As the interest in precision medicine grows, so does the interest in its economic implications. Economic evaluations are used to determine the value of treatments, helping policymakers allocate resources wisely. However, these evaluations can be difficult for precision medicine. In this blog post, we delve into the economics of precision medicine, exploring its cost-effectiveness and the broader economic benefits of tailored treatments.

The difficulty of evaluating the economics of precision medicine

Evaluating the economics of precision medicine is particularly challenging for several reasons: 

Complexity and variability of treatments: Precision medicine involves treatments that are highly tailored to individual patients, often based on genetic, environmental, and lifestyle factors. This complexity makes it difficult to generalise costs and outcomes across different patient groups, unlike more standard treatments.

High initial costs: The development and application of precision medicine, including genetic testing and personalised drug development, can be extremely expensive. This raises questions about cost-effectiveness, especially in the short term.

Long-term benefits vs. immediate costs: While precision medicine may lead to better health outcomes and potentially lower healthcare costs in the long run, the immediate costs are high. Evaluating these long-term benefits against short-term expenditures is a complex economic task.

Data and privacy concerns: Precision medicine relies heavily on data collection and analysis, raising concerns about patient privacy and data security. These concerns can impact the adoption and implementation of precision medicine practices, thereby influencing their economic evaluation.

Regulatory and reimbursement challenges: The evolving regulatory landscape and the complexities of reimbursement for personalised treatments add to the difficulty. Insurance companies and healthcare providers often struggle to establish frameworks for covering these innovative but often costly treatments.

Outcome measurement: Measuring the effectiveness of precision medicine is challenging due to the individualised nature of the treatments. Standard metrics used in traditional healthcare economics might not be applicable or sufficient. Understanding the cost per quality-adjusted life year (QALY) gained is a crucial factor to consider when measuring the true value of these treatments.

Equity and access issues: There are concerns about equitable access to precision medicine. These treatments might only be available to those who can afford them or live in regions with advanced healthcare systems, skewing economic evaluations.

Rapid technological advancements: The field of precision medicine is rapidly evolving, with new technologies and treatments emerging continuously. This rapid pace of change can make it hard to keep economic evaluations up-to-date.

Interdisciplinary nature: Precision medicine spans multiple disciplines (biology, genetics, data science, etc.), each with its own set of economic considerations. This interdisciplinary nature adds layers of complexity to economic evaluations.

Patient selection and personalisation: Selecting the right patients for precision medicine and tailoring treatments specifically to them involves complex decision-making processes. This individualisation makes it difficult to create broad economic models.

In essence, the economic assessment of precision medicine is complex and dynamic, requiring careful consideration of its unique costs, benefits, and rapidly evolving technologies.

Cost-effectiveness of tailored treatments

The general perception of precision medicine often leans towards the assumption of high costs due to the personalised nature of treatment. However, recent studies and practical applications suggest that precision medicine can be not only clinically effective but also economically efficient in the long term. This efficiency arises from its ability to identify the most effective treatments, thereby reducing trial-and-error approaches and minimising side effects.The following case studies serve as compelling examples of the cost effectiveness of precision medicine.

Reducing R&D costs

A study by Queen’s University Belfast in the field of oncology has shed light on the cost-effectiveness of precision medicine. It compared the costs of developing oncology medicines using a precision oncology approach against a traditional approach. Astonishingly, the precision approach was over $1 billion less expensive in terms of research and development. By tailoring treatments to the molecular characteristics of an individual's tumour, not only were the treatment outcomes improved, but the costs associated with R&D were significantly reduced.

By pinpointing the most promising drug targets in specific patient groups, precision medicine aims to reduce overall costs, enhance drug efficacy, and increase the likelihood of success in clinical development. A conservative estimate of the cost savings expected from using precision medicine in drug development could reach 17%, potentially saving the industry a significant annual sum of $26 billion worldwide, according to a PwC Strategy& report.

Direct cost reduction

In psychiatry, a study employing the 5-Step Precision Medicine model (5SPM) for treating schizophrenia demonstrated significant economic benefits. This model, based on pharmacogenetic analysis, was applied to tailor treatments for 188 patients. The study revealed a notable cost-to-benefit ratio and resulted in a substantial reduction in direct costs, such as hospitalisations and pharmacotherapy. Remarkably, 67% of patients saw an overall cost reduction, showcasing the potential of precision medicine to decrease the financial burden on both patients and healthcare systems.

By reducing the need for multiple rounds of treatment, limiting hospital stays due to adverse reactions, and increasing the overall effectiveness of medical interventions, precision medicine can lead to significant savings in healthcare. It also opens doors for more efficient allocation of resources, allowing healthcare systems to focus on preventive care and early intervention, which are often less costly and more effective than treating advanced stages of diseases. In fact, researchers in the U.S. found that employing precision molecular diagnostics to cancer, diabetes, heart disease, hypertension, lung disease, and stroke could lead to a minimum of 10% reduction in disease incidence over 50 years, translating to an economic value ranging from $33 billion to $114 billion.

Challenges and barriers

The move towards the widespread adoption of precision medicine in healthcare is not without its challenges. A significant barrier lies in the insufficient integration between the public health sector and the pharmaceutical industry, especially in the realm of clinical trials. These trials are hindered by inefficiencies and high costs, largely due to their operation in isolated or "siloed" segments. This lack of synergy hampers the progress and affordability of precision medicine. 

Another critical factor impeding the advancement of precision medicine is the limited and skewed participation in clinical trials. Currently, only a small fraction (5%) of eligible patients partake in these trials, and a disproportionate 78% of participants are of European descent. This lack of diversity in trial participants can significantly impact the relevance and effectiveness of research outcomes. 

However, addressing these challenges now can pave the way for more cost-effective treatments in the future. Enhanced collaboration between academic institutions and pharmaceutical companies could lead to increased participation in clinical trials. This, in turn, would not only expedite drug development but also potentially increase the availability of effective medicines in the market. Such progress would be beneficial for patients and also contribute positively to economic growth. By tackling these obstacles head-on, we can move closer to making precision medicine a more accessible and efficient healthcare option.


Precision medicine stands as a pivotal innovation in healthcare, promising treatments that are both more effective and economically advantageous. With its potential to reduce disease incidence by at least 10% and yield $26 billion in annual savings in drug development, precision medicine is poised to significantly benefit not only patient outcomes but also the broader economy in the long term. As we address the existing challenges, such as improving clinical trial diversity and enhancing public-private sector integration, we move closer to realising a healthcare system that is not only tailored to individual needs but also financially sustainable, promising widespread benefits for patients and society.

For more on the evolution of precision medicine and its role moving forward, download our report, “The future of clinical trials” below: 


Get in touch