The Rising Tide of Personalized Medicine

Pharmaceutical CommercePharmaceutical Commerce - January/February 2009

Targeted treatments for patients may yield economic benefit for payors as well as drug and diagnostics makers

Few technologies could be more germane to the anticipated transformation of

pharmaceutical business models than personalized medicine: The nimble development of

treatments based on molecular analysis of a patient all but turns on its head the

cumbersome traditional model of pursuing high-payoff, population-wide blockbusters.

Indeed, such customization would appear at odds with any effort for which cost is a

concern. Yet a recent analysis indicates that, when viewed in the broader perspective

encompassing the healthcare industry as a whole, the benefits of such a transformation

will likely extend beyond the patients receiving the care to all key stakeholders.

Analysts at Deloitte LLP’s life sciences industry group, in conducting a


to assess

the economic value proposition of personalized medicine, found good news for patients,

diagnostics companies, and drug makers. There is benefit for payors, too, but they’ll have to wait a little longer than the other stakeholders to enjoy it.

Researchers first conducted a literature review of the cost/benefits of personalized

medicine. Some 300 articles later, they developed the basis for generating two scenarios

for how personalized medicine might affect current care processes, and the associated

costs and benefits of current therapies. In the first scenario, a personalized medicine

diagnostic test alters the standard course of therapy. In the second, such a test results in

the introduction of a companion targeted therapy. Conditions including HIV/AIDS and

breast cancer were studied.

Variations in the level of evidence reported in the literature precluded a meta analysis,

according to the report. Instead, researchers focused on case studies useful in developing a personalized medicine ROI framework.

Patients are the biggest winners

Analysts concluded that patients stand to gain the most by realizing significant ROI

within the shortest time. However, such therapies will likely be more expensive than

traditional treatments and so may be accompanied by greater upfront costs. But long-term benefits may create an incentive for adoption.

Providers will benefit due to improved patient care. But reimbursement issues will need

to be worked out with payors, who may want to factor into the equation personalized

medicine products as the employer-sponsored model evolves into a retail health insurance model, providing the opportunity to include customized products. Payors received a marginal benefit in the study, but it required six years to achieve.

Plans may also benefit as personalized medicine helps slow the advancement of

conditions that left untreated result in more expensive acute care interventions and

institutional care.

Drug and diagnostics makers, for their part, may need to consider “more virtual” R&D

activities, the report said, to address smaller markets with more targeted therapies to

reduce such costs. Manufacturers may also need to collaborate with affiliates, such as

academic medical centers and research organizations. The continued trend toward M&A

and partnerships may also pick up as personalized diagnostic companies begin being

viewed as prime investments or acquisition targets. In addition, strategies for integrating

marketing, sales, and distribution with companion diagnostics will need to be developed.

“The U.S. health care system will confront an array of challenges to expedite

development of personalized medicine. Our report examines opportunities to overcome

these obstacles, from access to capital to stimulate increased R&D, to how to justify

coverage by health plans often pressured for short-term savings,” says Terry Hisey, vice

chairman and U.S. industry leader for Deloitte’s life sciences industry group, in an


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