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In 2015, Precision Medicine Options Grew; FDA, Labs Still at Odds; Payment Remained Mostly Elusive


NEW YORK (GenomeWeb) – The story of personalized medicine in 2015 tells of a scientific discipline that technological advancements and enthusiasm has turned into a medical mantra.

There are more treatments and tests for personalizing care that doctors are increasingly prescribing and patients are asking for. But the events of 2015 underscored the reality that getting the right medicine to the right patient won't be easy in a world of messy politics, rigid regulations, and plodding payment policies.

The year started enthusiastically at the White House and ended with uncertainty on Capitol Hill.

At a White House conference in January, standing next to a 3D model of DNA, President Barack Obama unveiled the Precision Medicine Initiative, a project to collect a variety of data from 1 million volunteers and advance biomedical research. The initiative kicked off a year during which the term personalized medicine was rebranded precision medicine; the US Food and Drug Administration approved these types of drugs in record numbers with impressive speed; and the molecular tests for identifying patients who might benefit from these treatments became cheaper and more ubiquitous, further blurring the lines between research and medical care.

In recent years, genomic advancements have occurred despite regulatory and reimbursement uncertainties. On both these fronts, interactions between industry and government agencies intensified during 2015.

On the reimbursement front, labs continued to decry the low payment levels and limited coverage for molecular diagnostics, particularly pharmacogenetic test panels. However, big changes are coming for the molecular diagnostics firms in 2016, with the implementation of the "Protecting Access to Medicare Act of 2014" (PAMA), a law that seeks to implement a market-based payment system for molecular tests. Some industry players have been particularly concerned about how the Centers for Medicare & Medicaid Services has proposed to implement this law.

On the regulatory front, labs and pathologists continued their staring contest with the FDA. After the agency released its draft guidance on regulating laboratory-developed tests in 2014, this year the American Clinical Laboratory Association (ACLA) hired lawyers to build a legal argument against FDA's authority to regulate LDTs; pathologists lobbied congress against FDA oversight; and several groups released alternative regulatory proposals. The FDA refused to blink, however, and methodically moved toward finalizing the draft guidance by gathering industry input through several public workshops.

To strengthen its case that FDA oversight of LDTs is necessary to protect public health, the agency released a report in November highlighting 20 cases where LDTs it had not overseen caused or could have caused harm. The FDA released the report the night before a congressional hearing during which officials from the FDA and CMS told legislators that the FDA should take the lead in overseeing LDTs. This didn't sit well with industry players who maintain that the FDA has no statutory authority over lab tests, and that any regulatory improvements should be made through CLIA under CMS, the agency with historic oversight responsibilities.

Jeffrey Shuren, director of FDA's Center for Devices and Radiological Health, appealed to the lab industry before Congress to "put down the swords" and "end the saber rattling," but the hearing and the report seem to have only heightened tensions. The Association for Molecular Pathology (AMP) accused the FDA of making "dubious claims" in its 20-case-study report, and in turn, the FDA released a list of guidances it plans to finalize in 2016, which includes the LDT oversight plan. 

More precision drugs, more CDx complexity

By GenomeWeb's count, the FDA in 2015 approved a dozen new treatment options for molecularly defined subsets of patients (see chart below). Among these approvals are next-generation BRAF inhibitors, ALK inhibitors, and EGFR inhibitors, indicating that the personalized medicine market is maturing. In July, the most active month in 2015 in terms of the number of precision treatment approvals, Amy Miller, executive VP of the Personalized Medicine Coalition, wrote that "personalized medicine is turning a corner."

While the list of precision drugs is growing for patients, prices have remained high, despite the hope of early supporters of personalized medicine that such drugs would lower costs by making clinical trials more efficient and by avoiding adverse events. Also in July, 118 oncologists wrote in the Mayo Clinic Proceedings about how cancer patients continue to carry a heavy financial burden due to coverage policies requiring them to make co-payments as high as 30 percent of the total prescribed drug cost.

Despite the competitive landscape in certain precision medicine indications, there is minimal pricing variation among marketed drugs. For example, Genentech launched Alecensa (alectinib) for advanced and refractory ALK-positive NSCLC this year at a list price of $12,500 per month, in between the list prices for one month of Zykadia (ceritinib) at $13,500 and $11,500 for Xalkori (crizotinib).

Despite high prices, the 2015 precision drug approvals reflect the fact that molecular testing is now the standard of care for certain types of cancer. For example, Lonsurf (trifluridine/tipiracil), a new option for metastatic colorectal cancer is indicated for RAS wild-type patients, reflecting that patients should now be readily tested for RAS mutations. Similarly, recognizing that BRAF mutation testing is part of the standard of care in melanoma and there are personalized options for patients with mutations, the FDA approved Opdivo (nivolumab) in September for patients who have the wild-type version of the BRAF V600 marker.

Immunotherapeutics, such as Opdivo and Keytruda (pembrolizumab), were the most anticipated approvals of the year, and the highlight at medical conferences. The agency approved Opdivo and Keytruda in non-small cell lung cancer, but defined the intended populations for these drugs in different ways. For identifying best responders to Keytruda, the agency approved a companion diagnostic to characterize tumors expressing PD-L1. But in the case of Opdivo, the agency approved a complementary diagnostic, creating a new category of tests that are not required for the safe and effective use of a drug, but could better define the best responder population. 

Meanwhile, the growing number of treatment options for the same molecularly defined patient groups — as is the case with anti-PD-1 and anti-PD-L1 immunotherapies — has created challenges on the companion diagnostic side. Companies developing these drugs are working with different companion tests with varying specifications, which in turn creates confusion for physicians when it comes time to prescribe treatments.

The FDA held a meeting this year to discuss this companion diagnostic complexity, which may ultimately have to be addressed by the adoption of next-generation sequencing tests that gauge a panel of markers. There are a number of collaborations between pharmaceutical companies and NGS platform providers like Illumina and Thermo Fisher Scientific to advance such tests through the FDA.

Although the FDA has yet to approve an NGS-based companion test, the interest among oncologists and cancer patients is growing. For example, Foundation Medicine in the third quarter of 2015 conducted more than 8,000 FoundationOne and FoundationHeme NGS tests, a 25 percent increase from the year-ago period. NGS panel testing is also integral to high-profile studies launched this year, such as NCI-MATCH, which is investigating how cancer patients fare when they receive treatments based on the molecular aberrations driving their tumors. Advocacy organizations are also educating patients about the availability of such studies and are connecting them to resources to determine if they qualify for comprehensive genomic profiling.

Coverage, payment still uncertain

"We're having really fantastic advancements on the technological front, as well as on the knowledge acquisition front," Roger Klein, chair of AMP's professional relations committee and a molecular pathologist at the Cleveland Clinic, told GenomeWeb. "We're able to genotype patients more rapidly, more inexpensively, and more accurately than we've ever been able to do before." 

However, by and large coverage and payment for molecular diagnostics remains a major challenge for industry. Klein noted as a positive this year that payors at least began issuing coverage policies for NGS-based tests, even though some groups have noted problematic language within these initial policies.

Earlier this year, CMS issued a detailed draft local coverage determination (LCD) proposing to cover BRCA testing as part of NGS panels under the following conditions: when independent pre- and post-test counseling is provided; the genes on the panel are relevant to the personal and family history of the person being tested; BRCA testing criteria outlined by CMS are met; and the person meets professional guidelines for being tested for at least one other hereditary cancer syndrome, such as Lynch syndrome.

In advanced NSCLC, a number of payors — UnitedHealthcare, Aetna, and several Medicare contractors — have issued policies for NGS tests. In late December, Foundation Medicine signed a national agreement with UnitedHealthcare to cover its FoundationOne test for patients with metastatic stage IV NSCLC, which should ease some of the firm's reimbursement difficulties. In documents filed with the US Securities and Exchange Commission, Foundation said that it had reported thousands of NGS test results to patients while still awaiting payment from insurers. 

Recognizing the need to improve the reimbursement environment for NGS tests, Thermo Fisher, Illumina, Eli Lilly, Celgene, and Roche/Genentech this year committed their expertise and funding for MED-C — a non-profit trying to establish standards for such tests and build the clinical utility evidence around personalized treatment strategies.

MED-C's first project will be to build a registry of lung cancer patients who will have their tumors profiled on research-quality, standardized NGS panels, and, based on the molecular characteristics of their tumors, will receive on- and off-label treatments supported by guidelines and drug compendia. The registry will collect information on how these patients do on these treatments, which in turn will inform payors and regulators.

Despite some forward movement on the reimbursement front, the molecular diagnostics space is in for dramatic changes with the implementation of PAMA, slated to take effect in 2017. Klein characterized CMS' steps to implement the law as one of the negative events of 2015. "It's going to drive reimbursement downward," he said.

PAMA mandates that "applicable laboratories" will report payment rates and test volumes from private payors to CMS for every clinical diagnostic lab test reimbursed under the Clinical Laboratory Fee Schedule (CLFS). Based on this information, CMS will calculate a weighted median payment amount for each test. Medicare can't cut payment for a test by more than 10 percent compared to the year-ago level between 2017 and 2019 and by more than 15 percent between 2020 and 2022. However, labs that fail to report or misrepresent their rates can be penalized as much as $10,000 per day.

This year, in coming up with a plan to implement PAMA's provisions, CMS defined "applicable laboratory" as one that receives more than half of its Medicare revenues as paid under the CLFS or Physician Fee Schedule. This would rule out hospital labs from having to report fees, and labs that have Medicare revenues of less than $50,000 wouldn't qualify as an "applicable laboratory" by CMS' definition.

Industry players have plenty of objections to CMS' proposal and have submitted more than 1,200 comments online. ACLA has expressed "serious concerns" about this definition of "applicable lab," noting that if the aim of the law was to establish a "market-based" payment system for diagnostics, then CMS' definition would exclude much of the lab market in reporting pricing.

Market observers expect that if CMS' proposal remains as is, then it will impact large labs, which also have the bandwidth to absorb the effects of the law. However, two of the largest references labs in the US, Quest and Laboratory Corporation of America, are also not happy with CMS' plan and have said they are working to rectify areas of contention, such as the "applicable lab" definition.

On the other hand, Klein noted that while on the payment side PAMA might end up benefiting labs selling advanced diagnostic laboratory tests — a newly created category under the statute describing tests such as Genomic Health's Oncotype DX — CMS' definition of "applicable labs" recognizes that most hospital systems don't have the capability to report each payment rate and volume for every test from all private payors.

The reporting requirements under PAMA would also be beyond the capabilities of small labs to comply, he added. As such, the $10,000/day penalty that CMS could place on labs for each mistake in reporting would be unfair for entities that don't really have the systems to handle the reporting.

Ultimately, since Medicare pricing will be calculated based on a volume-weighted median of rates from private payors, Klein believes that any potential gains from requiring hospital and health system laboratories to report pricing data would be outweighed by the difficulty in meeting the requirement. Furthermore, he is of the view that the reporting criteria would capture a significant portion of the market. "I don't know that the inclusion of a broader swathe of labs would have much impact on that median number," he said.

According to Klein, the implementation timeline is also causing a lot of concern within industry. PAMA is slated to take effect on Jan. 1, 2017, and labs will have to begin collating payment rates from private payors from July 1, 2015, to Dec. 31, 2015, and report this to CMS during the first three months of 2016. CMS will publish the final rates that take effect in 2017 in November 2016.

If FDA finalizes the guidance in 2016 as it has indicated, 'there would be great concern' among the lab and pathologist communities.

Regulatory standoff continues

The FDA started the year with a two-day public workshop to discuss its draft proposal to regulate LDTs, and industry players let the agency know just how much they disliked the plan. Lab operations were simply not suited to be regulated as devices, speakers told the agency over and over again. They even noted examples where FDA-approved tests hadn't worked as well as LDTs.

Despite ongoing tensions over LDT regulation, throughout the year the FDA has continued exercise its authority over tests it deems to be medical devices. For example, this year, consumer genomics firm 23andMe received de novo 510(k) clearance for its Bloom syndrome carrier screening test. With that action, the FDA also decided that carrier screening tests were Class II devices, which would not require premarket review and could be offered directly to consumers. In a Federal Register notice in October the agency outlined the special requirements labs will need to meet for 510(k) exempt carrier screening tests.

The FDA, however, continued to be vigilant over direct-to-consumer selling of genetic tests. The agency sent Pathway Genomics an untitled letter raising concerns over the "direct-to-consumer type model" that the company was using to market CancerIntercept Detect, a liquid biopsy test that analyzes the presence of 96 frequently occurring DNA mutations in nine cancer genes.

The two most talked about advaced diagnostics in 2015 were liquid biopsy and NGS tests. With regard to the latter, the FDA held workshops in February and November to gather input from industry on how to best regulate NGS tests. The agency also launched the beta version of PrecisionFDA, an online platform that allows the scientific community to try out and evaluate NGS assays. Several organizations have joined the effort.

Compared to the public workshops on LDT regulation in January, the mood at the NGS workshops were more harmonious. Still, the FDA's draft proposal to regulate LDTs, released last October, remains the most divisive and disquieting issue in 2015 for labs and test developers

The low point of the year, for Klein, was the release of the FDA's 20 case studies report on LDT-related public harms. "Many of the 20 examples are non-standard tests," said Klein, who as a pathologist and a member of AMP, believes that FDA's oversight plan would stifle innovation and harm patient access to critical tests. "They are unrepresentative of at least a hundred thousand lab developed procedures that are routinely used every day. If anything, the report shows the scant data that the FDA is using to implement what would be a profound and extreme change in the oversight of such tests."

AMP dissected the 20 cases in FDA's report and pointed out instances where the agency left out critical details, relied on news reports instead of published literature, and pointed out cases where the faulty tests never even reached the market. The problem with many of the examples, according to AMP, was incorrect medical practice, for example, a physician failing to follow up a screening test with more confirmatory assessments. This cannot be helped by FDA oversight, since the agency doesn't regulate the practice of medicine, according to the association.

Edward Ashwood, associate VP for government relations at ARUP Laboratories, also found FDA's 20 case studies disheartening. In response, he authored an op-ed in Morning Consult highlighting instances where the agency had mischaracterized LDTs, such as non-invasive prenatal testing. In its report, the FDA cited such LDTs for having high false-positive results and highlighted one case where this led to an unnecessary abortion.

But Ashwood noted that the published literature shows NIPT has a 98 percent detection rate for Down syndrome and a false-positive rate of 1 in 500. Comparatively, the most commonly used prenatal maternal blood screening test, called the quad test, has a 5 percent false-positive rate and an 85 percent rate of detection. Amniocentesis, which tests the amniotic fluid, causes miscarriage in 1 in 200.

"The FDA report on LDTs, perhaps intended to be a bombshell shattering the position of the lab community to maintain the regulatory framework under the CMS, in fact has exposed how unprepared the agency really is to assume oversight of LDT clinical validity," Ashwood wrote in the editorial.

Ashwood, past president and CEO of ARUP, spent the majority of his professional energies during 2015 on LDT regulatory issues. ARUP is part of a cadre of labs and test providers, called the Diagnostic Test Working Group, which came up with an alternative proposal to FDA's draft guidance. The House Energy & Commerce Committee incorporated the DTWG's ideas into legislation for discussion, but it didn't come up during the congressional hearing in November.

The main takeaway from that hearing was that FDA was ready and able to regulate LDTs, while CMS maintained that it didn't have the resources to regulate LDTs as AMP and the College of American Pathologists have alternatively proposed. "That probably should create pause for organizations like AMP, pushing a CLIA solution," Ashwood said.

But if FDA finalizes the guidance in 2016 as it has indicated, "there would be great concern" among the lab and pathologist communities, Klein reflected. "Some groups have threatened legal action," he said, referring to ACLA's decision to hire legal counsel in response to FDA's release of the draft guidance. AMP would like the Department of Health and Human Services and the Office of Management and Budget to perform a scientific analysis weighing the possible benefits and harms that FDA regulation would have on patients before allowing the agency to step into this role.

Meanwhile, the DTWG is still very active. Ashwood noted that many labs have also joined another coalition organized by the American Medical Association. "They are trying to look at all the [alternative regulatory] proposals on the table and trying to find common threads," he said. "The lab community is really trying to focus on trying to come to some sort of consensus so we can send a consistent message to Congress."