Solving the Value Equation for Molecular Diagnostics
November 1st, 2016
Posted by Caroline Popper, M.D., M.P.H.
In this special blog post, we share insights from national genomics reimbursement expert and former Medicare medical director, Dr. Bruce Quinn, on how to create and capture value in precision medicine.
As medicine continues to become more personalized, the biggest challenges to the precision medicine market aren’t scientific, they’re economic. These barriers are drawing more attention – from payers such as United Healthcare urging MDx reimbursement reform to healthcare systems such as Cleveland Clinic which presented several views of payment redesign at their 2016 Medical Innovation Summit. A recent GenomeWeb article by Monica Heger echoed this sentiment, citing the need for partnerships and novel regulatory structures to address challenges with diagnostic test development, reimbursement, and regulation.
Moving from Volume to Value
Personalized medicine has the potential to dramatically reduce healthcare costs and improve patient outcomes. But in a market focused on volume, many payers have been slow to invest in and reimburse medical diagnostics. There are a couple of reasons for this hesitation that range from uncertainty about cost savings to difficulty enforcing standard protocols for guideline-based testing.
As this market evolves, it is clear that the industry as a whole will need to work together and agree on better processes for developing tests, securing regulatory approval, and gaining reimbursement. Several key trends will shape this market and the ability of stakeholders to gain a share: investment by pharmaceutical and biotechnology companies; a regulatory environment that clarifies and encourages new research and clinical trials; and a new reimbursement model that includes payer coverage and physician incentives to practice personalized medicine.
As these trends take shape, it will be clear that the business of health is no longer based on volume, but on value. With this shift, some stakeholders will thrive, while others won’t. Big and agile companies that are able to navigate systems that require shared risk will likely succeed in this environment. But what about others? How will they capture and create value in this new market?
While experts agree on the reimbursement and regulatory challenges the precision medicine market faces, few agree on how to capture value. To understand this, I reached out to our colleague and collaborator, Dr. Bruce Quinn, a national expert on genomics reimbursement and former Medicare medical director.
Dr. Quinn has spent extensive time thinking about what the future of coverage and payment looks like for personalized medicine diagnostics. He notes that for reimbursement to be tied to value, value needs to first be defined. To do this, there are a couple of key considerations to address:
- Value is multi-factorial and different stakeholders have different views. Payers, providers, pharmaceutical companies, patients, and diagnostic companies all have different definitions of value in this market.
- Value is not just an output, but rather, should be integrated into every stage of development. Diagnostic and data companies should seek to create value in the planning, clinical development, validation, and commercialization strategies for new products and developments.
- Value creation and outcomes should be shared. As the precision medicine market evolves, partnerships between those treating disease and those diagnosing it will emerge. Therapeutic and diagnostic companies will collaborate to create tools that capture the promise of this market while also sharing the investment and risk to develop it.
Dr. Quinn suggests that one way of looking at value is based on the very information that diagnostics produce, or their “information impact.”
Information impact is the synthesis of clinical utility, and the effect on both outcome and cost-effectiveness of any medical device that generates information. Rather than looking only at the complexity of the method, information impact is determined based on the value of the information generated.
We believe that thinking about value in terms of information impact can proactively and comprehensively mitigate reimbursement risk. As information innovators evaluate this impact up front and integrate its potential into every aspect of development – from system design to system content menu to creative (co)-commercialization strategies – opportunities to mitigate risk will emerge. With this new approach, old notions of reimbursement and one-off payments will become increasingly dated.
To create value, or information impact, in precision medicine, several industry stakeholders need to make meaningful change in the next several years.
- Diagnostic Companies. Proactively demonstrate the impact of Dx data on healthcare cost and quality both at an individual level and at the population level.
- Payers. Reallocate reimbursement across providers, therapeutics, and diagnostics.
- Pharmaceuticals. Mitigate development and commercialization risk and formulary inclusion risk using stratification to proactively identify patients likely to benefit from a drug.
- Dx and Rx Together. Position more and better information as the real source of value. Move from an exclusive emphasis on companion Dx to an emphasis on complementary Dx that includes IVD, LDT, and digital diagnostics.
Together, payers, providers, diagnostic companies, and the pharmaceutical industry should work to redefine an integrated value proposition and reshape the incentives that will propel precision medicine forward.
At Popper, our passion is helping clients create and capture value. We work with companies at the forefront of applying information-generating technologies to the challenges of biology and medicine to make healthcare smarter. To learn more about how we can help you, visit our What We Do page or give us a call at (410) 246-6524.
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