McKinsey Discussed 81408

 

https://www.mckinsey.com/industries/life-sciences/our-insights/genetic-testing-opportunities-to-unlock-value-in-precision-medicine

Genetic testing opportunities

October 2018

 Thanks to a number of technological, scientific, and frontline operational advances, the cost of deciphering the entire human genome has dropped by an order of magnitude, from $10,000 in 2011 to about $1,000 today.

Genetic tests are reimbursed at relatively high rates (Exhibit 2): for example, CPT code 81416 for exome sequencing analysis (added early this year) has a national maximum allowable limit of $12,000. Reimbursements for pharmacogenomics, which assesses the way gene variants affect individual responses to drugs, generally cover the sequencing of multiple genes and vary a good deal, from $100 to $2,000. An interesting example—81408, a CPT code at the higher price end, $2,000—covers 24 genes for various disease conditions (Exhibit 3). 

Quantitative analysis of private-payer reimbursements from 2014 to 2016 indicates that the average level of reimbursement for 81408 has declined, to $1,080 per test, from $1,545. This suggests that higher-priced genetic tests may stabilize at a lower price range.

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SUMMARY AI

Genetic testing and precision medicine have significant growth potential in the healthcare industry. The market for personalized medicine is projected to reach $140 billion by 2026. The cost of genetic sequencing has significantly decreased, and next-generation sequencing (NGS) is becoming a widely adopted technology. Diagnostic-test-service providers can generate tangible revenue from selling tests and intangible value from the insights gained from collected data. Data integration and analytics, increasing cost pressures on payers, and evolving reimbursement landscape are three major trends in the genetic testing market.

Facts

• 💰 The global market for personalized medicine is expected to grow from $44 billion in 2016 to $140 billion by 2026.
• 🧬 The cost of deciphering the human genome has dropped from $10,000 in 2011 to about $1,000 today.
• 🧪 Next-generation sequencing (NGS) is replacing the Sanger method and is widely adopted in research and clinical practice.
• 💡 Diagnostic-test-service providers create value through tangible revenues from tests and intangible value from collected data.
• 👥 Companies like 23andMe aggregate genetic information, generating revenue from selling tests and partnering with pharmaceutical companies.
• 🏥 Roche's acquisition of Flatiron Health and Foundation Medicine accelerates precision medicine progress in oncology.
• 📊 Three major market trends in genetic testing: data integration and analytics, increasing cost pressures on payers, and evolving reimbursement landscape.