Economic Effects of Pharmacogenomic Testing

By January 4, 2018Commentary

Pharmacogenomics uses individual patient genetic information to guide use of medications.  It may affect dosage or even whether a compound is prescribed.  A number of drugs on the market are designed to be used with companion pharmacogenomic tests.  Payers have been fearful both of the cost of genetic tests and of the drugs they are used with.  Research at the National Bureau of Economic Research looks at the costs of pharmacogenomics and other related issues.   (NBER Paper)   Although payers have been concerned about costs, DNA sequencing costs have gone down dramatically.  And the total cost of use of pharmacogenomic data is unclear; it might drive some other forms of utilization but it may also save money by ensuring that therapies will actually work for a patient and by avoiding adverse events.  But even if beneficial, clinical use of pharmacogenomics is uneven, as most doctors may not feel they have the skills to use it properly and there may be issues with integrating the data into systems effectively.  The authors attempted to use information from real-world use of testing to build simulations which identified an optimal strategy for payers in regard to pharmacogenomic tests.

Factors which they identified as affecting the value and acceptability of this testing include turnover among payer membership and patient/physician relationships, the widespread availability of the test results across payers and physicians, the strength of evidence on savings from avoidance of adverse events and whether doctors actually use the data.  The cost of the test itself seems to have little impact on the overall analysis.  The authors also examined use of either a broad, pre-emptive strategy of obtaining a wide-range of genetic data on patients or just use of individual gene market tests in conjunction with specific prescribing decisions.  They used information from a program at Vanderbilt University that did genotyping on about 15,000 patients to help build their simulation.  This helped them identify how often adverse events might be avoided, how frequently doctors actually appeared to use important pharmacogenetics information and downstream utilization effects.  After a lot of complex econometric formulas, basically at this point it appears that widespread comprehensive preemptive testing of patients has a net cost of $50,000 or more a patient, largely due to lack of effective use of data and downstream utilization effects, but more individualized specific testing is probably cost-justified.   Taking into account, however, the quality implications, it seems to me that routinely collecting genetic information on patients and making that information available to all providers and providing guidance on the significance of the results, is an important step in improving both the health of patients and more effective health treatments.  In the long run, hard to believe that won’t save money.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at

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