Alex Philippidis Senior News Editor Genetic Engineering & Biotechnology News

From patients to payers, factors beyond science shape the economics of genomics.

2014 may have been the year the “$1,000 genome” became reality. But it’s ultimately a small piece of a much bigger puzzle, the economics of genomic medicine and translating that value into actual health benefits to patients—that will continue to vex researchers and clinicians into the new year and beyond.

The falling cost of sequencing and other tools for extracting genomic data will be more than made up by the expenses labs and medical practices will face not only analyzing the growing deluge of raw data, but clinically interpreting those results. Yet genomic economics is also being shaped by factors beyond numbers—from data quality and quantity, to patient behavior, to the actions of payers.

“It’s not the cost of the test, per se, that’s going to be driving the economic decision making. It’s how the information is conveyed to providers and patients, and how they respond to it that is a first-order concern to an insurer, or someone thinking about implementing genetics in clinical practice,” John A. Graves, Ph.D., Assistant Professor at Vanderbilt University School of Medicine, told Clinical OMICs.

Focusing narrowly on minimizing test costs, Dr. Graves said, minimizes the economic issues involved in assessing the value of genomics—without addressing perhaps the most important issue, how patient behavior may change as a result of being exposed to genomic data.

A complicating factor, he said, is that some data has yet to be fully vetted in scientific literature, such as an association between a gene and a condition or disease.

Dr. Graves cited Vanderbilt’s Pharmacogenomic Resource for Enhanced Decisions in Care and Treatment (PREDICT) project. All patients undergoing cardiac catheterization at Vanderbilt University Medical Center are tested for genetic variations that may affect their response to certain drugs. One of those drugs is clopidogrel, sold generically and as Plavix® by Bristol-Myers Squibb.

Testing has shown some patients can reduce their risks of side effects by changing from clopidogrel to ticagrelor (sold as Brilinta® by AstraZeneca) and prasugrel (co-marketed as Effient® by Daiichi Sankyo and Eli Lilly). Yet as branded alternatives, ticagrelor and prasugrel cost three to five times as much as generic clopidogrel, up to several thousand dollars a year.

Weighing off Risk

“Even given the information on maybe a higher risk for developing a stroke, or because they’re a bad metabolizer of a drug, physicians and patients are weighing off the additional risk that they might have with a given drug, versus the cost of the drug, and the other things that are working against the actual science itself alone driving the decision,” Dr. Graves said.

He said researchers are investigating how much drug-use decisions are swayed by economics—not just drug costs, but especially insurance considerations—and how information is conveyed.

“Should a patient be automatically switched to an alternative if they have a genetic disposition to be a bad metabolizer of a drug? Or should we allow the physician the choice to opt them into an alternative therapy. That’s where these questions of behavioral economics and opt-in vs opt-out strategies come into play. And we don’t have an answer on that yet,” Dr. Graves added.

For answers to emerge, long-term changes in physician training and practice will be needed, says Florence Comite, M.D., a New York City endocrinologist whose precision medicine practice, ComiteMD, designs personalized programs for individuals to prevent disorders of aging.

Those changes, she said, include seeing fewer than the dozens of patients now herded daily through most medical practices: “A physician needs the time to explain the detailed genomic information to the patient. Further, the physician needs to collect lifestyle info and much more in order to effectively interpret outcomes,” Dr. Comite told Clinical OMICs.

“We’re moving faster and faster in terms of being able to get that. And there’s a lot of agreement among groups to share data and make it public knowledge, which is fabulous,” she added. “What doesn’t exist yet is a framework or infrastructure to take all this knowledge and to effectively distill it for the physician’s guiding hand.  The physician needs to be able to translate, interpret and explain complex genomic data to the patient.”

Earlier this year came the formal launch of Google Genomics, a web tool supporting the storage, processing, exploration, and sharing of genomic data., IBM, and Microsoft are among competitors building their own genomic databases. Though technology and the reshaping of medical practice will lead to sharply higher expenses, “these companies, however, are in a position to aggregate data and offer insights that may also offset those rising costs,” Dr. Comite added.

Gurdeep Sagoo, Ph.D., epidemiologist/health economist with the PHG Foundation, says a key challenge to defining value is determining how additional gains in ‘health’ can be captured following a genetic diagnosis, as well as where full costs associated with that diagnosis are incurred.

“The benefit from genetic tests is often difficult to capture because it does not always fall within the ‘health maximizing’ framework, and the benefit is not limited to the individual undertaking the test but also other family members,” Dr. Sagoo told Clinical OMICs.

Diagnostics and Payers

Two University of Colorado researchers in 2012 reviewed the cost-effectiveness of screening non-small cell lung cancer (NSCLC) patients for drug sensitivity biomarkers, focusing on anaplastic lymphoma kinase (ALK) and its inhibitor crizotinib (marketed as Xalkori® by Pfizer).

Crizotinib’s approved companion diagnostic, Abbott’s VYSIS ALK Break Apart FISH Probe Kit cost the most at an estimated $1,400 per test, compared with reverse transcription–polymerase chain reaction (RT-PCR) at $875, and an immunohistochemistry (IHC) assay, $600. According to the study, IHC may miss 20% of ALK-positive cases at the “3+” level, and RT-PCR up to 30% of cases involving EML4–ALK, the most common ALK rearrangement in NSCLC.

Yet “an ‘imperfect’ test may be more cost-effective than a ‘perfect’ test, provided the proportion of cases missed remains less than the proportional reduction in the screening cost associated with using the ‘imperfect’ assay,” Adam James Atherly, Ph.D., and David Ross Camidge, M.D., Ph.D., concluded in British Journal of Cancer.

A 2013 study in Personalized Medicine weighed the cost-effectiveness of companion diagnostic testing for NSCLC patients compared with conventional and new treatments. That study concluded companion diagnostics may be cost-effective for treating patients with advanced NSCLC when new treatment is extremely expensive but results in a significantly improved outcome. That finding was based on an incremental cost-effectiveness of $56,829 per life of year saved, compared with new treatment.

Factors in determining the value of testing include severity of the disease state, and cost and benefits of care when it is, and is not, guided by genomic testing, the 2013 study’s corresponding author, Robert D. Lieberthal, Ph.D., told Clinical OMICs. Dr. Lieberthal is Assistant Professor in the applied health economics and outcomes research group at Thomas Jefferson University’s Jefferson School of Public Health.

“Economic models for evaluating genomic data are generally more complex than the models used to evaluate drugs, since the models for evaluating genomic data must consider both the costs and benefits of obtaining genomic data and the costs and benefits of treatments that may be indicated for based on genomic tests,” Dr. Lieberthal said.

Most private payers are likelier to pay for tests than Medicare, which reimburses for diagnostic genetic tests for patients with symptoms—but not for screening tests, unless through a national coverage decision such as the National Coverage Determination for annual mammography screening for women over age 39.

“Payers are used to paying for costly genetic tests to get a diagnosis, and understand that by doing it based on genomics rather than on individual gene molecular tests, it is more cost effective,” Debra G.B. Leonard, M.D., Ph.D., Chair and Professor of pathology and laboratory medicine at the University of Vermont, told Clinical OMICs. “I don’t think the private payers are paying on a whim. They’re paying based on evidence presented during peer-to-peer meetings. But Medicare does not seem to understand or accept this same evidence, and does not pay for the testing like private payers.”

“The Medicare reimbursement policies and practices for molecular testing and genomic testing are greatly in flux, which creates a lot of uncertainty for healthcare providers and patients,” she added.  

Diagnostics and Payers


The “$1,000 genome” may have arrived in 2014, but it’s ultimately a small piece of a much bigger puzzle—namely the economics of genomic medicine and translating that value into actual health benefits to patients. The falling cost of sequencing and other tools for extracting genomic data will be more than made up by expected higher costs for analyzing and, especially, clinically interpreting those results. Yet genomic economics is also being shaped by factors beyond numbers. 

Q. Which of these factors do you think will be most important in accelerating the economic growth of genomics over the next five years?

  • Quality of genomic data generated
  • Quantity of genomic data generated
  • Quality of interpretation of results
  • Response of patients to findings
  • Payer reimbursement decisions


Alex Philippidis specializes in biopharma business news and industry issues. Alex joined GEN in 2011 after four years at GenomeWeb, where he covered research institutes and biotech economic development topics. Previously, Alex worked more than 20 years for various newspapers covering business, science, and general news topics. He has been interviewed and quoted by news outlets that include The New York Times and the BBC. ([email protected])

This article appears in the December 10 issue of Clinical OMICs. For more content like this and details on how to get a free subscription to this digital publication, go to

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