Will lower prices for genomic tests raise medical costs?

The first time scientists sequenced a person’s entire genome, it took more than a decade and cost hundreds of millions of dollars. Currently, such sequencing takes less than twenty-four hours and costs less than $5,000.

To put that into perspective, Myriad Genetics charges $3,000 to test for mutations in just two genes associated with breast cancer. The days of affordable genomic sequencing are rapidly approaching. But will such testing bankrupt us?

In most consumer markets, lower prices are a boon to consumer budgets. In the 1950s, for example, Americans spent over 30% of their income on food. But with food production becoming more efficient, that  percent has been cut in half. Like we learned in Econ 101, produce food – or computers or clothing — for less money, and people will spend less money on those goods.

Will lower prices for genomic tests raise medical costs?

But that straightforward economic truth does not necessarily hold when it meets the crooked logic of the American health care system. Consider what happened to health care costs when old-fashioned gallbladder surgery was overtaken by laparoscopy cholecystectomy. In the old-fashioned approach, the surgeon would make a sizeable incision in the patient’s upper belly (right under the rib cage on the right side) and remove the gallbladder,  leaving the patient with impressive scars and several days in the hospital before he or she recovered enough to go home. With the newer laparoscopic approach, surgeons make a few tiny incisions, sneak a laparoscope through one of the openings to remove the gallbladder, leaving patients with a few butterfly Band-Aids and a quick return home. By substantially shortening the hospital stay, this laparoscopic approach was much cheaper than its predecessor. So we must have saved money on gallbladder surgery, right?

Wrong. Because the new procedure was safer, many patients who were previously too risky to operate on were now fair surgical game, as well as those with mild gallbladder disease who had previously been treated with a “tincture of time” (meaning the physician would wait to see if their symptoms would resolve without surgical intervention). As a result of the safety of this procedure, the rate of gallbladder surgery skyrocketed  more than 20% after physicians adopted laparoscopy, more than wiping out the cost savings of the new approach.

Genomic testing may raise medical expenses for a similar reason. As testing becomes less expensive, genomic sequencing can be utilized by an ever broader swath of patients. Moreover, unlike laparoscopic cholecystectomy, which definitively treats a specific illness, genomic sequencing can be used to screen for unknown illness or risk factors.  Laparoscopic cholecystectomy is the end of treatment for most people with gallbladder disease. Genomic sequencing is the beginning of a diagnostic and treatment cascade for many people who receive such tests.  A suspicious mutation may launch further testing to see if the mutation is a harbinger of hidden illness.

Some experts contend that genomic sequencing will lower costs when it helps to tailor therapy to those patients most likely to respond to treatment. Genetic testing may indicate whether a patient’s tumor is responsive to targeting chemotherapy. This would theoretically save money, if patients lacking the right genomic signature are spared an expensive and ineffective treatment. However, such cost savings will only come to fruition if clinicians withhold such treatments from their patients, which is not guaranteed to happen, especially if the genetic information is imperfect and some unidentifiable (if small) subset of that population would potentially respond to treatment.

Furthermore, if new treatments are only available to targeted populations of patients, the market for such products will be reduced and industry will likely respond by raising prices. Research and development costs are no smaller for treatments aimed at small populations than ones targeted at large populations. In fact, they might even more expensive, because it is harder to recruit patients for clinical trials which raises the cost of such testing. Consequently, manufacturers must recoup their costs over a smaller population of patients, thereby raising per-patient costs.

An extreme example of this phenomenon is the orphan drug industry, which develops interventions for diseases or conditions affecting no more than 200,000 people. Prices of these interventions often exceed $150,000 to $200,000 per patient. If genomic testing helps target interventions more efficiently, it could turn many more conditions into orphan diseases.

To fully realize the promise of less expensive genomic testing, we may need to take measures to limit the number of people receiving such tests or the price of interventions targeted to people with uncommon mutations.

Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel.  He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices TogetherThis article originally appeared in Forbes.

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  • James O’Brien, M.D.

    23andme.com got the price down to 99 bucks for a pretty good profile until the FDA shut them down last December, apparently over concerns that people would go out and get unnecessary mastectomies or something. As if that’s possible in an era of managed care.

  • doc99

    When cost gets conflated with quality, we get posts such as this. Will genomics raise or lower cost? That is NOT the question. Will genomics result in better outcomes? That IS the question.

  • JW

    I agree with doc99 that the main thing is better outcome.

    However I do think genetic testing has the potential to lower costs in some areas. Many conditions are currently treated by trying many drugs serially, in order to hope to figure out what will work. Not only do these drugs cost money, but time is lost while the patient may get worse. Additionally, some may cause side effects which could be serious and may even persist long after the drug is withdrawn. Genetic testing has the potential to identify the correct treatment from the outset.

    Furthermore, there are many common conditions which are currently not very treatable, and difficult to diagnose. Additionally, while rare conditions are individually rare, together they are common. And again hard to diagnose. Altogether that is a lot of patients: millions. The difficulty in diagnosing and treating these patients takes up huge amounts of time, resources, and pain (both for the doctors and for the patients). Being able to more rapidly diagnose and better treat all these patients would be a better use of time, if not money, even if the treatment is expensive. (Plus it has to go generic some year.)

    Additionally, a better outcome saves money in other areas. The patient needs less medical care and hopefully can work more. We need to stop looking at costs in isolated departments. Yes, we can spend more money on gallbladder surgery, rare diseases, etc., but does this decrease the health burden borne by our people overall? (Not only for the patient but also for their carer, if applicable?) Are other areas affected, such as homelessness and SNAP? Do people spend less on antacids? Do patients need less pain medicine? Does the jobless rate decrease? Health outcomes are not isolated.

    • BC

      Absolutely agree. “Cost” does not exactly correlate with true “value.” You might think it is expensive to pay $1000 for a genetic test, but it may end up saving 10-100 times that amount if it is for a condition that has an effective early treatment. The test may “cost” $1000 but you are looking at a greatly inflated price. It probably costs far less to actually run the test, and eventually in a competitive market prices will come down.

      Also, “cost” depends on whose perspective. When the insurance company pays for that genetic test, they would like to restrict it to patients who meet pre-defined criteria. However, patients are free to pay for the testing out of pocket if they wish, in which case we don’t care about the cost since people are free to waste money on whatever they want if they can afford it.