Economic Challenges Prevail in Development of Companion Diagnostics

While the potential benefits of utilizing genomic data to stratify patients most likely to respond to a specific treatment have been highly touted, the actual process of developing companion diagnostics (CDx) is fraught with a high degree of financial risk for diagnostic manufacturers. While some of these economic perils come from the “mismatch” between the pharmaceutical and the diagnostics industries, laboratories producing generic versions of the CDx as laboratory-developed tests (LDTs) also pose a significant economic threat to in vitro diagnostics (IVD) developers. Despite some recent approvals by the U.S. Food and Drug Administration (FDA), only 18 CDx have been approved to date. Participants in the workshop Refining Processes for the Co-Development of Genome-Based Therapeutics and Companion Diagnostic Tests, hosted by the Institute of Medicine last year, shared concerns about the process of codevelopment of CDx, particularly the commercial aspects of such arrangements. The workshop summary, published in mid-February, highlights the challenges associated with CDx codevelopment as well as some possible solutions to accelerate progress in development of CDx. “Drug development and test development are inherently difficult to coordinate,” said Felix Frueh, Ph.D., then an entrepreneur-in-residence at investment firm Third Rock Ventures. “For the most part the timelines of the two businesses really do not align. The resources are completely mismatched, and the market protection between the drug and the diagnostic is entirely different.” There is “a weak business case to support investment in CDx codevelopment,” writes workshop co-chair Robert McCormack, Ph.D., from Janssen Diagnostics (Raritan, N.J.), in a viewpoint published Feb. 12 in the Journal of the American Medical Association (JAMA). Simultaneous codevelopment of CDx and the drug provides the diagnostics company some strategic advantages including the analytical and clinical validation data required for the FDA review and clinical utility data from the phase 3 clinical trial required for reimbursement determinations. “Although the codevelopment process is lengthy and expensive for a company, the close association of the test with use of a drug and the potential for reimbursement at the time of approval are substantial incentives,” writes McCormack. However, this coupling, in reality, may not be as tight as diagnostics developers had hoped. For instance, the FDA does not recognize a test by name in its labeling. FDA’s director of personalized medicine, Elizabeth Mansfield, Ph.D., told the workshop that the label in the indications, warnings, or precautions sections refers to “a type of approved or cleared IVD CDx device, but not a specific one by name.” This decision takes into account the fact that better tests may be approved at a later date. Some of the related or CDx follow-on LDTs may capitalize on newer, more efficient technology platforms, like next-generation sequencing (NGS). However, stakeholders say, the fact that regulation of CDx developed as LDTs is less stringent makes it less costly to bring the test and is a cause for concern due to an unlevel playing field. While lack of reimbursement, and more specifically lack or reimbursement based on the informational value provided by the test, certainly contributes to the poor economic model surrounding CDx test development, IVD developers point to competition from LDTs as a serious threat to their business case. “Current billing practices do not allow for the payer to discriminate an FDA-labeled CDx from an LDT test, so the laboratory [can receive] higher payment for a test that was less costly to develop,” write McCormack and his co-authors inJAMA. “Thus, investment by the company that developed the CoDx is undermined before coming to market with little chance of achieving an acceptable return on investment.” There are also operational concerns regarding efficiently running CDx testing in laboratory practice. Most CDx test development focuses on single biomarkers for a single drug. Laboratory experts express concern that guidance is lacking for how to extend the use of a CDx to other cancers that express the relevant mutation and how to incorporate advancements in technological platforms (i.e., NGS) that are capable of multiplexing multiple biomarkers into a single test, often a practical consideration given that small specimen volume can be inadequate for multiple tests.

FDA-Approved Companion Diagnostics
Drug Name	Device Trade Name	Device Manufacturer
Erbitux	therascreen KRAS RGQ PCR Kit	Qiagen
Erbitux	DAKO EGFR PharmDx Kit	Dako North America
Gilotrif	therascreen EGFR RGQ PCR Kit	Qiagen
Gleevec/Glivec	DAKO C-KIT PharmDx	Dako North America
Herceptin	INFORM HER-2/NEU	Ventana Medical Systems
Herceptin	PATHVYSION HER-2 DNA Probe Kit	Abbott Molecular
Herceptin	INSITE HER-2/NEU KIT	Biogenex Laboratories
Herceptin	SPOT-LIGHT HER2 CISH Kit	Life Technologies
Herceptin	Bond Oracle Her2 IHC System	Leica Biosystems
Herceptin	HER2 CISH PharmDx Kit	Dako Denmark
Herceptin	INFORM HER2 DUAL ISH DNA Probe Cocktail	Ventana Medical Systems
Herceptin	HERCEPTEST	Dako Denmark
Herceptin	HER2 FISH PharmDx Kit	Dako Denmark
Menkinist/Tafinlar	THxID BRAF Kit	bioMerieux
Tarceva	cobas EGFR Mutation Test	Roche Molecular Systems
Xalkori	VYSIS ALK Break Apart FISH Probe Kit	Abbott Molecular
Zelboraf	cobas 4800 BRAF V600 Mutation Test	Roche Molecular Systems
FDA

  To help “level the playing field” many workshop participants say there is a need to require demonstration of equivalence between IVDs and LDTs. Regulatory oversight of LDTs can be achieved through strengthening of the Clinical Laboratory Improvement Amendments, risk-based FDA regulation, or creation of a single pathway for all CDx, regardless of their developer, participants proposed. While laboratories fear greater regulatory oversight of CDx created as LDTs will pose significant added expenses, others believe such mechanisms are necessary to provide “more comparable economic incentives” for IVD and LDT developers. All diagnostic developers will benefit economically, participants said, with a shift toward value-based payment for CDx focused on outcomes. Takeaway: Codevelopment of CDx is challenged by a weak business case, particularly for IVD developers who face erosion of financial incentives due to competition from LDTs. Increased regulation of CDx LDTs has been proposed by stakeholders to level the playing field.