By Turna Ray
As payors become increasingly concerned about unnecessary genetic testing and employers look into personalized healthcare strategies to reduce costs and improve the health of their employees, Generation Health is hoping to carve out a new business as a benefit manager for genetic testing services.
Formed in November 2008, Generation Health has tried to model itself as a kind of pharmacy-benefit manager, focused on optimizing the use of genetic testing instead of drugs. The company intends to work with large self-insured employers and healthcare plans to implement genetic testing in a manner that is cost-effective and clinically useful.
The company last year completed Series A financing of an undisclosed amount from Highland Capital Partners, Correlagen Diagnostics, D2Hawkeye, and executive management. Its cofounders include Per G.H. Lofberg, Rick Schatzberg, J. Christian Kryder, and David Margulies. Lofberg is the company's CEO and Schatzberg is its chief marketing officer. Kryder is CEO of D2Hawkeye, a data-mining firm, and Margulies is CEO of Correlagen.
The company's PBM-type strategy is colored by Generation Health's co-founders' prior experience working for Medco, one of the largest PBMs in the US, representing 60 million people, and a pioneer in the application of pharmacogenomics for its membership. Lofberg was chairman and CEO of Medco from 1993 to 2000 and Schatzberg was executive VP of sales from 1998 to 2001.
"Genetics is much more complex but there are some similarities" to the pharmacy benefit management model for drugs, Schatzberg told Pharmacogenomics Reporter in an interview recently.
Generation Health's service offerings to employers and payors includes conducting clinical and cost models for specific genetic tests; establishing a framework for test coverage based on clinical validity and utility; developing models and criteria for who is eligible for a particular test; and deciphering "stacked CPT codes" to create a system for collating billing data in a way that is usable and informative to payors.
When PBMs arose in the 1980s to help payors better manage pharmacy expenditures, large payors were initially more resistant to using PBMs, while large self-insured employers were willing to try out the services. In spreading the word about Generation Health's services, Schatzberg has seen most interest from "benefit managers at large self-insured employers who are willing to try out pilots."
Generation Health has begun several pilots with large employers and has been in discussions with several payors. Although large insurers tend to implement their own genetic testing programs, they have expressed interest in using Generation Health to augment areas of their service, such as implementing prior authorization for a test.
Furthermore, as more PBMs get into pharmacogenomics, encouraged by Medco's example, "we'll eventually end up doing a program with one of them," Schatzberg said.
The company is also developing a network of leading genetic testing labs to make it easier to negotiate price, establish service standards, and maintain quality of testing. With the help of a team of independent scientific advisors, Generation Health is planning to establish a "Best Test Guide" for genetic tests, for which there is sufficient clinical validity, analytical validity and clinical utility data.
Generation Health has access to medical claims data through its association with D2Hawkeye, a healthcare analytics and data-mining company. By analyzing such data, Generation Health is able to identify patients who may be in need of genetic testing but are not receiving it, or notice areas of over-testing.
"Unlike formularies in the pharmacy world, the genetic testing technology and literature changes too much to just publish a list of tests and say, 'Here's what we pay for,'" Schatzberg said.
"It needs to be more fluid than that," he said. "It may be more automated in the future, but for now it needs to be a conversation between professionals." Schatzberg noted that when patients are identified who should receive testing or if errors in testing are noted, the company would call doctors or genetic counselors to inform them of these gaps.
While there appears to be growing interest in personalized healthcare among payors, they have been cautious when it comes to providing coverage for new genetic tests.
In the case of PGx-guided warfarin dosing, for example, many insurers are demanding more evidence that the test is clinically useful before making coverage decisions.
At a recent personalized medicine conference at Ohio State University, Ronald Copeland, head of Kaiser Permanente's Ohio Medical Group, noted that not too many tests have the clinical utility to warrant coverage within the system. "It is oversimplistic to think that just knowing the genetic underpinning of a disease will drive its adoption," Copeland said.
Furthermore, as more tests come on the market and diagnostics firms begin aggressively marketing their tests to doctors and consumers, payors are becoming concerned about over-testing or physician errors in interpreting test results. Erroneous or unnecessary testing cuts into the cost savings personalized medicine strategies are meant to yield.
Lee Newcomer, senior vice president of oncology at United Healthcare, has cited data suggesting that without precertification and mandatory genetic counseling procedures many patients that should not be tested on BRACAnalysis would be unnecessarily tested. Myriad's BRCA test costs upwards $3000.
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In his conversations with payors and employers, while Schatzberg has noted an interest in reducing unnecessary testing, there is also more openness to employing testing in ways that can reduce costs.
"[For] some tests, such as the BRCA test, they want to see the numbers reduced, and for other tests they are open to our suggestions for more testing," Schatzberg said. "Of course, they are not rushing to that but they are open to the arguments."
In particular, payors seem to be interested in using genetic testing to reduce unnecessary prescribing of costly drugs. "Probably the area that gets the most interest is areas of oncology, given the high cost of cancer drugs," Schatzberg said.
Furthermore, Schatzberg noted that while most payors are not interested in covering genetic risk scans provided by consumer genomics services, such as 23andMe, Navigenics, and Decode, many are paying for such scans without knowing it.
This is an area of concern, as "plans want to make sure that they aren't doing some widespread screening, which is rarely cost-effective," Schatzberg said.
Genetic testing services are currently unmanaged because they represent between 1 percent and 2 percent of healthcare costs for payors. However, the $2 billion genetic testing market is expected to grow at an annual rate of between 30 percent to 50 percent in the next decade. The National Institutes of Health expects the number of Americans who get genetic testing to increase from 2 percent to 60 percent in the next 10 years.
"Even using the more conservative estimates, it is clear that with the increasingly prominent role genetics and genetic testing has begun to play in clinical practice there are good reasons why healthcare payors need to take a closer look at how this will impact employee/member benefit coverage," Generation Health said in a statement. The company estimates that the appropriate adoption of genetic testing can save payors up to 10 percent in plan savings from reductions in medical and drug spending, as well as lower adverse events costs.
Although Generation Health is still in start-up mode in many ways, Schatzberg is beginning to see payors and employers warming up to certain types of personalized medicine efforts.
"If the return for a genetic test isn't a generation away, the clinical outcomes are good, and it's part of a bigger program that has cost savings, then it's very difficult for a health plan to turn away from it, even if there are costs associated with the test," Schatzberg said. "Still, these are very cost-conscious times, so it's very difficult to ignore the economics."