Operationalizing Precision Medicine in Drug Development: Predictive Biomarkers, Companion Diagnostics, and Regulatory Pathways

Precision medicine offers the opportunity to improve the benefit–risk profile of new therapies by prospectively identifying patients most likely to respond or least likely to experience harm; however, its systematic integration into drug development remains inconsistent outside oncology. Key barriers include timely generation of robust predictive biomarker hypotheses (i.e., hypotheses regarding treatment‐by‐biomarker interactions), appropriate validation strategies, and coordinated development of companion diagnostics within increasingly complex FDA, European Medicines Agency, and In Vitro Diagnostic Regulation regulatory frameworks. This review presents a pragmatic operational framework to guide the incorporation of precision medicine into drug development across therapeutic areas. We outline structured approaches for early biomarker hypothesis generation and prephase II evidence development; define five clinical development scenarios based on the strength of the biomarker signal—front‐loaded enrichment, precision‐medicine‐enabled phase II, adaptive phase II, adaptive phase III, and back‐loaded confirmatory enrichment; and summarize regulatory and lifecycle considerations for companion diagnostics. Examples from oncology and emerging applications in cardiovascular and metabolic diseases illustrate evolving regulatory expectations and common industry challenges. We also discuss opportunities to extend precision medicine beyond predictive biomarkers to diagnostic, prognostic, and safety biomarkers, as well as digitally derived signatures. Treating precision medicine as a core component of drug development—rather than an optional enhancement—can improve clinical trial efficiency, support commercial viability, and ensure that patients derive meaningful clinical benefit. Early, structured biomarker planning; integrated clinical–diagnostic strategies; and iterative collaboration among sponsors, regulators, HTA bodies, payers, and patients are critical for translating biomarker insights into de‐risked pivotal trials and aligned regulatory and market‐access decisions.