The economic case for precision medicine

Figures & data

Table 1. Glossary of key terms.

Term	Definition
Cost-effectiveness analysis.	A method of economic evaluation that compares the expected incremental cost and health outcomes derived from relevant alternative health technologies [10].
Cost-effectiveness plane.	A plot to illustrate the incremental outcomes derived from an intervention health technology versus a relevant comparator [43].
Cost-effectiveness threshold.	The additional cost that must be imposed on the budget for health care to displace one QALY [30].
Decision-analytic model.	A series of mathematical relationships that represent the progression of a patient’s diagnosis or disease and the impact of a health technology on diagnosis and/or disease progression. Model-based cost-effectiveness analyses can synthesize all available evidence to inform resource allocation decision-making [51].
Decision uncertainty.	The probability of recommending a health technology that is not cost-effective [35].
Heterogeneity.	The variation in expected costs and consequences that can be explained by patient-level characteristics [37].
Methodological uncertainty.	The uncertainty with respect to the appropriate methods of performing an economic evaluation [83].
Microcosting	Estimation of the specific resources and associated unit costs of a health technology [71].
Opportunity cost.	The (health) benefits forgone due to a change in the allocation of health care resources [30].
Parameter uncertainty.	The uncertainty in the true value of each input within a decision-analytic model [87].
Structural uncertainty.	The uncertainty with respect to the structure (care pathways, model type) of an economic evaluation [86].
Quality-adjusted life years.	A generic measure of outcome that has reference points of one (for full health) and zero (for death) [33].
Reference case.	Pre-defined preferred criteria for performing an economic evaluation [84].
Value of information.	A set of methods to quantify the value of further research to reduce decision uncertainty [89].

Table 2. Case studies of precision medicine.

Diagnostic test and source of heterogeneity	Relevant population and decision	Potential source of value	Challenge when establishing the economic case
Companion diagnostic for activating mutations of epidermal growth factor receptor tyrosine kinase.	To inform the prescribing of gefitinib for patients with non-small cell lung cancer.	Improved clinical effectiveness.	Limited evidence from test result to cost and health outcomes for all diagnostics.
Thiopurine S-methyltransferase mutation genotyping or enzyme phenotyping.	To inform the prescribing of azathioprine for patients with eligible autoimmune diseases.	Reduced adverse drug reactions.	Clinicians may implement testing strategy imperfectly.
Assays to detect anti-drug antibodies and to measure drug levels.	To inform the prescribing of monoclonal antibody tumor necrosis factor-α inhibitors for patients with eligible autoimmune diseases.	Improved health outcomes and/or reduced health care resource use.	Different permutations of multiple tests are possible; Position of tests in care pathway may be uncertain; The cost of novel testing strategies may be unknown.
Next generation sequencing gene panel test.	To inform the diagnosis of inherited retinal dystrophies.	Improved diagnostic accuracy and potentially reduced health care resource use.	Capacity constraints may restrict the number of tests performed; Non-health consequences may be considered by decision-makers.

Table 3. Decision rules for relative cost-effectiveness.

Decision Rule	Formula
Incremental net monetary benefit
Incremental net health benefit

λ: cost-effectiveness threshold; Q₁: expected consequences derived from new technology, Q₀: expected consequences derived from comparator technology; C₁: expected cost derived from new technology; C₀: expected cost derived from comparator technology. Equivalent decision rules can be expressed as incremental net monetary or health benefits [34,35].

Figure 1. Three incremental outcomes consistent with a positive net benefit.

The cost-effectiveness plane [43] illustrates the incremental costs (Y-axis) and incremental consequences (X-axis) between a new health technology (for example, a precision medicine) and a relevant comparator (for example, current practice). The dashed line through the origin of the plane represents the cost-effectiveness threshold. Incremental outcomes that are below the dashed line graphically have a positive incremental net health benefit (see accompanying table). The figure illustrates that different combinations of incremental outcomes are possible for a precision medicine to be a relatively cost-effective use of health care resources.

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