If it isn’t already difficult for genetic tests in niche disease populations to find reimbursement, it may soon become “impossible” if the US Food and Drug Administration begins regulating in vitro diagnostic multivariate index assays, a Genzyme official cautioned this week.
In addition, according to a Genomic Health official, FDA approval may be superfluous from a payor’s perspective. Peer-reviewed journals confirming the clinical and analytical validity of the test, and not necessarily FDA approval, may be most important in convincing payors to reimburse for the test.
The FDA held a meeting last week to hear stakeholder comments on its draft guidance to regulate these tests, which use algorithms to interpret gene and protein data to guide medical decision-making. Previously the agency had practiced enforcement discretion for tests developed at a single laboratory, deferring instead to CMS’ Clinical Laboratory Improvement Amendments guidelines.
However, the FDA states in its guidance that IVDMIAs, due to their complexity, do not fall under the category of regular homebrew tests and now must be cleared by the agency (see related story, this issue).
The majority of industry representatives who spoke at the meeting were against the draft guidance, noting that requiring FDA approval for this subset of tests would hurt test developers in niche markets. They said that the added expense of going through lengthy development timelines and FDA approval processes, combined with a weak reimbursement environment, would wreak havoc on test makers.
“Currently the reimbursement system is a challenge for laboratories making decisions … to invest in these new tests. An additional level of regulation would make investment in these tests virtually impossible,” Genzyme Genetics President Mara Aspinall said at the meeting. “The regulation should not be one that only focuses on and promotes the development of high-volume testing.”.
A few days before the public meeting, the FDA approved the first IVDMIA, Agendia’s breast cancer recurrence test, MammaPrint. At the time, Agendia competitor and the developer of the Oncotype DX test Genomic Health had said that a nod from the FDA doesn’t necessarily signal the test will be adopted in the marketplace or garner reimbursement from payors [see PGx Reporter 02-07-07].
Other speakers claimed that the lengthy development timelines associated with FDA approval could slow a product’s entry to market, which could have a negative impact on the way a test is adopted in the market or by payors.
“The impact of the guidance on innovation [comes] directly and indirectly through the reimbursement system, and therefore [affects] the timely physician and patient access to the most up-to-date and newer signs of technology,” Aspinall said.
A Case for Dx Shops in Small Markets
According to Aspinall, diagnostic shops focusing on developing genetic tests for rare diseases with relatively small populations will be most negatively impacted by FDA’s guidance.
“As we look into the future, we envision many new, complex tests that Genzyme Genetics would like to develop that would focus on specific and relatively small populations of patients,” she said, adding many of these tests would be in the area of oncology.
“We believe that most of those future tests will meet the definition as defined in the draft guidance of an IVDMIA that would potentially require additional regulation and or costly premarket approval,” Aspinall added. “Because these tests are truly in the realm of personalized medicine, the market for them would be small.”
Aspinall noted that balancing expenditure with return on investment is an important consideration for diagnostic companies investing in cutting-edge technology.
“Expensive and costly regulatory requirements would serve as an extremely strong disincentive to the development of tests such as those for genetic disorders or rare diseases, and cancers that affect targeted populations,” she said.
According to Aspinall, while diagnostics comprise 5 percent of hospital costs and 1.6 percent of Medicare costs, findings based on diagnostics influence 70 percent of medical decision-making. “The current reimbursement system doesn’t reimburse laboratories adequately even now,” she said. “The added costs associated with an FDA clearance for approval would be impossible to recoup.”
To have a good shot at garnering reimbursement, tests much reach “a critical and relatively large volume,” Aspinall said. She said requiring companies to seek FDA clearance for IVDMIAs would make it more difficult to reach that target. “Lacking that critical volume, there is no market incentive to develop a kit and to spend the resources required to take this kit through a full FDA process.”
A Brewing Reimbursement Race?
The advantages and disadvantages of the dual regulatory pathway for IVDMIAs are poised to play out most immediately in the breast cancer market.
Agendia has said it expects FDA approval to bolster sales of its MammaPrint in the US and Europe. However, with that test, Agendia will enter a market already occupied by Genomic Health, which launched its CLIA-certified breast cancer recurrence test, Oncotype DX, in 2004.
Quest Diagnostics in December introduced its breast cancer gene expression-ratio tests, based on the ratio of expression between the homeobox gene-B13 and the interleukin- 17B receptor gene, to gauge the risk of disease recurrence in women with ER-positive, lymph node-negative breast cancer. In a release announcing the product’s launch, Quest said its testing laboratory in San Juan Capistrano, Calif., had validated the test.
Quest licensed the technology from Carlsbad, Calif. based Aviara Dx, a company that spoke at the FDA meeting to request the agency grant companies sufficient time to comply with its regulations.
Another potential entry into the space may come from Exagen. The Albuquerque, NM-based company supports FDA oversight of IVDMIAs, and announced recently that it plans to enter the market by filing its first test for breast cancer recurrence with the FDA within the next two months. According to the company, the computational approach it used to develop the test will give it an edge over the front-runners in the field (see related story).
For the time being, Genomic Health seems to be leading the market. During an earnings call last week, the company boasted that its test will be reimbursed by various payors covering nearly 100 million lives.
During a presentation this week at the Biotechnology Industry Organization’s CEO and Investor conference in New York, Genomic Health suggested that its success in securing reimbursement for Oncotype DX is proof that publishing data in peer-reviewed journals confirming the clinical and analytical validity of the test, and not necessarily FDA approval, is most important in convincing payors to reimburse for the test.
“Clinical validation is everything,” Genomic Health President Kim Popovits said during the BIO conference. “There is a lot of noise around personalized medicine, and is it one gene or two genes, and what ratio you need to do, and what algorithms you need to develop, but at the end of the day, what payors want to see, and what oncologists want to see, is clinical data.
“They want data validated,” Popovits said. “They want the bar high and we believe that’s what we need to continue to deliver.”
Genomic Health saw “very little traction with payors” before research validating the test appeared in multiple peer-reviewed publications, Popovits noted. For the first year and a half of Oncotype DX’s launch, Genomic Health had one peer-reviewed publication.
“Until we got the third and fourth ones, we struggled, not with getting payors to pay for the test, but to adopt a policy and put a broad contract in place within our organization,” Popovits said.
“Currently the reimbursement system is a challenge for laboratories making decisions … to invest in these new tests. An additional level of regulation would make investment in these tests virtually impossible.”
For its part, Quest has published efficacy and safety data for its tests in two peer-reviewed journals: An 852-patient retrospective study published in the Journal of Clinical Oncology and a study published in Clinical Cancer Research.
Agendia has said that its data, published in Nature and published the New England Journal of Medicine,demonstrate that gene-expression profiling is able to accurately predict the clinical outcome of breast cancer.
Additionally, on its website the company cites an October 2006 article in BioMed Centeral Genomics that found that “the genomic profile analyzed with MammaPrint is validated in more than 1,000 patients … and is extremely reproducible.”
A Level Playing Field
At the FDA meeting, those in favor of FDA oversight argued that the current dual pathway for bringing a homebrew test to market allows companies an easy out by taking the CLIA route. Meanwhile, stakeholders against the guidance maintained that lengthy development timelines would essentially deter much-needed investment.
Guido Brink, Agendia’s director for regulatory affairs, said that following the first approval of an IVDMIA — which happened to be his company’s MammaPrint test — all developers must be held to the same standard to ensure a “level playing field.”
Gail Javitt, director of law and policy at Johns Hopkins University’s Genetics and Public Policy Center, said the FDA’s prior enforcement discretion for homebrew tests has “created a disincentive to perform research to establish clinical validity and deters innovation of new tests that are able to demonstrate their clinical validity.
“The company that invests the time and effort” to create a test that will become approved by the FDA “will encounter competition in the marketplace from laboratories that offer homebrew tests for the same purpose, which have not undergone FDA review,” she said.
According to a survey by the Genetics and Public Policy Center, nearly 40 percent of laboratories do not use FDA-approved tests. “The main reason for not using FDA-approved tests kits were that no test kits were available for the disorders for which they were offering testing,” Javitt said.
In contrast, to illustrate the pitfalls of the FDA approval process for diagnostic shops, InterGenetics dicussed its experience at marketing OncoVue, a test assessing breast cancer risk.
InterGenetics CEO Craig Shimasaki said that the FDA's changing regulatory position on IVDMIAs has delayed the market launch of OncoVue. The company currently offers the test through a number of Breast Cancer Risk Testing Network locations as part of an investigational study.
In 2005, InterGenetics was ramping up for OncoVue’s launch, anticipating high demand for the product and projecting a growth rate of 2 million tests per year. The company had completed building a laboratory facility in Oklahoma City and signed a five-year deal with Tm Bioscience for a minimum $7.5 million worth of Tag-It reagents for the test [see PGx Reporter 10-13-05].
However, in 2006, InterGenetics received a letter from the FDA stating that it may not be in compliance and may need to apply for premarket approval.
“We had to figure out a way… which allowed us to file an investigational device exemption [by submitting] the additional data on psychological analysis and medical impact — we’re not talking about more genotyping — in order to suffice filing,” Shimasaki said.
He noted that the additional data took eight months to acquire, during which time other companies introduced similar tests into the market under CLIA. He also said that the company did not receive adequate opportunity to meet the FDA’s requirements.
“Therefore, the inequitable treatment among companies is also a confusion,” Shimasaki said. Due to the regulatory delays, “most of our investors backed out,” Shimasaki said.
Shimasaki estimated that while traditional diagnostics cost between $25 million to $50 million to develop, molecular diagnostics range from $40 million to $100 million.
“Most venture capital groups will tell you that if you hit a ceiling of $60 million they will not invest in the company in the beginning because the return is that the multiples just don’t work,” he said.
“If you add another regulatory process at the end, when the company is fully staffed up like we are today, and we talked about a PMA and a real time effect of about 18 months, you are looking at about $60 million to $120 million in developing costs,” he said. “And most likely that just will not occur.”
Based on InterGenetics’ experience, Shimasaki suggested that the FDA allow market forces to dictate which companies pursue FDA over CLIA regulation. Enforcing that all IVDMIA developers go through the FDA approval process may put some companies “out of business,” he said.
“If you allow the market forces to dictate that, it can be another way to make sure that the companies that have money can do this, and those that have niche markets don’t go out of business,” he said. “We don’t want to penalize the companies that are trying to do this correctly, taking the time to validate the tests.”