‘Precision Medicines’ are gaining favor, but can costs be controlled?

March 17, 2017
By Doug Gavel

Certain drug treatments are more effective in certain groups of patients, therefore increasing the incentive for drug makers to target the right patients for their products. But a number of economic factors can inhibit the development of so-called “precision medicines,” which are those produced as a result of biomarker-defined patient subgroups. A new research paper analyzes the economic challenges facing this market, and suggests that policymakers increase their understanding of these challenges as they discuss and regulate the national health care market.

“How economics can shape precision medicines” is published in the March 17th edition of Science Magazine, and is co-authored by Harvard Business School Assistant Professor A.D. Stern, Harvard Medical School Associate Professor B.M. Alexander, and Harvard Kennedy School Professor Amitabh Chandra.

“Incentives for precision medicine innovation differ from other drug development incentives due to precision medicines’ tendency to change the perceived market size, as well as raising issues regarding companion diagnostic development,” the authors write. “The market may contract if a biomarker identifies a patient subgroup most likely to benefit, suggesting discontinuation of the therapy for patients without the relevant biomarker. The market would expand if a therapy comes with adverse side effects whose likelihood can be reduced with knowledge about a biomarker.” 

The authors argue that budget pressures will necessarily dictate the need to create price competition in the precision medicine market, providing some form of financial relief for both patients and payers.

“Reductions in both the cost and length of trials mean that more drugs can clear the hurdle of commercial viability. A lower hurdle for commercial viability will lead to more innovation, which can, in turn, create more competition,” the authors conclude. “But smaller and shorter trials necessitate a strong and highly engaged, appropriately resourced FDA, working at the cutting edge of regulatory science. This reinforces the importance of state-of-the-art regulatory science and policy in facilitating precision medicine development.”

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Amitabh Chandra

Amitabh Chandra, Malcolm Wiener professor of social policy at Harvard Kennedy School


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