Centering the diagnosis around the patient

March 18, 2014

Drugs emerging from the biopharmaceutical industry are increasingly more powerful. Rather than going for as wide a net as possible, many developers are using tools such as genomics to find groups of patients within a disease population who have a higher chance of being cured. We rarely hear the word "blockbuster" these days; instead, strategies to develop "personalized" or "targeted" therapies are in the spotlight. As one of many examples, breast cancer is rarely treated as a single disease and often considered a group of individual diseases, with some groups (known as subtypes) individually treatable.

However, these next-generation therapeutics rely on diagnosis as the first step to a prescription. The tool that provides this information is known as a diagnostic, a medical device used by doctors to determine whether an individual is at risk for a disease, help diagnose the onset or progression, determine whether a drug will work for a particular patient, or monitor whether a drug is working. Despite the fact that 60 to 70 percent of treatment decisions are based on information provided by diagnostics, the industry that creates these devices has historically been treated as an ugly stepchild relative to drug developers. In the U.S., diagnostics developers receive less than 2 percent of total health-care revenue. But diagnostics are starting to get their due, elevated by the rise of targeted therapies and a global health-care spending environment that demands evidence of patients' improvement. Diagnostics have become both the gatekeeper and referee for effective therapies, representing a market worth $50 billion in 2012, with annual projected growth between 12 to 15 percent.

Reports published by two leading consultancies provide recommendations for medical device makers, which include the diagnostics industry, to help them keep up with the ever-changing marketplace. These are: "The three rules in medical technology: The transformation of an industry." by Deloitte University Press, and "Personalized Medicine" by McKinsey and Co.

Starting with the Deloitte report, the authors use a set of broad rules they have applied to several industries:

  • "Better before cheaper" - performance and value should precede competitive pricing
  • "Revenue before cost" - profitability should be based on volume and pricing, cost advantages are rarely effective

converting their rules into "strategic pillars" for the medical device industry:

  • Broader view of innovation - continuously look for new opportunities to stay ahead-of-the-curve
  • New commercial models - the patient and doctor aren't your only "customers", many stakeholders are now interested in a patient's well-being
  • Effective value articulation - health care is no longer being paid as a service, products need to show an improvement in a patient's condition at a reasonable cost

The marketplace and definition of "value" are both evolving processes, and the authors first pillar calls for a mentality of continuous innovation to keep up, as opposed to focusing on just one product. McKinsey adds that a focus on innovation will also help companies become less reactive and more proactive to changes. Innovation doesn't have to be resource-intensive, and there are many methods for leveraging such creativity such as making use of the collective expertise within an organization or outsourcing via partnerships and acquisitions.

As highlighted by FasterCures' work on biomedical research consortia, there are even ways to collaborate with competing organizations. But it isn't the Wild West. Both reports emphasize that the focus of any innovation should be on improving the quality of life for a patient. One example is to make innovations in the context of a platform technology, one that can be adapted for multiple uses instead of creating new instruments for every diagnostic test. This helps customers focus their decisions on improved value and performance for each test, instead of evaluating costs for a whole new system.

The second pillar highlights the need to address complicated commercial markets for medical products. As mentioned earlier, these markets comprise several stakeholder groups, including physicians, patients, government and private payers, each with their own requirements and expectations. The simplified "one-custome model for generating revenue doesn't apply to medicine, so instead of cutting costs, the Deloitte authors call for continuous adaptation to an ever-changing buying environment. McKinsey agrees with these recommendations, providing narrower advice in their sections on "ensuring market access" and "maximizing adoption and reducing leakage"?

The last pillar in the Deloitte report describes how to measure value propositions that are stakeholder-specific and avoid relying on metrics that demonstrate only cost-based savings. Pricing remains important, although the health-care market emphasizes the need to demonstrate value. Costs must be within boundaries that don't alienate stakeholders. However, these considerations aren't isolated. Pricing must reflect requirements that show "how a product can increase provider revenue, enhance operational effectiveness, improve clinical outcomes, and create economic value."

The practice of medicine is becoming increasingly patient-centric in ways that therapies and diagnostics are not only technically dependent on each other, but are paid for by an integrated financial model that demands evidence that a patient's health will improve. The pillars described in these reports are a playbook for the diagnostics industry, providing a value-based strategy to keep the industry and its products at the forefront of health care