Necessity is the Mother of Stratification: Personalized Medicine is Getting Real


Joe Stanta of eyeforpharma organized a Personalized and Translational Medicine conference last week for people who are directly involved with making personalized medicine a reality. What was especially refreshing about the conference was a healthy balance of prognosticators and practitioners—with the majority of speakers representing the latter. I came away from this conference with the feeling that the hype of personalized medicine is falling away and we are about to see a number of significant products from a variety of credible vendors.

Personalizing Therapeutics

Matthew Rosamond of PricewaterhouseCoopers opened the conference repeating the assertion that drug companies can effectively market “nichebuster” drugs (that are best in class for a subpopulation) that are safe, effective, and profitable. Even he admitted that this strategy is a tough sale to traditional pharmaceutical companies, but I did see abundant evidence for a strategy that I will call “necessity is the mother of stratification.” Companies are launching into the discovery and development process using biomarkers that help to explain the mechanism of action for the drug. If they see significant differential in patient response they can use these biomarkers to identify sub-populations for which a drug is more effective and develop a commercial diagnostic test based upon the most useful biomarkers. The therapy and diagnostic (theranostic) are then marketed in tandem.

This strategy implies that in some cases the drug company will not recover the sunk costs of development but they can use patient stratification to rescue a drug that pays the marginal cost of producing it. These are not as profitable as traditional blockbusters but are preferable to rejecting a useful compound altogether. There was an assertion that having both a rational basis for the drug’s benefit and empirical evidence of efficacy is more compelling evidence to justify reimbursement and may even raise patient compliance. It was difficult for me to determine whether this is actual experience or wishful thinking at this point.


Paired development of diagnostic and therapeutic is still an evolving business model for three reasons:

1. The time that is required to develop drugs and diagnostics are very different. Diagnostic developers want to be involved early in the process but the attrition rate of drugs is unacceptably high for them and it is difficult to know early on what biomarkers are going to be appropriate to commercialize.

2. The cost basis of the industry is quite different. Many diagnostics—particularly complex multivariate tests—will necessitate clinical trials, and the traditional cost model for tests and relatively low volume for companion diagnostics make it difficult for diagnostic companies to make a profit at traditional price points for diagnostics.

3. Reimbursement hurdles for companion diagnostics are higher than traditional diagnostics.

I had heard before that theranostics would shift the center of financial gravity from drug makers toward diagnostics companies, but I did not hear this … Next Page »

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Don Rule is the founder of Translational Software, a company that aims to accelerate the process of bringing molecular diagnostics from the bench to the bedside. He previously worked at Microsoft for 14 years. Follow @

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3 responses to “Necessity is the Mother of Stratification: Personalized Medicine is Getting Real”

  1. Ed Berger says:

    The reimbursement hurdle for a true companion diagnostic should be lower, not higher, than that for a novel stand-alone diagnostic. Why? Because if the diagnostic were used to stratify the treatment arm of a therapy clinical trial (attractive because it the trial can be smaller with a higher probability of success) it would be recognized in the FDA-approved indications for use. Insurers won’t have any trouble covering the test under that circumstance.

  2. Don RuleDon Rule says:

    Absolutely true that a companion diagnostic would be reimbursed more readily than a novel standalone diagnostic. But in comparison to most IVD companies bread-and-butter products it is more difficult. In fact the companion diagnostic isn’t useful at all if you are not prescribing the drug and it isn’t unusual that reimbursment for the drugs themselves lags FDA approval by a year or more. So from an IVD company’s current practices it is a long time. Which explains why many of the companion diagnostics and novel stand-alone tests are being developed by small biotechs and not the IVD companies.