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Two Insurers Tell Providers Not to Use Myriad Genetics for BRCA Testing

NEW YORK (GenomeWeb) – Two insurers have notified healthcare providers in their networks to discontinue using Myriad Genetics for BRCA testing.

In notes sent this week, Horizon Blue Cross Blue Shield of New Jersey and Amerigroup separately advised in-network providers to use only in-network laboratories for BRCA testing, a move that some investment analysts said could negatively impact Myriad.

In its note, Horizon BCBS New Jersey told providers to use Laboratory Corporation of America for BRCA-specific genetic testing covered by CPT codes 81211 to 81215 and 81217. In limited cases, the provider may refer the patient to another lab for BRCA testing, however.

Amerigroup's note covers genetic testing in general and mentions BRCA tests as an example. "Please discontinue use of non-participating labs, such as Myriad Genetics and Sequenom," Amerigroup said in its note. Sequenom provides non-invasive prenatal testing but not BRCA testing. "Effective immediately, we will no longer authorize genetic lab testing by out-of-network labs," Amerigroup added.

It alluded to recent changes — such as the entry of firms including LabCorp and Quest into the BRCA testing space after the US Supreme Court ruled last June that human genes are not patentable, though synthetic DNA, or cDNA is — that have altered the BRCA testing landscape.

As a result, Amerigroup is directing its providers to have genetic testing, including BRCA tests, performed in labs participating in HealthPlus, an Amerigroup company.

Amerigroup serves 2.8 million members in 12 states, according to its website, while Horizon BCBS New Jersey said it has about 3.7 million members in total. Earlier in the month, Myriad signed a three-year deal with UnitedHealthcare, which provides services and products to about 70 million Americans, for coverage of Myriad's myRisk panel.

"While in isolation, the … BRCA policy changes do not seem like big deals as Horizon BCBS of New Jersey and Amerigroup likely represent a small percentage of Myriad’s business," Cowen and Co. analyst Doug Schenkel said in a research note. "However, when combined with our recent analysis that suggests share loss is higher than what Myriad management has conveyed, these developments are likely to raise incremental concerns for more rapid than expected share loss and price deterioration."

Earlier in the month, Schenkel wrote that Myriad's beat of the consensus Wall Street EPS estimates in the firm's fiscal third quarter was mainly due to "abnormally low R&D spend and a lower tax rate," and added that "the lack of further upside relative to [fiscal Q3] consensus reveals some challenges in the BRACAnalysis/myRisk franchise."

Today, Schenkel maintained his $37 price target on Myriad's shares and a Market Perform rating, but noted that "if share and/or price deterioration is more material than current expectations, the bias would clearly be to the downside at current stock levels."

Separately, Goldman Sachs analyst Isaac Ro lowered his six month price target on Myriad's shares to $42 from an earlier estimate of $45 while he maintained a Neutral rating on the company's stock. He is taking a "modestly more cautions outlook on Myriad's pricing and market share," saying that though other Blue Cross Blue Shield plans may also advise providers to discontinue use of Myriad, "the language on [Horizon BCBS New Jersey's] website regarding BRCA testing is not decisive enough for us to take this view."

He also said that he believes that BRCA testing "will steadily shift to panel-based testing, an area where [Myriad] has taken a leadership position with myRisk."

Shares of Myriad were up a fraction of 1 percent in morning trading today on the Nasdaq at $33.51.