Linking Drug and Diagnostic Policy Pathways to Reach Patients Most Likely to Benefit

Insurers are now spending billions on the most consequential new medicines of the past three decades, from GLP-1s for obesity to treatments that slow the progression of Alzheimer’s disease and million-dollar gene therapies for conditions that were once untreatable. The spending has lifted overall healthcare costs and added new out-of-pocket bills for patients, and it has drawn the attention of policymakers who are trying to balance innovation with access. Most of these reform efforts, however, still overlook one thing: the tests that determine who should receive these drugs. In a Health Affairs Forefront commentary, Kathryn A. Phillips argues that drug and diagnostic policy pathways remain separate systems, and that this separation is quietly costing patients.

The scale of the problem is large. Nearly half the world’s population has little or no access to basic, life-saving tests, according to the Lancet Commission on Diagnostics, which has also flagged weak investment and innovation in diagnostics relative to drugs. In the United States, tests and drugs are evaluated, regulated and paid for through largely separate pathways even though they often function as a single clinical intervention. The FDA runs different centers with different standards and timelines for each, and insurers and health systems follow the same pattern. The disconnect feeds delayed diagnoses, inappropriate treatment selection, unnecessary spending and persistent inequities in access to care.

A case study in the disconnect

Cancer offers the clearest examples. When trastuzumab (Herceptin) was approved in 1998 as a targeted therapy for HER2-positive breast cancer, the drug and the HER2 test had been co-developed, a landmark moment for the new field of precision medicine. But the test ran into years of friction: variation in coverage policies, billing codes and payment, differences in how laboratories ran the assay and how accurately they ran it, and uneven patient access by geography. Patients who could have benefited from the drug did not receive it, while patients who would not benefit were still given it.

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The problem, Phillips writes, is not simply a lack of scientific evidence or of public and private investment in tests. It is a longstanding failure to facilitate and reward appropriate links between tests and drugs. The remedy is to stop evaluating them as separate technologies and to treat them instead as interconnected care that needs interconnected policy pathways.

Four reforms to link drug and diagnostic policy pathways

Phillips proposes four reforms, building on a 2025 National Academies of Sciences, Engineering, and Medicine report on using innovation to address unmet need for therapeutics and on a Science article she co-authored on opportunities to facilitate innovation in diagnostics.

Generate joint evidence for test-drug pathways. Policies should require evidence on the entire test-guided treatment pathway, not either component alone. This could mean strengthening the Centers for Medicare and Medicaid Services’ Coverage with Evidence Development (CED) program, which has so far been used far more often for devices and drugs than for tests or test-drug combinations.

Integrate regulatory review of tests and drugs. Only a small share of approved tests are designated as companion diagnostics, and expedited approvals are more common for drugs than for tests. Phillips points to the FDA-CMS Parallel Review program and greater use of the Breakthrough Device designation for diagnostics as ways to close that gap, alongside adequate funding and staffing for the FDA.

Base coverage and payment on the test-guided treatment strategy. Payers should offer integrated pathways that consider the holistic and lifetime value of test-drug combinations, particularly for one-time curative therapies such as gene therapies, and adopt value-based payment models that assess the combined value of diagnostic-informed therapy.

Assess the value of tests as part of the integrated care pathway. Technology assessment bodies often evaluate tests as isolated technologies whose costs simply raise the final price tag. An international review of health technology assessments across 12 agencies found that most did not adequately describe the value of the tests required for the targeted drugs being evaluated. Assessments should cover the entire test-informed pathway, including treatment selection, clinical outcomes, adverse events and long-term costs, with health economists developing standardized methods.

What this means for health technology assessment

The fourth reform matters most to health technology assessment. When an HTA body evaluates a targeted therapy without valuing the diagnostic that guides it, the value of testing, including the value of avoiding the wrong treatments, gets missed. Standardized methods and guidance would let payers and HTA agencies capture what diagnostics contribute to clinical and economic outcomes.

The need for tests that identify which patients will benefit most from a drug will only grow as new therapies reach the market and as tests built on artificial intelligence emerge. Tests, Phillips concludes, are too often an afterthought. Linking drug and diagnostic policy pathways is how the field makes good on the promise of precision medicine: the right test, the right drug, the right patient, at the right time and at the right price.

Source: Health Affairs Forefront (August 11, 2026). The author reports honoraria from the California Technology Assessment Forum and prior consulting income from Illumina and Roche Diagnostics.