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Related Experiment Videos

Economic and developmental considerations for pharmacogenomic technology.

John A Vernon1, Scott J Johnson, W Keener Hughen

  • 1School of Business, The University of Connecticut, Storrs, Connecticut 06269-1041, USA. John.Vernon@business.uconn.edu

Pharmacoeconomics
|April 12, 2006
PubMed
Summary

Pharmaceutical companies can strategically use pharmacogenetic (PG) testing to segment patients. While PG testing offers potential value, revenue models suggest traditional approaches may still yield higher overall returns than initially predicted.

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Area of Science:

  • Pharmacogenomics and Pharmaceutical Economics
  • Drug Development Strategy and Market Analysis

Background:

  • The pharmaceutical industry focuses on drug innovation, development, and marketing.
  • Pharmacogenetic (PG) testing offers potential to enhance drug value by predicting patient response.
  • A key industry challenge is integrating PG tests to segment populations into responders and non-responders for new drugs.

Purpose of the Study:

  • To model strategic decision-making for pharmaceutical manufacturers regarding drug development with PG technology.
  • To analyze the cost-effectiveness of different drug development and marketing strategies incorporating PG testing.
  • To evaluate the revenue implications of targeting specific genetic markers versus traditional broad-market approaches.

Main Methods:

  • Utilized a cost-effectiveness framework.

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  • Developed a simple, static, one-period model.
  • Compared three drug development strategies: marker-exclusive targeting, traditional non-segmented marketing, and price-discriminating segmented marketing.

    • Main Results:

    • Revenues from targeting only responders will not exceed those from a traditional approach.
    • Total revenues under a targeted PG strategy are less than traditional but higher than naive estimates.
    • Traditional and price discrimination strategies yield similar total revenues without intermarket arbitrage.

    Conclusions:

    • The principles derived may explain the slower-than-predicted adoption of PG technology by pharmaceutical manufacturers.
    • Revenue considerations suggest a nuanced view of PG's immediate financial benefits in drug development.
    • Further research into broader economic and clinical impacts beyond direct drug revenue is warranted.