Personalized medicine: Better results, but at what cost?

There may be a big advantage to treating people with personalized medicine — drugs and treatments tailored to an individual's genetic profile — but improved health outcomes for them will come at a big cost.

That's because it is very costly to screen patients for such tailored treatments and to produce medicine that targets individuals or narrow groups of patients.

That medicine is often made from biologic material, as opposed to synthesized chemicals, and as a result are more expensive to develop initially and for would-be competitors to replicate if they try to enter the market.

The cost trend is worrying insurance companies who pay for the treatments, and it will become a growing concern for the patients as they are increasingly forced to bear a bigger share of their medical expenses in the form of increased out-of-pocket charges.

"It would be easy to say that if you polled major stakeholders in the health-care system today, it's one of their top three concerns," said Dr. Dhruv Kazi, a cardiologist and professor at the University of California, San Francisco, when asked about how the overall costs from personalized medicine are seen in the health sector.

A 2013 paper in The HUGO Journal on personalized medicine argued that "the greatest challenges" facing the field "are economic, not scientific."

But personalized medicine advocates such as Kazi say that the higher prices will often be worth it — and can be controlled through a variety of strategies, including making sound decisions about who gets certain drugs and treatments.

"Whether or not we should personalize care is no longer a question," Kazi said. "We do better by the patients themselves; we know that outcomes are improved."

"If you have an expensive drug ... rather than give it to everybody, the act of individualizing that therapy actually reduces costs," he said.

Kazi co-authored a paper that ran in the Annals of Medicine last year, which found that genetic testing on patients who receive heart stents could help save money by determining which of them should get certain kinds of anti-blood-clotting drugs, and which should get other kinds of those drugs.

"If you pair the right person with the right drug, then you can produce substantial savings" in the long-term costs associated with individual patients, Kazi said, pointing to reductions in subsequent hospitals admissions for those patients.

"You will be spending more money to buy more health," Kazi said. "I'm saying, 'It won't save money, but it will yield good returns."

However, those returns could take a while to show up. Personalized medicine experts say there will be a lag between the substantial investments expended in developing personalized medicines, and the accumulation of data that can show significant, widespread improvements in health as a result.

Dr. Marty Kohn, chief medical scientist at Sentrian, a company that specializes in remote electronic monitoring of patients, said, "Right now, it is going to cost more up front" because of drug development costs and patient screening. "And there may be a certain reluctance on the part of the payors to pay for that," Kohn said.

"I'm expecting 10 to 15 years before we look can look back and say, 'Yes, personalized health care has made salutary differences,' " Kohn said.

However, "if we increase the cost but have measurably better outcomes, I think people would accept that," said Kohn.

Kohn said that paying more now is worth it because personalized medicines offer great potential for improving patients outcomes.

There is already some evidence he is right.

A report by PriceWaterhouseCoopers notes that a genetic test on breast cancer patients made by Genomic Health has estimated savings of about $1,900 per patient tested because it can reduce chemotherapy use of between 20 and 35 percent.

Research conducted by the M.D. Anderson Cancer Center, which analyzed more than 1,100 metastatic cancer patients for genetic mutations, found that when patients with one kind of mutation were treated with a targeted therapy for that aberration, they had a median survival rate of 13.4 months. That compared to the nine months median survival rate for patients who received targeted therapy that was not matched to their aberration.

"I think a lot of payors do believe" there is a benefit from personalized medicine treatments, said Winfred "Win" Shaw, senior director of the Precision Medicine Center for Excellence at Quintiles, a company that provides services and solutions to biopharmaceutical companies.

He added, "My experience with payors in the United States is that they are willing to pay for effective therapies. But they don't see the evidence" in all cases.

The "vexing problem" for personalized medicine at the moment, Shaw said, is "a chicken-and-egg scenario" in which the evidence for certain therapies being effective would only come from money having already been spent to deploy them.

Shaw said that one consequence is the current situation in which some insurers currently won't cover the costs of doing certain tests known as multigene panels, which screen patients for a slew of genetic markers that could affect what kind of specialized cancer drug they receive.

While those multigene panel tests are much less expensive than doing separate tests for each specific genetic marker, they are still pricey, costing thousands of dollars. Payors who are balking at paying that bill are concerned the tests aren't worth the money because of a lack of evidence that they will lead to better outcomes.

In reaction to those payors' concerns, Shaw said, some studies are being done that seek to show that "these tests ... really improve outcomes to patients."

He cited a study at Memorial Sloan Kettering Cancer Center in New York that looked at the aftermath of multipanel or multiplex tests for genetic markers in 1,000 lung cancer patients. Patients who had one kind of marker that was detected and had "targeted drug treatment" afterward had a median survival rate 1.1 years longer than patients with the marker who did not get such therapies. And patients who didn't have the marker had a median survival rate of 1.4 years shorter than ones with the markers who did receive targeted treatment.

That said, cancer remains the area where there is particularly high concern about the costs of personalized medicine treatments, Shaw said, because there is already existing treatment regimens in place that tend to cost less.

But rare genetic diseases, particularly ones that afflict children, Shaw said, generate less concern about costs among payors because "the unmet need" for effective treatment "is so high."

One aspect of personalized medicine that will concern payors in the future is that costs for the drugs will not necessarily come down significantly, as they do with other kinds of medications, because those drugs lose patent protection. When this happens, competitors are free to enter the market and sell their own version of the medication, which can drive down prices.

But Shaw noted that "many precision medicines are biologics" — drugs that are produced from natural sources of biologic material — as opposed to chemically synthesized pharmaceuticals.

And "they're more expensive to develop" than chemically synthesized drugs, Shaw said of biologics. Those costs, in turn, will have to be recouped by the companies that develop competing biologics.

There are other factors that could keep costs to the overall health-care system high from personalized medicine, said Peter Neumann, director of the Center for Evaluation of Value and Risk in Health.

One is the tendency of physicians to prescribe drugs for patients, even if those patients are not the intended population for those drugs, he said. "Physicians will often prescribe them if there's a small probability that they'll benefit" from using the drugs, Neumann said.

Another factor is that as pharmaceutical companies design drugs that are targeted at ever-shrinking fractions of the overall population, they are apt to charge very high prices because they want to recoup their costs of developing the niche medications, he said.

One example of that is the cystic fibrosis drug Kalydeco, made by Vertex Pharmaceuticals. The drug is approved for use in only about 2,000 of the 30,000 cystic fibrosis patients in the U.S. and costs a whopping $300,000 per year, per patient.

Dr. David Blumenthal, president of the Commonwealth Fund, a private nonpartisan foundation that supports independent research on health and social issues, cited Kalydeco in a column this fall in the Wall Street Journal, entitled "The High Cost — and Difficult Ethics — of Personalized Medicine."

Blumenthal told CNBC that the prices of such drugs is worrisome, particularly because of the fact that the amount that people pay out of pocket for their prescription medication — in the form of deductibles, co-payments and co-insurance — has continued to rise as employers and insurers shift a bigger share of overall health costs onto patients.

The cost of personalized medicines is "going to exact a high price on families that have sick members," Blumenthal said.

And "it's very anxiety-provoking to know that there's something that can cure you or your loved one but you can't afford to pay for it," he said.

"To reduce it to the ultimate case, let's say you had a drug that worked only on one person, and it cost as much to develop as it would to develop a drug that would work on 100 million people," Blumenthal said. "Well, you can see what the implications are on the affordability of that medication."

Blumenthal, like other health-care experts, sees very little chance, or none at all, of the government imposing price controls on the costs of personalized medicine or on any other prescription drugs in the near future despite widespread public concern about drug costs.

But Blumenthal said that health-care leaders could look at possible solutions that might help to mitigate rising drug costs, such as evaluating the current patent protections that drug makers have and discussing how much companies should disclose about their development costs for drugs.

"Before we jump to a particular solution, we need to look at the range of solutions," he said.