CEO SUMMARY: Pharmacogenomics, companion diagnostics, “personalized prescription drug therapy”—by any name, use of molecular diagnostics to guide clinicians in the prescribing and dosing of drugs is about to expand exponentially. Some experts predict that CYP450 testing alone will be a $1 billion business for labs in just a few years. Here’s a look at the forces driving this new opportunity.
THERE’S A MAJOR CLINICAL AND FINANCIAL HOME RUN looming for the laboratory industry. It’s testing based on cytochrome P450 (CYP450).
“We expect that the clinical lab market for companion diagnostic tests will expand substantially over the next several years,” predicted Bill Bonello, Research Analyst with Wachovia Capital Markets. “CYP450 2D6, 2C19 and 2C9 could be the first meaningful new tests, but other tests are sure to follow.
“We believe the value of this market could be over $1 billion in the next several years,” said Bonello. “Over time, we believe this market is likely to reach $3 billion.”
CYP450 tests identify genetic variants that impact metabolism for 25% or more of the current drug formulary in the United States, For some time, scientists have known that variations in the CYP2D6 and CYP2C19 genes are predictive of drug metabolism. What they lacked was a way to rapidly and accurately identify these variations for large numbers of people.
Bonello believes that CYP450 tests now entering the market could be accepted by the clinical community. “There is enormous potential for physicians to determine appropriate drug therapies and dosing for a number of commonly prescribed drugs, including Warfarin, Zoloft, Prozac, Straterra, certain beta blockers, and other drugs,” said Bonello.
The ability to predetermine the benefit—or potential adverse reaction—to patients of a particular drug therapy represents just the first step in pharmacogenomics. Other tests are sure to follow. As clinicians begin to use these tests, pressure will mount for laboratories to provide these assays. It will require significant investments of capital to acquire the technology and highly-skilled staff needed to perform these tests.
In Bonello’s opinion, the diagnostic assay best-positioned to ride this clinical wave is the Amplichip™ CYP450 Array offered by Roche Molecular Systems, Inc. This test is a microarray that utilizes the Gene-Chip® System 3000Dx manufactured by Affymetrix, Inc.
31 SNPs In A Single Assay
Using DNA extracted from a patient’s blood, Roche’s microarray assay searches for 31 different genetic variations—polymorphisms and mutations—in the cytochrome P450 enzymes. These polymorphisms affect the ability of a patient’s liver to metabolize certain drugs, as well as the rate of metabolism. Both systems were cleared for clinical use by the Food and Drug Administration (FDA) on December 23, 2004.
THE DARK REPORT concurs with Bonello’s assessment that microarray-based CYP450 testing has the possibility to be the next clinical and revenue- generating blockbuster in laboratory medicine. THE DARK REPORT was first to note the importance of this development. (See TDR, January 3, 2005.) It was also first to provide presentations on this topic to lab directors and pathologists by having Sunil Hazaray, Vice President of Roche Molecular Systems, address the Executive War College in May 2005.
In fact, Bonello will be discussing CYP450 gene testing in greater detail at the upcoming Executive War College on Laboratory and Pathology Management in Miami on May 3, 2006. Bonello is the first financial analyst to look at the factors which will drive clinical demand for CYP450 testing and how it will financially benefit the laboratory industry.
Labs Now Offer The Test
“Right now, only a handful of laboratories offer CYP450 testing, including Quest Diagnostics Incorporated and Laboratory Corporation of America,” stated Bonello. “But we expect to see a steady expansion in the number of laboratories which offer this test. The AmpliChip test has been found to be most effective in evaluating the patient response to 15 commonly pre- scribed compounds. (See sidebar on pages 5-6.)
“Clinicians write approximately 70 million prescriptions for these therapeutic drugs every year,” continued Bonello. “Based on the modest assumption of an initial new patient screening rate of 4% and a price of $400 per test, the near-term market potential is $650 million!
“Reimbursement levels for this test remain unclear,” he observed. “The near-term price point for this test may even be much higher than $400—perhaps as much as $1,300 per test initially.”
The existing market for companion testing is relatively small and centers around HIV genotyping and HER2/neu, used in conjunction with Herceptin. “The HIV genotyping market alone went from $0 in 1997 to $175 million within three years,” Bonello said. “Compared to HIV and HER2/neu, the potential clinical demand for CYP450 testing is huge.
“We estimate that Quest Diagnostics and LabCorp could each generate approximately $250 million of annual revenue and $50 million in EBIDTA (Earnings Before Interest, Depreciation, Taxes, and Amortization) from CYP450 testing, over time,” stated Bonello. “Each could capture 40% of the near-term market. In the longer term, other laboratories will likely offer competing CYP450 tests.”
Three Market Factors
Bonello identifies three market factors that could affect the rate at which clinicians adopt CYP450 testing. “One, any FDA labeling requirements—such as for Warfarin and other commonly prescribed drugs—could cause expansion in the market,” predicted Bonello. “Two, as other tests and drugs come into the marketplace, adoption rates would expand even further. Three, payer reimbursement rates will be a critical component impacting the adoption of new tests based on CYP450.”
Despite strong, even compelling evidence in favor of widespread testing for CYP450, Bonello points out three possible barriers. “It will take some time for the clinical community to sort out the precise factors which can influence drug metabolism,” he explained. “These can include age, race, liver function, co-morbidity, and nutrition.
Will Docs Be Reluctant?
“Next, in the absence of evidence- based protocols and guidelines delineating proper clinical response to genotypic information, clinicians may be reluctant to use the test,” explained Bonello. “A third factor may be payer reluctance to pay for these tests.
“On the other hand,” he continued, “even without clear protocols and guidelines, many clinicians may feel a moral and ethical responsibility to use CYP450 screening for two reasons. One, CYP450’s ability to predict drug toxicity could trump other uncertainties. Two, physicians may be concerned about potential liability if they do not offer these predictive tests.
“With the increased focus on patient safety, the FDA may start requiring reference to pharmacogenetic testing on the labels of prescription drugs,” speculated Bonello. “Currently, there are over two million adverse drug reactions and 100,000 deaths per annum in the U.S. attributable to improper drug dosing and other adverse drug reactions (ADRs). Potential FDA labeling requirements would impact a broad array of new and existing drugs.”
During the past decade, numerous papers have been published in peer-reviewed medical journals about how genetic variation in cytochrome P450 affects the ability of individuals to metabolize certain drugs and gain therapeutic benefit. There is plenty of evidence and agreement within the healthcare community that CYP450 testing can help clinicians prescribe the right drug for individual patients, thus improving clinical outcomes and reducing the number of adverse drug events.
In the next briefing, THE DARK REPORT provides an analysis of the factors which support increased use of CYP450 tests prior to prescribing many drugs in the current formulary.
As Bonnello has indicated, there are powerful economic and clinical reasons why use of CYP450 tests should increase. Just one example illustrates this point. Within hospitals, there are 2.2 million adverse drug reactions (ADRs) each year in the United States and more than 100,000 deaths are attributed to these ADRs.