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Abstract

Personalized medicine is a concept promoted as a new paradigm for health care delivery, with particular emphasis on more tightly linking genomics-based diagnostics and therapeutics. Previous analyses focused on the pharmaceutical market; this analysis also addresses the incentives to develop linked genomics-based diagnostics and the broader public policy implications. Using a standard economic framework of an insurer-payer negotiating reimbursement with manufacturers of an innovative, targeted diagnostic and a companion patented therapeutic, several illustrative hypothetical scenarios are developed. The relative importance of the key economic factors is examined, including whether the reimbursement system is value or cost based, whether the therapeutic is already marketed, the strength of diagnostic intellectual property, and a current year versus longer time frame. The results suggest that health systems reforms that promote value-based, flexible reimbursement for innovative, patent-protected diagnostic and therapeutic products are critical to create stronger economic incentives for the development of personalized medicine.

Keywords

Personalized medicine Value-based reimbursement Economics of diagnostics Linked diagnostic-therapeutics

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The Economics of Personalized Medicine: A Model of Incentives for Value Creation and Capture

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