Thomas Nifong, M.D. executive vice president Definiens

Companion diagnostics can help validate the price of drugs for patients and impact costs in the whole system.

Cancer treatment costs are on the rise, and in many cases doctors, insurers and patients must now decide whether the cost of a drug is worth the benefit it provides. There is significant debate around why drug costs are so high and how the industry can lower pricing to make treatments more affordable. However, given the extremely high cost of drug development, price points are unlikely to decrease in the near term. Thus, the industry’s focus should actually be on enabling physicians to prescribe drugs to only the patients they know will actually benefit from those treatments—the essence of personalized medicine.

One major factor for the high cost of drug development is that only a small percentage of drugs successfully make it through clinical trials. A recent Nature Biotech study showed that only one in 10 drugs actually makes it to market.i  To further break it down, only 32% of drugs have a probability of making it to Phase III trials, and of those only 60% will go onto FDA approval—where they may or may not be approved.ii  Since Phase III drugs require a substantial financial investment, it’s extremely costly when they fail late in the development process. Ultimately, each successful drug that goes to market must cover not only its own R&D costs, but the costs for all the unsuccessful drugs as well.

Additionally, while personalized medicine holds the most promise for patients and for reducing overall costs in the system, it can actually contribute to higher individual drug prices. Whereas pricing used to be based on blockbuster drugs marketed to large markets, it’s now based on targeted drugs for more segmented populations—meaning each drug has a smaller market in which to recoup its R&D costs.

Given these factors, drug costs will continue to be high for the foreseeable future. Thus, the only feasible way to reduce costs in the system is to work toward prescribing drugs to only patients who will likely benefit. To achieve this, better diagnostics must be developed.

Companion Diagnostics

Companion diagnostics not only help doctors prescribe more effective treatment regimens, but can also help validate the cost of drugs for patients and impact costs in the system as a whole. 

Drug Discovery and Development

Leveraging diagnostics in order to reduce development costs is an important first step. Diagnostic tests can help reduce R&D costs in a couple of ways:

  1. They can help identify and suspend failed drug candidates earlier in the pipeline. Over 50% of drugs that fail in Phase III do so because of insufficient efficacy.iii  Biomarker testing can help identify lack of efficacy, enabling pharmaceutical companies to halt unsuccessful drugs earlier in the process and achieve significant cost savings.
  2. They can improve the success rate of drugs that do move forward. Diagnostics help identify patients that will most likely benefit from the associated drug. They thus allow pharmaceutical companies to conduct studies with enriched populations of patients. For example, instead of enrolling 2,000 patients in a trial, a pharmaceutical company may only need 1,000 or fewer qualified patients. The cost of research per patient on a Phase III oncology trial can average $75,000 to $125,000iv, representing hundreds of millions of dollars by the time a drug reaches the market, so smaller trials can significantly reduce R&D costs.

Treatment Decisions

That same diagnostic test developed for an enrichment study can ultimately become the companion diagnostic for the approved drug. These tests enable doctors, patients and insurers to make more informed decisions about investing in treatment options, and can reduce costs dramatically. For example, in the case of colorectal cancer, it’s estimated that using KRAS testing could save the U.S. healthcare system more than $600 million annually by avoiding unnecessary treatments.v

With personalized medicine, there may be a relatively small treatment population and a high cost associated with each specific drug, but it’s important to consider the total cost of healthcare—by using diagnostic tests to provide the best treatment for a particular patient, the cost of an optimized treatment regimen will be lower and the overall financial burden on the system will be reduced.

Current State of Diagnostics

There are of course challenges with both the development and use of diagnostics, which the industry is working to address.

Predictive diagnostic test discovery is currently heavily focused on genetic mutations. While these tests can be effective, they measure biological processes that are only indirectly related to the drug target, which is usually a protein. It’s important to expand biomarker discovery to include accurate tissue-based morphological and protein measurements, which better describe the tumor phenome and can help link the diagnostic test to the actual drug target.

Secondly, immunotherapy is a major focus area for cancer treatments currently, but there are not yet effective tests to determine which patients will best respond to these therapies. As more of these drugs come to market, cost will be a major question; however, developing companion diagnostic tests will be challenging because immunotherapy requires looking not only at alterations in the cancer cells, but also at the immune status in the tumor and in the surrounding tumor microenvironment of a particular patient.

Thirdly, challenges exist with obtaining FDA approval of diagnostic tests in a streamlined way. The current approval process is very static—once a test is approved for market, modifications cannot easily be made. If the industry’s goal is to develop more holistic tests, meaning one diagnostic test that can be used with multiple approved drugs, there needs to be an efficient way to update a test to encompass newly approved drugs or drug combinations. The industry as a whole needs to be able to adapt in a more timely manner so we can bring tests to market and support appropriate drug selection more quickly.

There are also challenges with effectively using diagnostic tests that have already been approved, especially when new drug indications are added. To illustrate, the HercepTest™ for HER2 breast cancer is a helpful companion diagnostic that measures the drug target protein (HER2), but not all people indicated for treatment by the test actually respond to the treatment. In order to address variability in response we need to further understand tumor heterogeneity and continue to refine these tests. Image analysis has been used to help standardize the interpretation of some tests. Additionally, clinicians may struggle with how to select an appropriate test for a patient. Diagnostic tests are often designed to test patients for very specific drugs. The challenge arises in the future if a clinician is faced with 20 different therapies accompanied by 20 different diagnostic tests – there needs to be a way to efficiently match the right test to the patient.

Light on the Horizon

The good news is that the industry recognizes the value of companion diagnostics and is beginning to collaborate more to develop effective tests. Historically, formal partnerships did not exist between pharmaceutical and diagnostics companies, but over the past decade that environment has changed. These companies are working more closely together on biomarker discovery for patient stratification, as well as developing and commercializing companion diagnostics. These partnerships will help guide personalized treatments for patients.

Regarding the need for greater analysis of tumors and their microenvironments to support rapid advances in immuno-oncology, studies are already underway to create immunoprofile tests for patients so we can better leverage immunotherapies.

Additionally, while genomics continue to be an important part of developing diagnostics and treatments, the industry is starting to move toward a model of looking at both the genome as well as the phenome. This combined analysis will help develop more accurate diagnostic tests by utilizing the strengths of both approaches.

All of these developments support the advancement of diagnostics and ultimately the reduction of healthcare costs in cancer. With a strong arsenal of therapeutics and diagnostic tests that connect each patient to an individualized medicine, patients and the healthcare industry will benefit dramatically.

Dr. Thomas Nifong, M.D., is executive vice president, diagnostic tests at Definiens. He has more than 15 years of experience in clinical diagnostics development and operations, laboratory medicine, and project engineering.

i  Michael Hay, et al., “Clinical development success rates for investigational drugs,” Nature Biotechnology, Vol. 32, 40-41 (January 9, 2014)
ii  Michael Hay, et al., “Clinical development success rates for investigational drugs,” Nature Biotechnology, Vol. 32, 40-41 (January 9, 2014)
iii  John Arrowsmith, “Trial watch: Phase III and submission failures: 2007–2010,” Nature Reviews Drug Discovery, Volume 10, no. 87. (February 2011)
iv  David P. Steensma, “Impact of Cancer Research Bureacracy on Innovation, Costs, and Patient Care,” Journal of Clinical Oncology, Vol. 32, no. 5 (January 6, 2014)
v  (2011, August 5). Qiagen submits second PMA for Therascreen KRAS companion Dx. GenomeWeb

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