, Volume 34, Issue 7, pp 635–644 | Cite as

Cost Implications of Value-Based Pricing for Companion Diagnostic Tests in Precision Medicine

Current Opinion


Many interpretations of personalized medicine, also referred to as precision medicine, include discussions of companion diagnostic tests that allow drugs to be targeted to those individuals who are most likely to benefit or that allow treatment to be designed in a way such that individuals who are unlikely to benefit do not receive treatment. Many authors have commented on the clinical and competitive implications of companion diagnostics, but there has been relatively little formal analysis of the cost implications of companion diagnostics, although cost reduction is often cited as a significant benefit of precision medicine. We investigate the potential impact on costs of precision medicine implemented through the use of companion diagnostics. We develop a framework in which the costs of companion diagnostic tests are determined by considerations of profit maximization and cost effectiveness. We analyze four scenarios that are defined by the incremental cost-effectiveness ratio of the new drug in the absence of a companion diagnostic test. We find that, in most scenarios, precision medicine strategies based on companion diagnostics should be expected to lead to increases in costs in the short term and that costs would fall only in a limited number of situations.


Ipilimumab Test Manufacturer Precision Medicine Target Strategy Companion Diagnostics 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Compliance with Ethical Standards


The author is supported through the Canada Research Chairs program. No additional funding was received for this article.

Conflicts of interest

No conflicts of interest exist.


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Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Ivey Business SchoolWestern UniversityLondonCanada

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