Where is the return on investment in personalized medicine?
Although it might be debated how quickly the new discoveries in molecular biology will transform healthcare, it is widely assumed that they point towards personalized approaches to drug discovery, development and delivery. Less well understood, but no less important than the advances in science and technology that underpin personalized medicine, are the business models that will accelerate or slow the necessary investment to bring more effective and safer therapies to patients.
Unless pharmaceutical, diagnostic and insurance executives can see returns on their investments in research and development, they will necessarily remain cautious, for example, about codeveloping diagnostic and therapeutic products. Even though external forces, including the precipitous decline of new, blockbuster, one-size-fits-all drugs, increasing valuations for diagnostic products, and the escalating cost of healthcare, have all forced them to at least think about new approaches to current challenges, with a few exceptions, most companies have not yet veered far from the well-worn paths of established business practices.
According to Phyllis Whiteley, an entrepreneur in residence at 5AM Ventures, a venture capital firm in Menlo Park (CA, USA), and a Personalized Medicine Coalition (PMC) board member, there are three ‘elephants‘ in the room regarding the business models for personalized medicine. Of different sizes, they all loom large and deter investment. Pharmaceutical companies, rightly or wrongly, must still contend with the assumption that segmenting patient populations inexorably leads to smaller markets and, therefore, decreased revenues and profits. Diagnostic companies believe that, even when successful, they are not financially rewarded in proportion to the value that their tests deliver to patients because they do not share in the increased value of the therapy. And insurance companies argue that they have no incentive to reduce costs by investing in (reimbursing for) preventive care, when those returns are not likely to be seen for years, if at all.
The PMC believes that these elephants, while real, may not be as large as they seem. By providing an answer to the central question ‘What‘s in it for me?‘, the PMC believes that we can carefully usher the elephants from the room.
In collaboration with the Deloitte Center for Health Solutions (Washington, DC, USA), the PMC is seeking to answer the question: ‘What is the return on investment for my organization to adopt or invest in … targeted therapies?‘.
Based on real examples, the Deloitte Center for Health Solutions is critically examining the business models currently in practice that drive or deter personalized medicine in an effort to identify the incentives that will spur innovation in healthcare. By analyzing how costs and benefits affect the various stakeholders, we believe that we can better understand the framework that will lead to increased investment. If we understand which stakeholders have the most costs and which can derive the most benefit, we can better negotiate the environment in which key decisions are made. If there are gaps in the business models, as we believe that there are, we will be better positioned to make the case for governmental intervention to increase incentives to invest in more efficacious, safer and lower-cost healthcare, a clear public benefit.
Among those that we are considering in the USA are a research and development tax credit for the codevelopment of therapeutic and molecular diagnostic products; increased public funding for genetic and genomics research; expedited US FDA review of personalized medicine products; increased incentives for payer participation in preventive care; automatic reimbursement for FDA-approved diagnostics; and value-based pricing for new diagnostic products.
The Deloitte study will be released early in 2009 at a PMC workshop in Washington, DC (USA) entitled, ‘Personalized Medicine at the Intersection of Business and Policy: Where Do We Go From Here?‘. In addition to exploring the business models underlying personalized medicine, the conference will also consider policies outlined in the Genomics and Personalized Medicine Act proposed by Senators Obama and Burr in the US Senate and by Congressman Kennedy in the US House of Representatives.
We hope that you will be able to join us.