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The Value of Diagnostic Testing in Personalized Medicine


  • Goldman Dana P.
  • Lakdawalla Darius
  • Sood Neeraj

    (Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, Los Angeles, CA, USA)

  • Gupta Charu
  • Vasudeva Eshan

    (Precision Health Economics, Los Angeles, CA, USA)

  • Trakas Kostas
  • Riley Ralph

    (Janssen Diagnostics, Toronto, ON, Canada and Philadelphia, PA, USA)

  • Agus David

    (Center for Applied Molecular Medicine, University of Southern California, Los Angeles, CA, USA)

  • Jena Anupam B.

    (Harvard Medical School and Massachusetts General Hospital, Boston, MA, USA)

  • Philipson Tomas J.

    () (Harris School of Public Policy, The University of Chicago, 1155 East 60th Street, Chicago, IL 60637, USA)


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.

Suggested Citation

  • Goldman Dana P. & Lakdawalla Darius & Sood Neeraj & Gupta Charu & Vasudeva Eshan & Trakas Kostas & Riley Ralph & Agus David & Jena Anupam B. & Philipson Tomas J., 2013. "The Value of Diagnostic Testing in Personalized Medicine," Forum for Health Economics & Policy, De Gruyter, vol. 16(2), pages 121-133, September.
  • Handle: RePEc:bpj:fhecpo:v:16:y:2013:i:2:p:121-133:n:6

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    References listed on IDEAS

    1. Philipson Tomas J & Jena Anupam B, 2006. "Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs," Forum for Health Economics & Policy, De Gruyter, vol. 9(2), pages 1-33, January.
    2. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
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    Cited by:

    1. repec:nbr:nberch:13986 is not listed on IDEAS
    2. Manuel I. Hermosilla & Jorge A. Lemus, 2017. "Therapeutic Translation of Genomic Science: Opportunities and limitations of GWAS," NBER Working Papers 23989, National Bureau of Economic Research, Inc.
    3. repec:nbr:nberch:13988 is not listed on IDEAS

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