The Outlook For Molecular Diagnostics

The outlook for molecular diagnostics that can inform clinical decision-making, predict therapeutic efficacy, and monitor disease progression has never been brighter. All healthcare stakeholders, including drug developers as well as practicing clinicians, are seeking ways to give the right treatment to the right patient at the right time. In order to do so, state-of-the-art, reliable, and standardizable molecular diagnostics are necessary to identify diagnostic, predictive, and prognostic biomarkers to properly segment patients for treatment.

The molecular diagnostic market has challenges, largely emanating from the ambiguous and continuously evolving regulatory and reimbursement landscape. Ideally, regulators and clinicians are seeking long-term outcomes studies to approve new diagnostics and change clinical behavior. However, these studies can be costly and lengthy, and can result in the slow uptake of an otherwise promising diagnostic technology. Therefore, diagnostic companies need to demonstrate value now by providing a direct patient benefit and by extracting costs out of the healthcare system.

The cancer market is a particularly active target for molecular diagnostics given the high cost of new treatments and relatively low response rates, especially in the case of the burgeoning field of cancer immunotherapy. As a brief primer, cancer immunotherapy is a new class of cancer treatment that mobilizes the immune system by activating regulatory protein receptors to fight the disease and represents the most immediate hope for curing patients with any type of cancer.

In fact, Bristol Myers Squibb’s drug Yervoy, the first cancer immunotherapy drug (approved March 2011) actually puts a percentage of refractory melanoma patients in complete remission (CR). However, the drug only works on a fraction of the total population (estimates vary from 10-25%). While this drug is a true breakthrough for some patients, the severe immune-related side effects can be fatal for others or cause the need to terminate treatment. From a payer perspective, the cost of administering a therapeutic to a large population if it will only benefit a small percentage is hard to justify, not to mention the cost of treating severe side effects. Molecular tests that can segment patient populations to predict therapeutic efficacy address both payer cost concerns and have a direct patient benefit. BMS has recognized the need to segment patient populations for Yervoy and its entire pipeline of cancer immunotherapeutics, and is actively including biomarker studies into single agent and combination trials to best pair diagnostics with therapeutics for the benefit of cancer patients.

Adaptive Biotechnologies is working closely with BMS and other pharmaceutical companies developing immunotherapy drugs to use characteristics of the adaptive immune system to predict response to specific drugs and drug combinations. The Company anticipates both companion diagnostic products as well as prognostic or predictive tests that are not specifically tied to a drug to emerge as a result of these collaborations in cancer immunotherapy. In the case of a companion diagnostic, the regulatory and reimbursement challenges should be easier; however, the Company is preparing now for both the companion diagnostic and laboratory developed test (LDT) approval processes to ensure readiness for launch.

There are other headwinds diagnostic companies face such as an arcane coding system with lack of clear direction for reimbursement based on current procedural terminology (CPT) codes that weren’t set up to deal with high complexity next generation tests. Another issue is the lack of universal coverage decisions that increase operational costs as diagnostic companies have to shoulder the burden of untangling the matrix of CMS and payers on a region by region, state by state, and payer by payer basis. These excess costs have historically driven down operating margins, erected high barriers to entry for promising technologies and have made the space a less attractive investment opportunity. It’s encouraging that the College of American Pathologists (CAP) have issued new guidelines attempting to address the CPT complexity issues. The payer community is starting to recognize the very real and tangible cost benefits to the system of high technology/high complexity diagnostic tests.

While there are some very real challenges in the molecular diagnostics field, new technologies are emerging that have such high patient impact while simultaneously extracting healthcare system costs that the payer community, patient advocacy groups, and test guideline organizations are starting to work together for more rapid adoption of high value molecular tests. As is the case with the breakthrough potential of cancer immunotherapy diagnostics, a complementary industry is emerging for cancer diagnostics and it is just the tip of the iceberg.

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