Diagnostic companies may be particularly positioned to profit from personalized medicine if new payment models end up in their favor, according to a new report.
"Pharmacodiagnostics and Personalized Medicine 2009," from healthcare market research publisher Kalorama Information, says all of personalized medicine would originate in tests, but it's not yet clear where the payoff would occur for diagnostic companies to develop products over the long term.
Pharmaceutical and molecular test product combinations, known as pharmacodiagnostics, are seen as the pathway to personalized medicine, which is expected to foster earlier detection of disease and a reduction in healthcare costs and adverse drug reactions.
The traditional model of selling test kits requires the end user to be reimbursed for the test, but reimbursements for molecular tests vary. At least one test, Genomic Health's Oncotype DX, has been reimbursed for as high as its cost of $3,500.
Reimbursement for other DNA tests varies depending on the type of insurance contractor and billing strategy used. The PGx test for Wafarin efficacy remains under Medicare review and that decision is widely seen as a model for other pharmacodiagnostics. Kalorama sees this ambiguity about reimbursement as a bottleneck for progress in personalized medicine.
"Everyone wants to make personalized medicine happen," said Bruce Carlson, Kalorama's publisher. "Consumers, insurers, employers, pharmaceutical companies and governments all want it. But diagnostic companies are the primary actors, and so the open question is how they will get paid for the service they are providing others."
Given the traditional diagnostic business model, Kalorama believes there may not be enough dollars to make the enterprise profitable, no matter how popular the concept is. Even if all patients with cancer are screened with these tests, the survey sees a smaller potential market than most expect – perhaps $800 million by 2015, compared to the nearly $5 billion in-vitro cancer diagnostics industry.
This market may not produce the incentives needed for investment in test development, the study's authors said.
"If you want to unlock the entrepreneurial spirit to make personalized medicine a broad reality across disease categories, the payoff question needs to be addressed," Carlson sayid. "Either reimbursement rates will have to be increased, or test makers will have to seek royalties on sales of the end pharmaceutical for which they develop the test, or both."