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Payors' Evolving Demand for Evidence Clouds Reimbursement Outlook for Dx Shops, HHS Says

An increasing number of payor requirements seeking proof from diagnostic developers that their products have clinical utility will likely create a more difficult reimbursement environment, a recent Health and Human Services report suggests.
According to a Roche official, payors are holding Dx developers to the same evidence standards as pharmaceutical companies, which may end up hindering the development of innovative tests.  
“I think payers may be trying to hold diagnostics tests to the same requirements that are used to evaluate devices and pharmaceuticals,” John Ridge, director of reimbursement services at Roche Diagnostics, told Pharmacogenomics Reporter via e-mail recently. “Given that the generation of scientific evidence in the product development process is significantly different among devices, pharmaceuticals, and diagnostics it may be unrealistic to hold diagnostics to the same standards.
“It is possible that the costs associated with meeting higher levels of evidence may result in less innovation,” he added.
One example of the kinds of requirements a payor may demand from a company is illustrated by Aetna’s policy for Roche’s AmpliChip test. According to the HHS draft report, “Realizing the Promise of Pharmacogenomics,” Aetna’s policy required Roche to perform controlled clinical trials to prove that the AmpliChip will reduce adverse drug reactions. Aetna also requires that Roche compare the AmpliChip, which interrogates CYP2D6 and CYP2C19 polymorphisms, with standard therapeutic drug-monitoring techniques.
Based on randomized clinical trial data Aetna’s 2005 clinical policy bulletin regarding Herceptin classifies Genomic Health’s Oncotype DX as “medically necessary” in women whose breast tumor is HER2 receptor negative or HER2 receptor positive and less than 1 cm in diameter.
In contrast, Aetna’s 2006 policy bulletin, citing conflicting evidence from recent studies, said that Third Wave’s Invader UGT1A1 test and CYP450 polymorphism genotyping needed additional investigation and that the clinical value of these tests have not yet been demonstrated. Particularly in the case of the UGT1A1 test, Aetna notes that prospective, randomized, controlled clinical trials may be required. RCTs have been FDA’s gold standard when considering a new drug application for approval.
In an article Ridge authored in Future Medicine last year, he outlined technology-assessment criteria for another large insurer, BlueCross BlueShield, which requires sponsors to prove that the test helps to improve outcomes, that it yields benefits comparable to established alternatives, and that it is approved by government regulatory bodies.
In the article, “Reimbursement and coverage challenges associated with bringing emerging molecular diagnostics into the personalized medicine paradigm,” Ridge suggests that medical product companies like Roche “are being forced to demonstrate the value” of health care technologies. This has “resulted in pressure by and on insurers and managed care organizations to restrain premium increases by controlling costs within health care systems,” he wrote.
“It is clear that as high-value molecular diagnostic tests are brought to market, private payors will continue to seek clinical utility and medical benefit data before approving coverage and reimbursement,” he noted.
Regulatory Wrinkle
Specifically, if payors are factoring in regulatory action in their reimbursement decisions, then another hurdle for Dx shops is FDA’s recent efforts to increase oversight for certain laboratory-developed tests called in vitro diagnostic multivariate index assays.
A majority of industry representatives who spoke in February at a public meeting on FDA’s IVDMIA draft guidance said that the added expense of going through lengthy development timelines and FDA approval processes, combined with a weak reimbursement environment, would bankrupt test makers and stifle innovation [see PGx Reporter 02-14-07].
“The lack of appropriate reimbursement for molecular diagnostics can potentially threaten a laboratory’s willingness to develop and offer genetic tests if they must provide them at a financial loss,” Ridge wrote in the Future Medicine article. “For rare diseases, tests may be performed by a single laboratory in the US, and the consequences of under-reimbursement can be particularly significant.”
Among test developers, there are varying opinions as to how much FDA approval factors into reimbursement decisions. Agendia, maker of MammaPrint – a breast cancer recurrence test and the first FDA-approved IVDMIA – has said that a nod from the agency will encourage US users to adopt its test.
In contrast, Genomic Health, which markets the competing Oncotype Dx breast cancer test through its own CLIA-certified labs, has said that when payors consider a test for reimbursement they consider articles published in peer-reviewed journals confirming the clinical and analytical validity of the test, and not necessarily FDA approval.

“It is clear that as high-value molecular diagnostic tests are brought to market, private payors will continue to seek clinical utility and medical benefit data before approving coverage and reimbursement.”

The company’s strategy for garnering reimbursement seems to have worked. During a recent earnings call Genomic Health boasted that its test will be reimbursed by various payors covering nearly 100 million lives.
Managing Benefits
Other healthcare stakeholders are beginning to understand that reimbursement plays a critical role in a physician’s decision to adopt predictive technologies. As such, two major pharmacy benefit managers have taken it upon themselves to investigate the clinical utility of diagnostics.
Medco and PharmaCare have begun doing their own pharmacogenomic and pharmacoeconomic studies to gauge how predictive technologies affect treatment decisions. Medco, the second-largest pharmacy benefit manager in the US, has said that payors need to see the “value proposition” of incorporating genomic data into coverage decisions in order to become comfortable with the concept.
According to one Medco official, the “value” of such data in treatment decisions can be established in the minds of payors by conducting large outcomes trials, by relabeling a drug to recommend a particular diagnostic, or through credible association guidelines suggesting how the use of the test should be incorporated into standard medical practice [see PGx Reporter 12-06-06].
See a Mess?
However, one place payors should not look to make reimbursement decisions for genetic tests is the Centers for Medicare and Medicaid Services, the HHS report states. According to the report, as of 2004, Medicare payments under CMS for diagnostic tests had not been updated for inflation in 13 of 15 consecutive years.
Therefore, payments have “fallen short of reflecting their value or being adjusted over time for inflation,” the report states. “Because many other payors follow Medicare’s lead in setting payment levels, these shortcomings often carry over to reimbursement rates for third-party payors and covered patients.”
Ridge points out in his article that CMS’ current fee schedule reimburses labs 75 cents on the dollar.
HHS further notes that Congress must pass new legislation with regard to genetic testing in order for Medicare to appropriately cover preventative technologies.
Ridge notes that personalized medicine is more advanced than perhaps reimbursement and regulatory authorities realize. “When one searches the websites of the FDA and CMS for pharmagenomics, personalized medicine, and genetic testing, over 1800 hits come up on the US FDA website, and 52 hits come up on the CMS website,” he points out in his article.
According to Ridge, only by “educating policy makers about the value of emerging molecular diagnostic tests” will we “succeed in realizing a personalized medicine paradigm.”
However, he also puts the onus on industry to complete “the appropriate studies that demonstrate clinical utility and medical benefit of emerging molecular diagnostic tests.”

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