SOURCE: Kalorama Information

Kalorama Information

April 22, 2009 15:56 ET

Personalized Medicine Can Work, With Greater Payoff to Diagnostic Companies

NEW YORK, NY--(Marketwire - April 22, 2009) - Personalized medicine can improve healthcare and reap large profits for diagnostic companies, but it may require new business models, according to a new report "Pharmacodiagnostics and Personalized Medicine 2009" from healthcare market research publisher Kalorama Information. Pharmaceutical and molecular test product combinations, known as pharmacodiagnostics, are seen as the pathway to personalized medicine, which is expected to foster earlier detection of disease, and a reduction in healthcare costs and adverse drug reactions.

According to Kalorama Information's research, one challenge to personalized medicine is how testing companies will be compensated. All of personalized medicine would originate in tests, but where the payoff would occur for diagnostic companies to develop products over the long term is not well established at the moment. The traditional model of selling test kits requires the end user to be reimbursed for the test, but reimbursements for molecular tests vary. At least one test, Genomic Health's Oncotype DX, has been reimbursed for as high as its cost of $3,500. Reimbursement for other DNA tests varies depending on the type of insurance contractor and billing strategy used. The PGx test for Wafarin efficacy remains under Medicare review and that decision is widely seen as a model for other pharmacodiagnostics. Kalorama sees this ambiguity about reimbursement as a bottleneck for progress in personalized medicine.

"Everyone wants to make personalized medicine happen," said Bruce Carlson, Publisher of Kalorama Information. "Consumers, insurers, employers, pharmaceutical companies and governments all want it. But diagnostic companies are the primary actors, and so the open question is how they will get paid for the service they are providing others."

Given the traditional diagnostic business model, Kalorama Information believes that there may not be enough dollars to make the enterprise profitable, no matter how popular the concept is. Even if all patients with cancer are screened with these tests -- a highly unlikely event -- Kalorama sees a smaller potential market than most expect, perhaps $800 million by 2015, compared to the nearly $5 billion in-vitro cancer diagnostics industry. This market may not produce the incentives needed for investment in test development.

"If you want to unlock the entrepreneurial spirit to make personalized medicine a broad reality across disease categories, the payoff question needs to be addressed," Carlson says. "Either reimbursement rates will have to be increased, or test makers will have to seek royalties on sales of the end pharmaceutical for which they develop the test, or both."

These and other market considerations, along with a review of the projects that companies are currently undertaking is contained in Kalorama Information's new report, "Pharmacodiagnostics and Personalized Medicine 2009." For further information visit: http://www.kaloramainformation.com/redirect.asp?progid=68277&productid=2128157.

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