Real World Data and Health Outcomes

Nov 29, 2012 - Nov 30, 2012, Boston

Use new Data Sources, Models and Technology to measure Real World Health Outcomes

Personalized Medicine – Where’s the Value?

Personalized medicine is beginning to revolutionize healthcare by matching patients to the best treatment options. However, this vision faces several key challenges before it truly delivers on its potential.



Fifty-four percent of physicians don’t know who paid for the diagnostic test they just ordered.

With personalized medicine expected to reach routine clinical practice in the next five years reimbursement models have failed to keep up with scientific advances.

During recent research by the Adelphi Group, physicians reported an urgent need for increased clarity on funding issues if personalized medicine is to become fully integrated into their routine practice. This finding was supported by the fact that 54% of US and 28% of EU physicians were unable to identify who funded the diagnostic tests they had ordered. Even where physicians claimed awareness of funding sources, a third believed that the diagnostic manufacturer was funding use of their own test, demonstrating the lack of clarity in this area. With additional concerns surrounding the costs and resource burden for the healthcare provider, and the fear among physicians that patients may end up paying towards their diagnostic tests, funding issues present a major obstacle to the routine use of personalized medicine. These obstacles at the physician level are indicative of a wider challenge —how to establish the true value of personalized therapies and who stands to benefit.

Pharma and diagnostic companies have tried to address this issue by experimenting with different partnership models, and they are still trying to find a suitable and replicable commercial framework for collaboration. As these alliances find their feet, they remain a long way from formulating and delivering a clear story about the value of personalized medicine to all the interested stakeholders, including payers. In the meantime, personalized medicine offerings continue to be developed without a clear understanding of what payers need in order to be convinced of their value, and how that value can be recognized through an appropriate reimbursement model.

As a result, the majority of funding models in the US and Europe are based on the cost of the technical procedure (for example through Diagnosis Related Group or procedure coding) rather than an analysis of the treatment’s clinical and economic value. There have been some notable value-based reimbursement decisions in the US, such as for the Oncotype DX breast cancer assay from Genomic Health Inc. However, in the face of the reimbursement challenge a common workaround has been for the pharmaceutical company, an obvious beneficiary of the test, to subsidize its cost. As personalized medicine evolves and more than one company stands to benefit from the result of a diagnostic test, it is clear that this model will become unsustainable.

Personalized medicine has traditionally (and justifiably) been presented as an attractive concept to budget-conscious payers under increasing pressure to rationalize treatments. Clinical and economic value could be realized by controlling the use of expensive medicines, ensuring better outcomes per course of therapy, avoiding ‘hope-based prescription’ (and associated adverse events), and determining rules for stopping treatment when the response is not adequate. However, it is important to realize that these conceptual benefits do not adequately address the reality of payer decision-making. When presented with a personalized medicine offering, a payer has a detailed, complex and interdependent set of criteria to be met: What is the cost relative to not carrying out the test? What is the return on investing in the test? How many tests are required to achieve my goal? What will it save me? If the personalized therapy offering hasn’t been designed from an early stage to answer these questions and meet these needs, the payer will not be convinced.

The need to demonstrate the value of a personalized medicine approach is even greater when the lack of evidence demonstrating long-term benefit is examined. For standardized, appropriate reimbursement models to be established, payers will look beyond both the technical parameters of the companion diagnostic, and its utility in disease diagnosis and patient stratification. The real value of the diagnostic lies in how its integration into the treatment algorithm will improve outcomes in the patient population over the long term, and whether this is achieved in a cost-effective way. An understanding of payer organizations is critical here —organizational and budgetary structures mean that the person responsible for paying for a test may not recognize any value from the result. The case for value needs to be expressed in terms that are relevant to the multitude of different payer systems, which will be encountered in a global product launch.

So how can Pharma start to address the challenges of payer engagement? As with any value proposition we must start by understanding what matters to our audience, and design the solution to meet that need. This will not be achieved if payers continue to perceive that pharma companies are product focused in their thinking and communication. Payers don’t care about the product, or even the combined product and companion diagnostic offering – they care about their budget, the population that budget is set to serve, and the pressure points and costs in care pathways which, if addressed, could help them better spend the budget for that population.

One approach to communicating the value of a diagnostic offering to payers is to look at the net value of the decisions that it will inform, i.e. the cost of the test and the cost implications of its associated therapeutic decision, compared with the costs and outcomes achieved via current standard practice. For example, a test to identify which patients would suffer from an infrequent or minor adverse event with statin therapy would have to be very inexpensive to justify its use in the general population. On the other hand, if a test might avoid the unnecessary administration of an expensive cancer drug in unresponsive patients then the value is much easier to recognize. This approach needs to translate from the global to national and regional levels; a ‘holistic’ view of net value can depend on your perspective. It remains important to demonstrate evidence in a way that payers can relate to in the context of their own decision-making.

As new targeted therapies are developed, we believe there is the opportunity for their value to be shared between payers, drug manufacturers and diagnostic providers. However, without a consistent and well-informed approach, outcomes are unlikely to benefit all parties. Situations where the value is only shared between the payer and the diagnostic manufacturer for example, with the pharmaceutical company paying the price for both, are not sustainable. Input from the medical, market access and marketing disciplines is key, but so far there are few cases where integrated payer strategy has been actively designed into the development of personalized therapy offerings. For personalized medicine to take hold in routine clinical practice this will have to change.


Extracts from a study of 446 oncologists, cardiologists, neurologists and PCPs in the US and EU designed and conducted Summer 2012 by Adelphi Group in association with CAHG and Medefield.

Thanks to Dominic Sloane for editorial support. For further information please contact Jackie.morgan@adelphigroup.com.


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Real World Data and Health Outcomes

Nov 29, 2012 - Nov 30, 2012, Boston

Use new Data Sources, Models and Technology to measure Real World Health Outcomes