In-vitro diagnostic (IVD) tests are complementing targeted therapeutics to reduce side effects, improve efficacy, and help control healthcare costs. Analysts are projecting billion-dollar revenues for some new drugs linked to companion diagnostics.
As the pharmaceutical industry develops more targeted therapeutics, and their interdependence with companion diagnostics grows, companies are considering ways to access diagnostics technology to complement their evolving product portfolios. The main strategy has been to seek companion diagnostic solutions by forming partnerships with diagnostic companies. Yet, the allocation of the overall financial value of the drug-diagnostic combination has made deal-making a challenge.
SURGE IN DRUG-DIAGNOSTIC PARTNERSHIPSCompanion diagnostics partnerships in the industry more than tripled in 2010 compared with 2008, and the pace of deal activity has continued during the first half of 2011. The rising number of partnerships reflects the increasing seriousness with which bio/pharmaceutical companies view biomarker and diagnostic programs designed to accompany their drug-development efforts. They are making more systematic use of companion diagnostic programs to increase drug response rates and reduce side effects. Diagnostic companies, particularly those with strong molecular and tissue diagnostic capabilities, have been active in developing tools to respond to industry's specific needs.
Driving the momentum in companion diagnostics partnership activity is the increasing role of diagnostics in the regulatory approval, reimbursement, and performance optimization of new drugs. Increasingly, regulatory agencies insist on validated diagnostics prior to considering marketing clearance. In addition, the growing use of tests that identify patients who would not benefit from certain therapies has raised the bar for obtaining reimbursement for new drugs. Increasingly, payers see companion diagnostics as useful tools to allocate healthcare funds more effectively and to control costs. Many healthcare professionals insist on specialist testing before prescribing and reimbursing treatment regimens that are expensive and not efficacious in certain patient subpopulations.
In the US, some pharmacy benefit managers are adapting their business models by forming partnerships with, or acquiring, specialist clinical laboratories. Payers' preference for drugs that come with a companion test, particularly when these drugs are expensive and may lead to severe side effects, will likely increase over time with the rising pressure on healthcare budgets and greater availability of appropriate diagnostic tools.
THE PARTNERS: THE RX-DX COMBINATION
Bio/pharmaceutical companies have achieved some success in seeking improvements in drug-response profiles through better patient targeting. For example, drug-response rates of up to 80% have been reported for targeted subpopulations for cancers that generally have a 20% response rate.
The prospect of repeating such technological wins is encouraging industry to accept changes that appear increasingly inevitable, including the decline of the mass-market blockbuster drug model, the emergence of smaller targeted markets, and the need for high-performance diagnostic tools to dominate well-defined smaller market segments.
On the supply side, the technological feasibility of companion diagnostic programs is increasing. Companies continue to develop relevant expertise in molecular and tissue diagnostics, which will enable the development of better tools to guide treatment decisions.