Diagnostic technology has evolved tremendously in the past 20 years, but the majority of diagnostic innovation isn’t making it to the market to broadly impact patient care. This is mostly due to a historically poor relationship between diagnostic developers and the payers who pay for diagnostics. In order to optimize patient outcomes and payer economics, we have to create a healthcare ecosystem whereby diagnostic developers can be paid for tests commensurate with the value they provide to the market.
Diagnostic Developers & Labs
MISALLOCATION OF RESOURCES
There is a tendency for diagnostic developers to focus most early resources on the technical aspects of diagnostic development, as shown below left, often to the detriment of the market-facing needs, below right. Too often, this results in products not being successfully commercialized because the customer (payer) doesn’t agree with the clinical utility, value proposition, or data development plan, resulting in an inability to access the market.
Who pays for technology?
Who cares about the impact?
How much evidence is required to prove impact?
Correct clinical/market utility assumptions?
Any pockets lose money?
Who wants to block the market?
Path to adoption by KOL & community stakeholders?
Customer willing to pay?
Logistical barriers to payment?
Logistical barriers to access?
Market Limiting Challenges
Biomarker discovery
Assay Development
Analytical Validity
Clinical Validity
Sample Type
Sample Stability
Sample Processing
Regulatory
Systems compliance
Coding
App development
Software integration
Technical ChallEnges
Resources disproportionately allocated to solving technical challenges, leaving market limiting challenges under-resourced
Technical
ChallEnges
Market Limiting
Challenges
Vicious vs Virtuous
The standard diagnostic development cycle, coined the ‘Vicious Cycle’ of diagnostics, is what makes investors shy away from investing in innovative technologies. Companies tend to develop their test with the input from key opinion leaders, large academic centers, and their own scientists, as well as internally determine what the minimally viable product is, and launch onto the market with the intention of asking payers for pilot studies and joint development agreements in order to generate more data.
This is almost never successful. Why?
The payers (customers) see a product that isn’t fully complete and doesn’t have enough supporting evidence. Frequently, the payer also doesn’t agree with either the clinical utility, value proposition/pricing, or both. The payer deems the test ‘experimental’ and does not cover it, waiting for more data. The diagnostic developer finds themselves in the less than ideal position of needing to go to their investors, or board, and ask for more resources to generate sufficient data. Frequently, that request is turned down, because there is no clear path to market success. This is the valley of death for diagnostics.
Vicious Cycle
Let’s look at the above Vicious Cycle compared to the Virtuous Cycle. In the latter cycle you, being the diagnostic developer, engage with the customer ahead of the validation data development. What, you may ask, does that do?
This ensures that there is agreement on:
1. Clinical utility
2. Value proposition (payer economics)
3. Reimbursement (diagnostic company and investor economics)
By coming to agreement upfront, the same resources are used on the payer side, but now the diagnostic developer has a clear path to the market, and a clear return on investment for the investors. It's a WIN-WIN-WIN from the start.
Virtuous Cycle
Vicious vs Virtuous
Let’s look at the above Vicious Cycle compared to the Virtuous Cycle. In the latter cycle you, being the diagnostic developer, engage with the customer ahead of the validation data development. What, you may ask, does that do?
This ensures that there is agreement on:
1. Clinical utility
2. Value proposition (payer
economics)
3. Reimbursement
(diagnostic company and
investor economics)
Virtuous Cycle
The standard diagnostic development cycle, coined the ‘Vicious Cycle’ of diagnostics, is what makes investors shy away from investing in innovative technologies. Companies tend to develop their test with the input from key opinion leaders, large academic centers, and their own scientists, as well as internally determine what the minimally viable product is,
Vicious Cycle
and launch onto the market with the intention of asking payers for pilot studies and joint development agreements in order to generate more data.
This is almost never successful. Why?
The payers (customers) see a product that isn’t fully complete and doesn’t have enough supporting evidence. Frequently, the payer also doesn’t agree with either the clinical utility, value proposition/pricing, or both. The payer deems the test ‘experimental’ and does not cover it, waiting for more data. The diagnostic developer finds themselves in the less than ideal position of needing to go to their investors, or board, and ask for more resources to generate sufficient data. Frequently, that request is turned down, because there is no clear path to market success. This is the valley of death for diagnostics.
By coming to agreement upfront, the same resources are used on the payer side, but now the diagnostic developer has a clear path to the market, and a clear return on investment for the investors. It's a WIN-WIN-WIN from the start.
