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Dec 1, 2011 (Vol. 31, No. 21)

Reimbursement in Personalized Medicine

Payer Acceptance of Molecular Diagnostics Remains a Constant Battle with No Relief in Sight

  • Partnerships

    Despite the great promise of personalized medicine and molecular diagnostics, “it’s hard to find a business model that works in real life,” according to Stephen Little, Ph.D., vp for personalized healthcare at Qiagen. “For tests to be useful, they must be validated and information must be actionable. Gaining validation is quite expensive, and markets aren’t that large.” With the current reimbursement model, many companies can’t afford the needed studies.

    To overcome that hurdle, Qiagen is working with the pharmaceutical industry. In developing a companion diagnostic for AstraZeneca anticancer agent Iressa™ (an EGFR inhibitor), “we get the EGFR testing market, and AstraZeneca gets the value of the treatment market, so we meet the requirements of market development in a very controlled way,” Dr. Little said.

    “Another area of activity we’ve seen, especially last year, is the integration of molecular diagnostics into a larger suite of services to capture value from that, such as Nestle Health Science’s (www.nestlehealthscience.com) acquisition of Prometheus Laboratories last May,” Rosamond added. “That acquisition moved Nestle into gastrointestinal diagnostics and complemented its nutritional solutions business.”

    “Economics, whether for investors or payers, determine the markets likely to be pursued. Few look at the long-term cost of disease,” Stewart said. Therefore, companies must balance the cost of the therapeutic against the cost of a diagnostic. “As technology improves, the economic equation changes.”

    As Dr. Little added, “It’s never been about the cost of doing the test, but the cost of obtaining information from it.” He suggested that the next big opportunities lie in oncology and “maybe, neurological disease.” The key, he said, is to target diseases in which early detection can make a clinical difference.

  • Outside the U.S.

    Dr. Little predicted that personalized medicine will make its greatest initial inroads outside the United States. “Much of this will be paid for outside the U.S. first. Our (U.S.) system is extremely complex.”

    Investors are beginning to understand this, too, and are seeking international opportunities. PwC’s Rosamond reports interest in American companies exporting tests to Europe because they think it’s easier to deal with a single payer—despite the fact that payment is made by region. Likewise, European companies are interested in entering the American market because of its receptivity toward innovation—despite significant reimbursement hurdles.

    Every region has challenges, panel members said. They noted that payment mechanisms in the U.K. effectively prevent molecular diagnostics from being adopted. In Asia, they pointed out many regulatory systems that are not only vastly different from the EU, but vastly different from each other. One speaker says China’s seemingly capricious SFDA makes it quite difficult to manage risk. Another termed China’s intellectual property situation “dreadful.”

    In Japan, the reimbursement system is effective, but the regulatory system was termed egregious by one panelist, citing a patent that was recently awarded on an application submitted 15 years ago.

    Personalized medicine is disruptive technology that runs counter to the systems and practices currently used by providers, payers, and regulators. Overcoming the perverse incentives is possible.

    How is your company overcoming reimbursement hurdles for molecular diagnostics in the U.S.?

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