostics player to lead its competitors in the evolving reimbursement paradigm? The future winners will maximize the data-integration opportunities afforded by electronic medical records. This integration suggests to physicians an appropriate diagnostic-test-ordering opportunity with minimal disruption to the clinical-care work flow, and automates the critical preauthorization step that converts reimbursement opportunities to revenues. These diagnostic companies will also develop a substantial knowledge base of publications that demonstrate medical necessity, recognizing that regulatory approval is only the first step in creating evidence for payers."
Finally, McKinsey says, innovative diagnostics companies will have pragmatic product development plans maps that account for NGS with targeted gene-interpretation panels in the near term and more nuanced whole-genome approaches in the long term. "While the future of personalized medicine belongs to big data from genomics and even proteomics, the present revenue realities in genetic diagnostics are still focused on small gene panels," the firm adds.