December 1, 2011 (Vol. 31, No. 21)
Payer Acceptance of Molecular Diagnostics Remains a Constant Battle with No Relief in Sight
Gaining acceptance for the molecular diagnostics that are the hallmark of personalized medicine is like hand-to-hand combat, according to Steven Burrill, CEO of Burrill & Company. Speaking at the “Burrill Personalized Medicine” meeting in San Francisco recently, he and other presenters outlined the significant challenges companies are facing in gaining provider acceptance and reimbursement, as well as the strategies some companies are using to overcome those challenges.
“Investors were naïve at how substantial and perverse the resistance to adoption is,” Burrill observed. But, personalized medicine executives admit a certain naivety, too. “As a diagnostics industry, we think of the world as a series of validations, but ignore the two most important and hardest hurdles—payment and the need to change the behavior in clinics and hospitals,” explained Brad Stewart, chairman, CEO, and president of Cylex.
The molecular diagnostics industry is thwarted by perverse incentives that make hospitals and reference labs unwilling to consider molecular diagnostics. The challenge is that hospitals have equipment that must be paid for through use. When new tests are available that don’t require that equipment, providers’ revenues are threatened. Furthermore, “Payers are reluctant to make their provider network angry,” by advocating a more cost-effective test, said Deb Kilpatrick, Ph.D., senior vp of commercial operations for CardioDx.
It takes comparative effectiveness outcomes to create an opening for these new, disruptive diagnostics. “Learn the value proposition of therapeutics,” Matthew McManus, M.D., Ph.D., president and CEO of PrimeraDX, advised. In a reimbursement system that pays only for therapies that work, “providers want to have the right therapy up front.” Identifying that therapy creates opportunities in the clinical laboratories.
STAR technology from PrimeraDx is a good example. It measures up to 16 analytes on a single FFPE sample, thus reducing human error and eliminating the costs of running multiple tests. “We have a lot of traction in the clinical market by driving costs out of the lab, on a diagnosis related group basis.”
“The basic challenge is economic,” Stewart agreed. Cylex developed the ImmuKnow® test to illuminate immunity in organ transplantation. The company obtained a dedicated current procedural terminology (CPT) code, “but that was a two and a half year process I don’t wish on anyone,” Stewart added. However, with the code, the reimbursement rate for ImmuKnow nearly tripled.
Getting a dedicated code is a Catch-22 situation. “You have to demonstrate substantial clinical use,” Stewart explained, yet it’s difficult to build usage without a reimbursement code. “Typically, regulators will cross-walk the new code back to what you were paid before.”
The laws of unintended consequence also are in play, according to several speakers. When a reimbursement request is submitted to a payer, “Not getting denied doesn’t mean you have coverage. It means they don’t realize they’re paying for it,” Stewart noted. “Having the CPT code gave payers the opportunity to identify our diagnostic as novel and deny payment, even though they had paid for it the past eight years.”
Matthew Rosamond, director of the personalized medicine practice for PwC, suggests avoiding the CPT coding issue by using the bundled outcomes model in appropriate markets. For example, he says a Merck Serono trial in Britain used a molecular diagnostic to prove its compound worked and “saw a huge spike in market share. They had to provide the test, essentially, for free, but the cost was covered in the cost of the therapeutic.”
Standard of Care
“It’s absolutely critical for a diagnostic test to be accepted as a standard of care by clinical guidelines,” insisted Pierre Cassigneul, president and CEO of XDx. “Gaining FDA clearance for AlloMap® (a noninvasive assay to manage the risk of heart transplant rejection) did nothing for reimbursement or clinical adoption. Instead, outcome studies to determine comparative effectiveness made the difference in physician adoption and payer acceptance.”
Since those studies, AlloMap has been added to the protocols of nearly 50 of America’s organ transplant centers. Several insurers, including Aetna and Blue Cross of California, now consider the test medically necessary.
Mickey Urdea, Ph.D., co-founder, chairman, and CSO of Tethys Bioscience, also emphasized the need for physician education so that physicians understand the implications of test results and how to use those results. Tethys identified biomarkers that appear 15 years before patients become diabetic, and has developed a blood test for prediabetics that accurately predicts the onset of diabetes as early as five years before it presents.
“Not all prediabetics develop diabetes,” Dr. Urdea explained. Therefore, physicians can use this test to identify the subset of the prediabetic population most able to benefit from interventions.” Dr. Urdea is working with prevention specialists to develop materials to help physicians apply this technology in their practices. “Work with thought leaders in the field and publish in the best journals you can,” he advised.
CardioDX is speeding adoption by working closely with primary care physicians and payers, according to Dr. Kilpatrick. Using the gene-expression blood test Corus® CAD, labs can quickly identify symptomatic patients who are unlikely to have obstructive coronary artery disease (CAD) and, therefore reduce the number of patients needing coronary angiography. The test also provides gender specific diagnostics—an important feature because, “female patients are typically atypical,” Dr. Kilpatrick said. “About one-fifth of the women undergoing elective heart catheterization actually need it.”
By working with providers, Corus CAD is being reimbursed while outcomes data is gathered. “We’re finding a receptive payer community around coverage with evidenced development,” Dr. Kilpatrick said.
Cancer Comments is doing something similar for oncologists and their patients by capturing information about combination therapies and outcomes from thousands of provider sites, according to Jay “Marty” Tenenbaum, Ph.D., founder of Cancer Comments and chairman of CollabRx .
“To deal with combination therapies, it’s important to capture information from every patient,” he stressed, as only about 5% of cancer patients participate in clinical trials. “It’s the central mission of Cancer Comments to give every patient the best possible outcome by capturing the learnings in the thousands of oncology offices.”
Evidenced development strategies are seen as a strategy that may, sometimes, replace large-scale Phase III trials, particularly for complex diseases and for small patient populations for which large trials are difficult to enroll. After safety is validated, “regulators should allow a drug to be validated in specific populations, and data collected while the drug is on the market,” said Carlos Santos, Ph.D., CSO, Biovest International.
“In the age of very targeted therapies, clinical trials shouldn’t be a block to deliver drugs to patients. There’s a happy medium, but the regulatory and legal landscapes have to evolve.”
Despite the great promise of personalized medicine and molecular diagnostics, “it’s hard to find a business model that works in real life,” according to Stephen Little, Ph.D., vp for personalized healthcare at Qiagen. “For tests to be useful, they must be validated and information must be actionable. Gaining validation is quite expensive, and markets aren’t that large.” With the current reimbursement model, many companies can’t afford the needed studies.
To overcome that hurdle, Qiagen is working with the pharmaceutical industry. In developing a companion diagnostic for AstraZeneca anticancer agent Iressa™ (an EGFR inhibitor), “we get the EGFR testing market, and AstraZeneca gets the value of the treatment market, so we meet the requirements of market development in a very controlled way,” Dr. Little said.
“Another area of activity we’ve seen, especially last year, is the integration of molecular diagnostics into a larger suite of services to capture value from that, such as Nestle Health Science’s (www.nestlehealthscience.com) acquisition of Prometheus Laboratories last May,” Rosamond added. “That acquisition moved Nestle into gastrointestinal diagnostics and complemented its nutritional solutions business.”
“Economics, whether for investors or payers, determine the markets likely to be pursued. Few look at the long-term cost of disease,” Stewart said. Therefore, companies must balance the cost of the therapeutic against the cost of a diagnostic. “As technology improves, the economic equation changes.”
As Dr. Little added, “It’s never been about the cost of doing the test, but the cost of obtaining information from it.” He suggested that the next big opportunities lie in oncology and “maybe, neurological disease.” The key, he said, is to target diseases in which early detection can make a clinical difference.
Outside the U.S.
Dr. Little predicted that personalized medicine will make its greatest initial inroads outside the United States. “Much of this will be paid for outside the U.S. first. Our (U.S.) system is extremely complex.”
Investors are beginning to understand this, too, and are seeking international opportunities. PwC’s Rosamond reports interest in American companies exporting tests to Europe because they think it’s easier to deal with a single payer—despite the fact that payment is made by region. Likewise, European companies are interested in entering the American market because of its receptivity toward innovation—despite significant reimbursement hurdles.
Every region has challenges, panel members said. They noted that payment mechanisms in the U.K. effectively prevent molecular diagnostics from being adopted. In Asia, they pointed out many regulatory systems that are not only vastly different from the EU, but vastly different from each other. One speaker says China’s seemingly capricious SFDA makes it quite difficult to manage risk. Another termed China’s intellectual property situation “dreadful.”
In Japan, the reimbursement system is effective, but the regulatory system was termed egregious by one panelist, citing a patent that was recently awarded on an application submitted 15 years ago.
Personalized medicine is disruptive technology that runs counter to the systems and practices currently used by providers, payers, and regulators. Overcoming the perverse incentives is possible.