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Introduction
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The initial fruits of the human genome project are beginning to be seen, with novel technologies based on genomic information being implemented in clinical practice. At the same time, however, the cost of developing new technologies has risen at a significant rate. With new pharmaceuticals estimated to cost more than $1 billion on average to develop and to take 10 years to bring to market (DiMasi et al., 2003), many drug developers have examined new strategies for creating efficiencies in their development processes, including the adoption of genomics-based approaches.

Genomic data can identify new drug targets for both common and rare diseases, can predict which patients are likely to respond to a specific treatment, and has the potential to significantly reduce the cost of clinical trials by reducing the number of patients that must be enrolled in order to demonstrate safety and efficacy. Somatic genome information can be used to guide therapy for cancer treatment and germline information can be used to assess risk of inherited diseases and to avoid adverse reactions to drugs. Recently, the expectation of such benefits has led to the development and approval of a number of targeted therapeutics for diseases such as non-small-cell lung cancer, metastatic melanoma, and cystic fibrosis (Chiang and Million, 2011; Davis et al., 2012). A key component of each of these new

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1The planning committee’s role was limited to planning the workshop, and the workshop summary has been prepared by the workshop rapporteurs as a factual summary of what occurred at the workshop. Statements, recommendations, and opinions expressed are those of individual presenters and participants and are not necessarily endorsed or verified by the Institute of Medicine, and they should not be construed as reflecting any group consensus.



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1 Introduction1 The initial fruits of the human genome project are beginning to be seen, with novel technologies based on genomic information being implemented in clinical practice. At the same time, however, the cost of developing new technologies has risen at a significant rate. With new pharmaceuticals estimated to cost more than $1 billion on average to develop and to take 10 years to bring to market (DiMasi et al., 2003), many drug developers have examined new strategies for creating efficiencies in their development processes, including the adoption of genomics-based approaches. Genomic data can identify new drug targets for both common and rare diseases, can predict which patients are likely to respond to a specific treatment, and has the potential to significantly reduce the cost of clinical trials by reducing the number of patients that must be enrolled in order to demonstrate safety and efficacy. Somatic genome information can be used to guide therapy for cancer treatment and germline information can be used to assess risk of inherited diseases and to avoid adverse reactions to drugs. Recently, the expectation of such benefits has led to the development and approval of a number of targeted therapeutics for diseases such as non- small-cell lung cancer, metastatic melanoma, and cystic fibrosis (Chiang and Million, 2011; Davis et al., 2012). A key component of each of these new 1  The planning committee’s role was limited to planning the workshop, and the workshop summary has been prepared by the workshop rapporteurs as a factual summary of what occurred at the workshop. Statements, recommendations, and opinions expressed are those of individual presenters and participants and are not necessarily endorsed or verified by the Institute of Medicine, and they should not be construed as reflecting any group consensus. 1

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2 THERAPEUTIC AND DIAGNOSTIC CO-DEVELOPMENT drug approvals is the ability to identify the population of patients who will benefit from treatment, and this has largely hinged on the co-development and co-submission to the U.S. Food and Drug Administration (FDA) of a companion diagnostic test. The co-development process, or the develop- ment of the test and drug for the simultaneous submission to FDA,2 has led to a major alteration in the way that drugs are being developed, with traditionally separate entities—pharmaceutical and diagnostic companies— now working in close collaboration. While these early co-development successes have bolstered the industry ­ and demonstrated to some extent the efficacy of a genomics-based approach to drug discovery and development, this convergence has not occurred without issue (Moore et al., 2012). Questions remain regarding the regula- tory pathway (see Box 1-1) and reimbursement, the economic model, and clinical lab challenges. There is concern over the regulatory uncertainty that exists for companion diagnostic tests in particular over whether they should either be reviewed by FDA or through oversight by the Clinical Labora- tory Improvement Amendments of 1988 (CLIA) or by a risk-based triage approach by FDA to determine which pathway should be used (Chapter 6). Payment is also a concern for laboratory-developed tests (LDTs) and in vitro diagnostics (IVDs) as well as follow-on tests (Chapters 5 and 6). Economic considerations concerning the co-development of companion diagnostic tests include the low reimbursement compared to value, the competition with LDTs that can erode IVD developer investments,3 and the process by which drug and test companies partner for co-development (Chapters 4 and 6). From the clinical lab perspective, the result from a companion diagnostic test provides just one piece of information about the complexity of the disease, which makes assessing clinical utility for decision making a challenge. Technical problems also exist, including limited sample quantities available for testing (Chapter 3). There is also interest from stakeholders about how next-­ eneration sequencing (NGS) will affect the g regulation and use of companion diagnostics, especially after the approval of a test (Chapters 2–3 and 5–6). 2  For the purposes of this workshop summary, an in vitro diagnostic (IVD), as defined by FDA, is considered a device, and is used to make a diagnosis of disease or other condition. It can also be useful for determining how to treat or prevent disease. A laboratory-developed test (LDT) is not FDA-approved and is developed and used by an individual laboratory. An FDA-approved companion diagnostic is an IVD that is used as a tool to provide additional decision-informing information about the safety and likely effectiveness of a related therapy. IVDs and LDTs are regulated differently (see Box 1-1). 3  Recent U.S. Supreme Court Decisions on patentable material could have the potential for lasting impacts on co-development. It will take time to fully realize the economic and devel- opmental implications of the rulings. See: Association for Molecular Pathology v. Myriad Ge- netics, 569 U.S. 12-398 (2013) and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 10-1150 (2012).

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INTRODUCTION 3 BOX 1-1 Overview of Companion Diagnostic Test Regulation FDA defines a companion diagnostic test as a device that “provides informa- tion that is essential for the safe and effective use of a corresponding therapeutic product” by identifying those patients who are most likely to benefit from treatment or who are at an increased risk of an adverse reaction or by providing information used in adjusting treatment (FDA, 2011). To further clarify the co-development review process, in July 2011, FDA issued draft guidance on co-development for developers of IVD tests and therapeutics (FDA, 2011). FDA’s companion diagnos- tics process was designed to accommodate the co-development of a drug with a companion diagnostic test for identification of the subpopulation of patients most likely to respond to the drug. According to the guidance, IVDs developed as com- panion diagnostics for targeted therapeutics are subject to approval by FDA. The FDA framework for the risk-based regulation of devices involves assigning them to one of three classes, from those devices that have a low likelihood of harm (Class I) to those with high or unknown risk of harm (Class III). An FDA-approved companion diagnostic test is an IVD and is considered by FDA for use in aiding in the diagnosis of disease or another condition and can provide information about disease treatment and prevention. Because companion diagnostics direct treat- ment decisions, FDA has generally viewed them as high-risk Class III devices that require premarket approvals. While FDA assesses the analytical and clinical validity of IVDs in its review process, it does not formally assess their clinical utility. However, in the case of companion diagnostic tests, clinical utility may be demonstrated during the course of the Phase III clinical trial for the drug. During this stage, the experimental drug is compared with the current therapy standard and additional information is collected on the effectiveness, side effects, and safety of the given therapy so that FDA can determine whether it will be approved for sale. After FDA issued its draft guidance, many questions were raised by stake- holders, specifically health care providers, clinical laboratories, test developers, pharmaceutical companies, and payers. Because drug development and test development have very different characteristics, questions were raised about timelines, required resources, market protection, intellectual property, market size, and potential profits. In some cases, as noted by Walter Koch of Roche Molecular Systems, companies have not submitted an IVD for approval from FDA because the return on investment would not justify the effort needed to gain approval. Also, according to John Pfeifer of the Washington University School of Medicine, limited tissue samples may prohibit performing multiple tests for the same disease or for different diseases in clinical laboratories. Another major concern is that the regulatory pathway remains uncertain for LDTs. The laboratories in which LDTs are used are governed by CLIA for analytical validity and are at the regulatory discretion of FDA. CLIA is administered by the Centers for Medicare & Medicaid Services (CMS) to federally regulate laboratory testing on humans in the United States (with the exception of testing for research purposes). continued

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4 THERAPEUTIC AND DIAGNOSTIC CO-DEVELOPMENT BOX 1-1 Continued While FDA regulates IVDs, historically it has used discretion in its regulation of LDTs. Clinical laboratories and laboratories in pathology practices and univer- sity medical centers develop, validate, and use LDTs. Furthermore, if an FDA- approved test is modified and improved by a CLIA laboratory, it is considered an LDT.a CLIA sets standards for analytical validity and quality assurance for LDTs, but, according to Scott Patterson of Amgen, a major question for stakeholders is whether LDTs have the same assurance of performance characteristics as an IVD approved through the FDA co-development process. a   linical Laboratory Improvement Amendments. http://www.cms.gov/Regulations-and-­ C Guidance/Legislation/CLIA/index.html?redirect=/clia (accessed on November 26, 2013). Since 2009 the Roundtable on Translating Genomic-Based Research for Health has focused much of its work on examining these issues and the development of clinical utility data for genomic technologies because establishing utility is one of the major obstacles to translating sequencing technology for patient use, said Robert McCormack, workshop co-chair and head of technology innovation and strategy at Veridex LLC. Because of the need to further address the questions surrounding the companion diagnostics co-development process (see Box 1-2), the Roundtable held a workshop on February 27, 2013, in Washington, DC, with the objec- tive to examine and discuss challenges and potential solutions for the co- development of targeted therapeutics and companion molecular tests for the prediction of drug response. Prior to the workshop, key stakeholders, including laboratory and medical professional societies, were individually asked to provide possible solutions to resolve the concerns raised about co-development of compan- ion diagnostic tests and therapies (see Box 1-2). Workshop speakers were charged with addressing these solutions in their presentations by provid- ing insight on (1) whether the proposed solutions address the problems described, (2) whether there are other solutions to propose, and (3) what steps could be taken to effectively implement the proposed solutions. WORKSHOP THEMES The next four chapters of this summary of the workshop offer perspec- tives from a variety of stakeholders on the co-development of drugs and diagnostics. Chapter 2 provides perspectives on FDA’s approach to the co- development process from inside and from outside the agency. The changes

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INTRODUCTION 5 BOX 1-2 Concerns Identified by Individual Stakeholders and Potential Solutions to the Current Co-Development Process Common Stakeholder Concerns •  egulatory uncertainty around LDTs. R •  eimbursement uncertainty with regard to LDTs and future generations of R tests. •  rosion of investments and of the clinical utility of the original device as E additional tests emerge on the market. •  linical difficulties for demonstrating clinical utility of multiple companion C diagnostics for the same drug. Potential Stakeholder Solutions •  he regulatory pathway for co-developed tests needs to be clarified for T both pre- and post-therapeutic approval, including a pathway for tests to be developed for off-label use of drugs when such use is recognized as a standard of care in medical practice. Developers (whether industry or laboratories) of new tests or new versions of established co-developed tests should offer proof of the clinical validity of these versions in order to obtain coverage. Coverage and reimbursement should be based on the performance of each unique test and the evidence that supports it. (Coali- tion for 21st Century Medicine) •  he role of CLIA should be strengthened to assure the clinical validity of T laboratory tests. A test registry should be established to improve the trans- parency of public information, and efforts should be directed at expanded oversight of genetic tests directly marketed to consumers. (American Clini- cal Laboratory Association) •  ests should be regulated according to risk instead of according to the busi- T ness model for test development. (Advanced Medical Technology Associa- tion, AdvaMed) •  he relevant analyte for drug efficacy rather than the specific test should be T defined. Test submission should include enough details about the biologic basis for the test and its performance characteristics that these could be used as benchmarks for comparison of other tests. A repository for test results would allow a more rapid assessment of the clinical usefulness of testing. (College of American Pathologists, CAP) •  better understanding of tumor biology and drug–target interactions A involved in the use of a predictive biomarker is needed before a predictive biomarker is selected for development and validation. Regulatory certainty regarding FDA oversight of LDT companion diagnostics is needed, with coordination between the Center for Drug Evaluation and Research and the Center for Devices and Radiological Health. (American Society of Clinical Oncology, ASCO) •  he cost of the test should be included in the price of the drug so that the T laboratories would be committed to using that specific test for the drug. (individual participant submission)

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6 THERAPEUTIC AND DIAGNOSTIC CO-DEVELOPMENT in drug development strategies necessitated by companion diagnostics are discussed along with commercial challenges such as available resources and mismatched market sizes. Chapter 3 summarizes the observations of representatives from three different end user groups: patients, health care providers, and clinical labo- ratories. Challenges for clinical labs, the regulation of NGS, and patient- centered efforts are addressed. Chapter 4 offers the views of representatives of pharmaceutical companies. Several workshop participants pointed to what they called “the problem of the generic”—that is, once an IVD has been approved, little prevents clinical laboratories from offering a test for the same analyte at a reduced cost. This undercuts the economic incentives to develop IVDs and the performance characteristics of LDTs compared with FDA-approved IVD. Chapter 5 focuses on the regulatory environment for the marketing of co-developed companion diagnostics, the regulatory scrutiny that should be given to IVDs and LDTs, demonstrating the safety and effectiveness of devices, and reimbursement decisions based on clinical utility. Finally, Chapter 6 outlines observations made by individual speakers and workshop participants about the possible solutions in Box 1-2 for addressing the current co-development landscape. Regulatory consider- ations are discussed, including a role for FDA to regulate tests based on risk, making CLIA more robust for LDTs, and choosing one regulatory pathway for all co-developed companion diagnostic tests to ensure their safety and effectiveness. The chapter reviews how standards of evidence for clinical utility are defined, as well as the pricing of tests. The role of NGS in the context of test regulation and reimbursement for more comprehensive diagnostics was not a focus of the workshop, but several speakers addressed these issues as they may be important in the future.