The Business

of
Precision
Stephen T. Parente, Ph.D., M.P.H., M.S.
Minnesota Insurance Industry ChairMedicine
of Health Finance
Governing Chair, Health Care Cost Institute
Director, Medical Industry Leadership Institute
Associate Dean, MBA Programs
Carlson School of Management
Department of Finance
sparente@umn.edu

May 20, 2015; The Mayo Clinic, Rochester, MN

WhatisaPrecisionMedicine?
Amedicalmodelthatproposesthecustomizationof
healthcarewithmedicaldecisions,practices,and/or
productsbeingtailoredtotheindividualpatient.In
thismodel,diagnostictestingisoftenemployedfor
selectingappropriateandoptimaltherapiesbasedon
thecontextofapatientsgeneticcontentorother
molecularorcellularanalysis.ToolsemployedinPM
canincludemoleculardiagnostics,imaging,and
analytics/software.(source:Timmerman,Luke(4February2013).
"WhatsinaName?ALot,WhenItComestoPrecisionMedicine".Xconomy.

WheredoesHealthEconomicsPlay?
JournalofEconomicPerspectivesStudy:
Setting:priceandhealthbenefitsof58anticancerdrugs
approvedbetween1995and2013
Conclusion:gainsinsurvivaltimeassociatedwithrecently
approvedanticancerdrugsaretypicallymeasuredinmonths,
notyears.
BUT:thecostofeachmonthoflifegainedthroughthenew
treatmentsiswayup.
Theinflationadjustedpricefornewanticancerdrugsrose10%ayearover
those18years,accordingtothestudy.
In1995,patientsandinsurerspaid$54,100(in2013dollars)forayearofextra
life.
By2005,thathadgoneupto$139,100ayear,andby2013itwas$207,000.

Summary: From Bench Science to

Reimbursement Schedule
1.
2.
3.
4.
5.
6.
7.
8.

NIH/Industrysupportbasicscienceresearch
Basicscienceyieldsaninnovativematerialormissinglinkfor
therapeuticordiagnosticvalue
Newproductdevelopmentwithinafirm.
Prototypedeveloped
Prototypeusedforclinicaltrials
Ifprototypeproceedstohumantrials,costeffectivenessanalysis
commissioned.
SuccessfulhumantrialsleadingtoFDAapprovalcombinedwith
positivecosteffectivenessanalysisareusedtosolicitreimbursement
frompublicandprivateinsurers.
Technologyaddedtoreimbursementscheduleaftermedicaltechnology
reviewbyinternalinsurerauditors.Medicarereimbursementoftena
signalofpositivereimbursementdecision.

Is Technological Change Worth It?

How much would you be willing to
pay everyday from this day forward
for a better than 50% chance you
will live five more years than without
such an the investment?

The Drive Towards

Cost-Effectiveness
Increasingly,healthcaresystemsareinsistingon
manufacturerspresentingacosteffectivenesscasefor
aproducttojustifyunitpricingandaffordability
withinhealthcaresystems
Evidentiaryandanalyticalstandardsaredemanding
andfewpharmaceuticalandbiotechnology
companieshavestaffskilledinmeetingthese
standards

CostEffectivenessAnalysisStandards
NationalInstituteforClinicalExcellence(UK):Guidetothe
MethodsofTechnologyAppraisal(2004)(www.NICE.org.uk)
PharmaceuticalBenefitsAdvisoryCommittee(PBAC):
GuidelinesforthePharmaceuticalIndustryonPreparationof
SubmissionstothePharmaceuticalBenefitsAdvisory
Committee(2002)
WellPointPharmacyManagement,HealthTechnology
AssessmentGuidelines,DrugSubmissionGuidelinesforNew
Products,NewIndicationsandNewFormulations(2004)
(www.Wellpointrx.com)
WellPointPharmacyManagement,HealthTechnology
AssessmentGuidelines:DrugSubmissionGuidelinesforRe
EvaluationofProducts,IndicationsandFormulations(2004)
(www.Wellpointrx.com)

ThePrecisionMedicineMarket:
WhereHealthEconomicsGetsReal
Theprincipalroleofthehealtheconomistinthe
pharmaceuticalindustryistodevelopandrecommend
asustainableglobalunitpricingstrategy
Asustainablepricingstrategyisonethatisconsistent
withachievingandmaintainingreimbursementinkey
globalmarketsandmarketsegmentsataunitprice
thatisconsistentwithanacceptablemarketshareand
rateofreturnonresearchanddevelopment
expenditures

HealthEconomistsandtheirJamborees

To Measure Value You Need to Prepare

a Global Health Technology Dossier
Tounderscoretheroleofthehealtheconomistand
theimportanceofhealtheconomicsactivitiesinthe
lifecycleofadrug
Toemphasizetheimportanceofmeetinghealth
technologyassessmentevidentiaryandanalytical
standards
Todetailtheroleofadossierinsupportingaglobal
reimbursementstrategy
Toconsiderthecontentsandscopeofaglobal
technologydossier

The Need for Consistency and

Transparency
ThecommitmenttoahealthtechnologydossieratprePhaseIin
productdevelopmentandthesupportforthatdossieroverthelife
cycleofadrugensures:
Validationofassumptionsdrivingbusinessopportunity
decisionstosupportproductdevelopment
Validationoftheepidemiologyandmarketopportunitiesina
diseasestate
Acoherentandconsistentassessmentofcomparativeclinical
performance
Coremodelstosupportcosteffectivenessandsystemimpact
claims
Aframeworkforassessingtheimpactofachanging
competitiveenvironment
Abasisforpreparingfordiseaseareaandtherapeuticclass
reviews

Dossier Structure

TargetDiseaseClassification
Epidemiology
Treatmentpatterns,resourceutilizationandcosts
Productdescription
Comparatorproduct/proceduredescription(s)
Clinicalsummariesandmetaanalyses
Modeledcosteffectivenesscase
Modeledsystemimpactcase
Productclaims,monitoringandverification

Dossier Scope
Dossiermustidentifyandreportonallkeymarkets
andmarketsegmentsforcontentdescriptionand
analysis:

US(managedcare,VA,Medicaid,Medicare)
EuropeanUnion(UK,France,Italy,GermanySpain)
Canada
Australia
Japan
Developingcountries(Mexico,Brazil,India,China)

How Apples to Apples Comparisons

of Products are Made
Allproductclaimsmustbepresentedintermsthat
makethemempiricallyevaluable
Claimswhicharenotempiricallyevaluablewouldbe
rejected
Manufacturersmustpresent(andgetagreement)asto
whichclaimsareevaluabletosupportbothcost
effectivenessandsystemimpactimpacts,whichmust
bedetailedinthedossier
Manufacturersmustagreetotheprocessbywhich
claimsaremonitoredandvalidated,whichmustbe
detailedinthedossier

AndtheTargetAlwaysMoves
Overthebalanceoftheproductlifecyclethedossiermustbe
updatedtoreflectnotonlytheresultsofproductclaims
monitoringandvalidationbutalsochangesinthecompetitive
environmentforthemanufacturersproduct
Thedossiershouldsupportongoingdiseaseareaand
therapeuticclassreviews
Updateofclinicalsummariesandmetaanalyses
Reviewofcomparatorchoice
Reevaluationofmodeledcosteffectivenessandsystemimpactcase
fortheproduct
Revisionstoempiricallyevaluableproductimpactclaims

NICE PM Canary to Watch

TheNationalInstituteforHealthand
ClinicalExcellence(NICE)isthe
independentorganisationintheUK
responsibleforprovidingnational
guidancetotheNHSandthewider
publichealthcommunityonthe
promotionofgoodhealthandthe
preventionandtreatmentofillhealth.
Hashadapublichealthrolesince2005.

NICE Legacy
TheCochraneandCampbellCollaborations.
HealtheconomicsandtheQualityAdjustedLifeYear
(QALY)
TheNHSCentreforReviewsandDissemination
(UniversityofYork).
TheCochranecontrolledtrialsregister.
Fastelectronicsearchenginesaccessinglargedatabases.
SystematicReviewandmetaanalysis
NICE

The pillars of NICEs work

Comprehensiveevidencebase
Expertinput
Patientandcarerinvolvement
Independentadvisorycommittees
Genuineconsultation
Regularreview
Openandtransparentprocess.

Methodologicalprinciplesgoverning
allNICEswork

Baserecommendationsonthebest
availableevidence.
Todeterminecosteffectiveness
usingtheQALY.
Tobeclearaboutscientificand
othervalues
Toallowcontestability.
Tobeseentobeandtobe
independentofgovernment,the
pharmaceuticalindustryandother
vestedinterests.

The hierarchy of evidence

Assessing Cost Effectiveness

1

Probability
of rejection

x
XX
XX
0
10

20

30

40

Cost per QALY (K)

50

NICE Quality Standards

NICEqualitystandardsareasetofspecific,concise
statementsandassociatedmeasures.Theysetout
aspirational,butachievable,markersofhighquality,
costeffectivepatientcare,coveringthetreatmentand
preventionofdifferentdiseasesandconditions.

3DisRequired
Derivedfromthebestavailableevidencesuchas
NICEguidanceandotherevidencesourcesaccredited
byNHSEvidence,theyaredevelopedindependently
byNICE,incollaborationwithNHSandsocialcare
professionals,theirpartnersandserviceusers,and
addressthreedimensionsofquality:clinical
effectiveness,patientsafetyandpatientexperience.

NICE quality standards enable:

Healthandsocialcareprofessionalstomake
decisionsaboutcarebasedonthelatestevidenceand
bestpractice.
Patientsandcarerstounderstandwhatservicethey
shouldexpectfromtheirhealthandsocialcare
provider.
Serviceproviderstoquicklyandeasilyexaminethe
clinicalperformanceoftheirorganisationandassess
thestandardsofcaretheyprovide
Commissionerstobeconfidentaboutpurchasing.

Challenge of Precision Medicine:

Custom Needs a Clear Path

E
X

G
B

C
H

D
J

Y
L

AndClearResults:Thehealthgradient
Hi

Healthstate

Lo
Lo

Hi

Socialstatus

Thehealthgradient
Hi

Healthstate

Lo
Lo

Hi

Socialstatus

Thehealthgradient
Hi

Healthstate

Lo
Lo

Hi

Socialstatus

Summary
Therelargemarketopportunitiesfromprecisionmedicine.
Butwithopportunity,thereisrisk..
Theincreasinglyprescriptiverequirementsthatmanufacturers
meetgoldstandardevidentiaryandanalyticalcriteriain
formularysubmissionsandproductreevaluationshave
profoundimplicationsfortheprocessofproductdevelopment
andassessmentsofcomparativetreatmenteffects.
Manufacturersmustrecognizethatallclaimsarepotentially
discoverableandthataconsistentglobalapproachtoclinical
assessmentwillminimizeadverseassessmentsoffalseor
misleadingclaims.
Asfutureconsumers,noneofuswouldwantanythingless.