top of page

Economics of Pharmacogenomics

Economics of Pharmacogenomics

Product Development Challenges

Especially in the latter example, but also to some degree in the former there will be an impact on pharmaceutical research costs for late phase trials. Although this issue is likely to be true to some degree related to the use of pharmacogenomics for adverse event management, its impact on the economic viability of pharmaceutical commercialization is less dramatic, and for this reason will not be discussed further. Instead this discussion will focus on the application of pharmacogenomics for the targeted selection of patients.

DNA Tests

Impact on Technology Pricing

Higher trial costs, shorter effective market exclusivity, and smaller target markets; the simple economic translation for the pharmaceutical industry is much higher price tags for these products. We have seen evidence of this with the newer targeted cancer and HIV drugs (e.g.Herceptin, Ziagen).

These higher price tags are not necessarily a problem. Higher price tags can be acceptable if the drugs are more effective, but as is usually the case from an economic perspective the acceptability of the price depends on the market dynamics.

Developing countries

In the private pay market in the developed countries the ability or willingness to pay must be balanced against the perceived value by the health professional or end consumer. If the pharmaceutical industry can convince health professionals and consumers that the increased efficacy justify the extra cost (which they have proven to be quite effective at) then the product will have a viable market, and will be able to generate sales. This is the market segment that is likely to provide greatest value to the pharmaceutical industry.

The more interesting situation is in the markets where a sizeable percentage of the expenditures for pharmaceuticals are through the public purse and includes such countries as Canada, United Kingdom, France, Germany, Italy, Sweden, Switzerland, and Australia. Although collectively these markets represent less than half of the current world market for pharmaceutical sales (and likely closer to one quarter), all of these markets are much more price sensitive, due largely to resource constraints. As a consequence most have employed some form of cost-effectiveness threshold for reimbursement as a way to ration new technologies. These thresholds typically evaluate the cost per life year gained (or quality adjusted life year gained), and determine a value that they consider acceptable, refusing in most cases to reimburse products that exceed these thresholds.

Public funds

Author : Christopher J. Longo, Ph.D.


Foster MW, Sharp RR. (2005) Will investments in biobanks, prospective cohorts, and markers of common patterns of variation benefit other populations of drug response and disease susceptibility gene discovery? The Pharmacogenomics Journal, 5: 75-80.

Shastry BS. (2006) Pharmacogenetics and the concept of individualized medicine. The Pharmacogenomics Journal, 6: 16-21.

Williams-Jones B, Corrigan OP. (2003). Rhetoric or hype. Where’s the ethics in pharmacogenomics. Am J Pharmacogenomics, 3(6): 375-383.


bottom of page