Editor’s note: The second in a series of seven articles by A.T. Kearney on the trends that are radically transforming the health sector.

Jerry Cacciotti

There is no question that science is rapidly accelerating the health care opportunities we see in the marketplace. Broader genetics capabilities could mean new services and treatments based on genetic makeup that accommodate the biological realities of differences between individuals. This “precision” or “personalized” medicine begins with diagnostic tests to identify a patient’s biological markers, and analyses of these markers, as well as information from the patient’s electronic health records (EHRs), and the patient’s personal and family health history are then used to determine the most effective treatments for that ­individual.

These technologies represent a paradigm shift in our definition of diseases and our approaches to disease treatment and prevention. Our understanding of cancer, for example, was previously focused on specific organ systems, such as colorectal cancer or stomach cancer. Now, scientists have identified mutations that drive the growth of tumors in the body in a range of organ systems. While some of these mutations occur in very low frequencies, this advancement changes the study of cancer drugs, the approval of these drugs, and the way they are priced.

The new technologies create a twofold challenge. First, from a financial perspective, the scientific advancements are upending the economics of health care. Treating diseases we were unable to address in the past can be expensive — the screenings to identify and diagnose certain tumors alone can cost as much as the price of cancer therapies just a few years ago. Some of the immunotherapies are approaching $500,000 per course of treatment. These costs are not sustainable in our current health care funding model and could create financial strain for public and commercial payers and self-insured employers. Offering these treatments to the small population that needs them will require new funding models — time-deferred, headroom-creating — that reward innovation, drive access to high-impact treatment, and ensure we have a sustainable health care system.

Second, from a moral and ethical perspective, we need to consider who has ready access to these treatments, and whether there are differences across geographic and demographic groups. It is well established that income and wealth inequality in the United States has significant consequences for individuals’ health. Research indicates that the richest 1% of American men now live 15 years longer than the poorest 1% , and the richest 1% of American women live 10 years longer than the poorest 1% of women. And since 2001, the poorest 5% of Americans have seen no increase in life expectancy while middle- and upper-class Americans witnessed a two-year boost in life expectancy. This divergence in life expectancy is, in part, a product of health spending. A longitudinal study of American health spending found that real medical spending by the poorest 20% of Americans fell by 3.7% from 2004 to 2012, while spending by the richest 20% of Americans increased by 19.7% over the same period.

These high-cost advances in health care may only exacerbate existing health care inequities. Insurers may draw lines between what they see as costly elective or preventative applications of personalized medicine and current courses of treatment. If the treatments are only available to the very rich, we will see even more divergent health outcomes by income level for American ­patients.

We also need to consider the costs of allocating our health care dollars to these high-cost therapies at the expense of advances in general public health that could improve the lives of many more people. Given our limited resources for health care, how do we create room in this system to reward innovation, provide these expensive treatments to all who need them, and continue to advance public health more generally? How do we continue to fund innovation but ensure that medical bills do not continue to increase over the next several decades?

Ultimately, the solution will involve, in part, eliminating the significant waste we see everywhere in the health care environment today: redundant treatment or overtreatment, variation in standards, and lack of adherence to medical evidence. Every dollar that is wasted could be spent on some of these curative advances. The solution must also include creating headroom in existing funding models by moving less efficacious treatments and protocols out of practice so that we can afford the new advances. We can’t just do more and spend more — we need to be smarter about how we modernize treatment protocols and the systems that support them. In fact, there is hope that despite high initial costs, advances in treatment personalization and targeting could lead to lower costs in the long run through improved efficiency and management of patient care and outcomes. According to the Personalized Medicine Coalition, $604 million could be saved annually if patients with metastatic colorectal cancer received a genetic test that would allow the treatment regimen they receive to be tailored or spared altogether. We are likely to see savings of similar magnitudes across other types of cancer and acute diseases.

Questions regarding health equity, price and allocation of scarce resources are occurring with increasing frequency; accelerating innovation makes the need for answers more urgent. As life sciences researchers push the scientific frontier forward, their colleagues in schools of medicine struggle with the complexity of putting these new technologies into practice, and schools of public health search for financing models that will enable a sustainable and equitable health care system. We need to bring interdisciplinary groups together to ensure that we’re not looking at this problem in isolation and that we’re asking systemic questions. It will take the participation of the whole ecosystem — payers, patients, researchers and health care providers — to craft comprehensive solutions.

Jerry Cacciotti is a partner for the Americas in the health practice of A.T. Kearney, a leading global management consulting firm. He can be reached at [email protected].