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The Price of Personalization

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In some cases, even very high-priced medications might ultimately save money. The drug Erbitux (cetuximab), for example, is designed to slow the spread of colorectal cancer in patients who carry the common form of the KRAS gene, at a cost of about $95,000 per course. Yet a Northwestern University analysis determined that if all Americans with metastatic colorectal cancer underwent testing for the KRAS mutation, and if only those who tested positive were treated with Erbitux, the U.S. health care system could save $604 million a year. “If we see more relatively cost-effective drug-diagnostic combinations, we won’t lower costs, but we’ll bend the cost curve downward,” says Cohen. That could happen, he says, “if we have more Gleevecs—drugs that are expensive but do a really good job.”

face made out of pills

Adam Voorhes

There’s also the argument that higher prices may simply be the cost of better medicine. “We have paid large amounts of money to do trial-and-error medicine, without very good results for patients,” says Henri Termeer, the former president and CEO of Genzyme Corporation, who with his wife donated $10 million to create the Henri and Belinda Termeer Center for Targeted Therapies at Mass General Cancer Center in 2011. “The cost of treating a disease effectively could be higher than treating a disease ineffectively.”

Indeed, Vertex, the maker of Kalydeco, defended the drug’s $300,000 annual cost in a statement: “The price of Kalydeco reflects how well this medicine works, the time and cost it took to develop, and our commitment to reinvest to help many more people with CF—work that is highly expensive, risky, and takes the dedication of hundreds of people over decades.” Vertex added that most patients in the United States who take Kalydeco have monthly out-of-pocket costs of $50 or less, and that the company offers financial assistance and free medicine to patients who meet certain criteria.

In a similar statement, Pfizer, maker of Xalkori, noted that targeted therapies may be more cost efficient than conventional medicines because they’re administered only to patients who are more likely to respond to them. When NICE rejected Xalkori, Pfizer chided it for its “limited and slow-paced adoption of innovative medicines.”

Targeted therapies often cost more to develop than conventional medications because they require an accompanying test to identify candidates, says Daryl Pritchard, director of policy research for the National Pharmaceutical Council, a trade group supported by biopharmaceutical companies. “There are substantial costs associated with co-development,” says Pritchard, regardless of whether a drug company designs the test on its own or hires a diagnostics firm to create one.

Yet there are a number of ways to reduce the cost of producing targeted therapies, savings that could be passed on in the form of lower prices, says Kevin A. Schulman, director of the Center for Clinical and Genetic Economics at the Duke Clinical Research Institute. For one, the long, expensive process of gaining Food and Drug Administration approval for a new drug could be faster and more efficient. Instead of paying clinicians and institutions to recruit volunteers for a clinical trial, a quest that can take years, drug developers might find participants by collaborating with disease foundations and support groups.

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The Trouble with Targeting Treatments

Researchers are working to develop diagnostic tests to determine who is eligible for targeted therapies, but red tape and limited expertise stand in the way.


1. Me Medicine vs. We Medicine: Reclaiming Biotechnology for the Common Good, by Donna Dickenson (Columbia University Press, 2013). A medical ethicist argues that the promise of personalized health care has been overstated and that focusing on the individual distracts from the importance of proven public health interventions, such as vaccination programs.

2. “Towards a Balanced Value Business Model for Personalized Medicine: An Outlook,” by Christof Koelsch et al., Pharmacogenomics, January 2013. To bring down the high cost of personalized medicine, drug developers need to adopt new strategies, such as shorter, smaller clinical trials, Koelsch and colleagues argue, stating that “not all targeted therapies must inevitably cost a fortune.”

3. “Can Genomics Bend the Cost Curve?” by Katrina Armstrong, JAMA, March 14, 2012. Like most medical innovations, targeted therapies and companion diagnostic tests add to health care costs. However, Armstrong argues that personalized medicine has the potential to improve the value of health care by reducing the use of ineffective treatments.

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