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Q&A: GE's Orrin Marcella Discusses Coalition to Strengthen the Future of Molecular Diagnostics


Amid mounting industry dissatisfaction with newly issued Medicare reimbursement levels for molecular tests, a diverse group of stakeholders have formed a coalition hoping that collectively they can sway the Centers for Medicare & Medicaid Services to make the price-setting process more transparent.

The newly formed Coalition to Strengthen the Future of Molecular Diagnostics brings together labs, patient groups, test manufacturers, pharmaceutical firms, and venture capital investors, which all want to improve the process by which molecular tests are currently being priced under Medicare.

As Medicare contractors "determine reimbursement rates for new molecular diagnostic codes for 2013 and as CMS considers rates for 2014 and beyond, they must take into consideration that many new therapies depend on companion diagnostics to determine which patients qualify for a particular drug," CSFMD said in a position statement. "The totality of the clinical and economic value of these tests must be considered by both the [contractors] and CMS and included in the reimbursement if patient access to these tests is to be maintained."

Furthermore, CSFMD has criticized CMS and its contractors, claiming they haven't "engaged in a transparent, data driven process" to set pricing for test codes.

CMS earlier this year used the controversial gapfill process to establish reimbursement levels for more than 100 CPT codes on molecular tests issued by the American Medical Association, and then released the new prices for public comment.

Under the gapfill system, Medicare Administrative Contractors set reimbursement for test codes based on a number of factors, such as local pricing patterns, the resources needed to perform the test, and how other payors price them. After one year, CMS uses the median rate from contractor-specific amounts to issue a national reimbursement rate for each code. CMS is slated to set median pricing for each test code in November based on the gapfill prices set by the MACs.

However, the price-setting process hasn't played out so smoothly. CMS and its contractors have in the past used the cross-walk process to peg prices for newly coded tests to similar tests that already have codes. They have rarely used the gapfill process. Likely due to contractor inexperience with gapfilling, most of the MACs have copied the prices set by one contractor, Palmetto, while other contractors have set reimbursement levels that are even lower.

As such, after the MACs released their pricing for the new codes, many labs and industry observers complained that the reimbursement levels were too low. In some instances, the new reimbursement rates are so low that labs said they can't afford to keep performing the tests. Contractors have denied coverage for tests they've deemed "investigational" and "not medically necessary" for the Medicare population (PGx Reporter 5/22/2013). There have even been reports that some labs, as a result of the difficult reimbursement environment, have had to cut staff and shutter their businesses.

Despite efforts to communicate with CMS about these issues, change has been slow. Palmetto raised the reimbursement levels for a handful of test codes, but even then, labs have said the prices aren't sufficient to cover the cost of performing the tests.

With the formation of CSFMD, stakeholders are hoping to bring their concerns to CMS in a more organized manner. "We have a very diverse coalition, and the diversity of the coalition should get CMS' attention," Orrin Marcella, manager of government affairs at GE Healthcare, told PGx Reporter during an interview discussing the aims of CSFMD. "It's not just a lab coalition, everyone's at the table including patient organizations." Marcella encouraged interested stakeholders to join the coalition and send letters to their Congressperson expressing their molecular diagnostics reimbursement concerns through a website called

Below is an edited transcript of the interview.

To what extent have you engaged CMS so far to discuss the value that molecular diagnostics provide to healthcare and how reimbursement should reflect that value?

We get the sense that this is an area that's very new to the broader CMS agency. So far the coalition has done several things. We have written a letter, as early as April, regarding the gapfill process and some of the concerns we were having at that point. We've also submitted formal comments to the carrier-specific prices on July 8. And then several of the coalition members have had individual meetings with CMS as well, all with the goal of creating greater awareness at CMS of the value of molecular diagnostics and some of the issues that we're seeing now in the gapfill process.

And what's the response been from CMS?

CMS thus far has had a very open door. Right now, what we're seeing from them is an agency that is entirely committed to and wedded to the current [gapfill] process. Up until this point that meant being very deferential to the MACs. So, there has been very limited feedback directly from CMS. I think there will come a time real soon when we may see some more direct engagement from CMS, particularly as they review the comments that have been submitted [to the MACs prices], not only by the coalition but by all kinds of stakeholders across the cancer care spectrum.

As new CPT codes were developed by the AMA, some of the MACs [such as Palmetto] said that an improved coding structure would allow payors more granularity and enable value-based pricing for diagnostics. So, what's been lost in this process that, in issuing prices for these newly coded tests, the MACs haven't established what many labs consider value-based pricing?

The term 'value' has different definitions depending on where you sit. CMS, I believe, has a very different idea of value than others in the community. CMS's idea of value traditionally is saving money, or value as opposed to volume in the fee-for-service world. And we have to keep in mind that the same folks responsible for the lab payment system are responsible for other systems where value has that connotation. Many members of our coalition would absolutely like to see the value of these tests reflected in a payment formula, but that's really not the way CMS reimburses at this point in time. So, it's very challenging.

What would need to happen for a more transparent reimbursement setting methodology to emerge where you could gauge what the price would be for a test based on its characteristics?

We've been exploring that as a coalition. Right now, we're very focused on the current gapfill process, and not so much on any future reform to gapfill, although many in the coalition do support that sort of thing. So, in terms of our work, up till now, we would like to see more transparency in the current process, and … MACs using all the gapfill requirements [in setting pricing] and being open and transparent about how they're using the data that they're collecting.

In terms of gapfill, CMS and the MACs don't have much experience using that process. Is that the main reason why you think some of their issued prices for [newly coded tests] are so low? Or is it more a methodology issue?

It's a little bit of both.

Do you think the new codes that the AMA has issued are sufficient in describing the molecular diagnostics?

I've heard some people express concerns about the codes that they don't account sufficiently for certain test methodologies as is already. I think the codes require careful monitoring, as the science improves very rapidly. We don't want to stifle innovation because of coding limitation.

The coalition issued a press release in which it highlighted that some of the most critical tests were seeing cuts, by an average of 20 percent and as high as 80 percent, in their reimbursement rate. During this process of gapfilling prices for the new codes, at least one MAC official openly discussed that payment rates would be lower for certain types of tests. Could you provide some details on what types of tests are experiencing the reimbursement cuts? Are the cuts occurring for a specific type of test or are they across the board?

I would highlight EGFR, KRAS, and BRAF in particular, although there are a number of other [tests] that people have raised concerns about as being priced below what it costs many labs to perform them. Some of these [codes] represent some of the most powerful and commonly used cancer diagnostics that … are used to inform treatment decisions in many different cancers. They are really front-line tools in the war on cancer. And that's what's concerning.

In terms of the difficulties that these labs are seeing as a result of these cuts, I've read reports that some labs have gone out of business. Can you provide any examples of specific labs that have experienced trouble with their business or actually have closed their doors?

One of the coalition members has gone out of business to date, and that's Predictive Biosciences. We've had other members that have had layoffs and members who have had to adjust their service options as a result of these pricing changes.

As a coalition, what are you asking CMS to do to provide relief for these labs?

We're asking CMS to increase reimbursement to a sustainable level based on historical median pricing for a limited number of tests that are identified as a concern through this recent comment period. We feel that this can be temporary. Going forward we're asking CMS to provide a more open, transparent, data-driven process to gather more information on these codes, before setting a national price in 2014. That's what we're looking for in terms of pricing.

We're also asking CMS to enforce the local coverage determination process. Members of the coalition are concerned about coverage decisions being made in this pricing exercise. So, we'd like to see CMS enforce that [LCD] process. We'd also like to see each MAC perform its own gapfill. There are molecular labs in every MAC region and the carrier prices that inform the national price in 2014 should be derived locally.