Accessible Requires Authentication Published by De Gruyter September 14, 2013

The Value of Diagnostic Testing in Personalized Medicine

Dana P. Goldman, Charu Gupta, Eshan Vasudeva, Kostas Trakas, Ralph Riley, Darius Lakdawalla, David Agus, Neeraj Sood, Anupam B. Jena and Tomas J. Philipson


Personalized medicine – the targeting of therapies to individuals on the basis of their biological, clinical, or genetic characteristics – is thought to have the potential to transform health care. While much emphasis has been placed on the value of personalized therapies, less attention has been paid to the value generated by the diagnostic tests that direct patients to those targeted treatments. This paper presents a framework derived from information economics for assessing the value of diagnostics. We demonstrate, via a case study, that the social value of such diagnostics can be very large, both by avoiding unnecessary treatment and by identifying patients who otherwise would not get treated. Despite the potential social benefits, diagnostic development has been discouraged by cost-based, rather than value-based, reimbursement.

Corresponding author: Tomas J. Philipson, Harris School of Public Policy, The University of Chicago, 1155 East 60th Street, Chicago, IL 60637, USA, e-mail:

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    For example, HercepTest is an assay to determine HER2 protein overexpression in breast cancer tissue. Only breast cancer patients who overexpress HER2 respond to therapy with Herceptin (trastuzumab), a monoclonal antibody (Hudis 2007).


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Published Online: 2013-09-14
Published in Print: 2013-09-01

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