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Foundation Medicine Pursuing Multiple Strategies to Expand Reimbursement for Clinical Tests

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NEW YORK (GenomeWeb) – Foundation Medicine is making efforts on several fronts to increase reimbursement for its cancer genomic profiling tests by public and private payors in the US and abroad, including submitting its FoundationOne test for parallel review by the US Food and Drug Administration and the Centers for Medicare and Medicaid Services and opening a laboratory in Germany to take advantage of that country's recently updated reimbursement codes.

In the second quarter, Foundation Medicine saw increased clinical test volumes, breaking the 10,000-test mark for the first time, but a decline in revenue from clinical tests, as well as a small decrease in the average payment for reimbursed tests.

Yesterday, Foundation Medicine said that the FDA and CMS had accepted the FoundationOne test for the Parallel Review program, which enables test developers to obtain FDA clearance and a national coverage determination by CMS at the same time. The FDA also accepted FoundationOne for review under its Expedited Access Pathway (EAP) program for breakthrough devices, which promises reduced times and costs in connection with the approval process.

Neither program is new, but the FDA has not done a good job promoting it, CEO Michael Pellini said during a conference call to discuss the firm's earnings this week. He recalled sitting in a meeting with several FDA members last October who mentioned the parallel review program and noted how few companies had taken advantage of it. "And a number of diagnostic company CEOs were sitting in the room, and everybody looked at one another and said, 'We had no idea this program was even available,'" he said.

Foundation Medicine's discussions with both the FDA and CMS, he added, and its relationship with the agencies over several years, "ultimately led to the belief that this is the best path for us on which to proceed."

In terms of the review process, Pellini said the company's initial focus will be on fulfilling the FDA's requirements, and that its team has already started generating data for that. The idea is that CMS will follow the FDA's findings in the review. "Our expectation is that the CMS decision will be tied to the FDA decision," he said.

The company anticipates that the parallel review process will be completed in the second half of 2017 and will include approval of the FoundationOne assay, including a number of companion diagnostics claims. "The initial claims may include FDA-approved drugs for a range of solid tumor indications, such as lung, breast, colon, gastric, ovarian, and melanoma," said Pellini. Those tumor types account for about 43 percent of advanced metastatic cancer patients in the US, or more than 450,000 patients annually, "which represents almost one half of our total available market," he added.

"Our test will be a single, validated [comprehensive genomic profiling] assay of 324 genes, including a range of companion diagnostics, providing physicians with much of the necessary genomic information to point them to the relevant approved cancer therapeutics and do so with documented regulatory-level quality," Pellini said.

While the FDA and CMS parallel review proceeds, Foundation Medicine will continue to work with its local Medicare Administrative Contractors — National Government Services in Massachusetts and Palmetto GBA in North Carolina, where the company is opening a new laboratory. "We are currently working with Palmetto in particular to expand coverage of [comprehensive genomic profiling] beyond the current [local coverage determination]," he said. That LCD covers its test for a subset of non-small cell lung cancer patients

The new lab, in Research Triangle Park, is expected to be operational by the end of this quarter and to bill against Palmetto's existing LCD at that time. "We expect the location to provide advantages for Medicare coverage and payment in the future," Foundation Medicine President and COO Steven Kafka said during the call. "We are leaving no stone unturned with regards to obtaining broad Medicare coverage in both the near and long terms," he said.

Obtaining Medicare coverage could also help the company win additional coverage by private payors, according to Pellini. Initially, "we never had the sense that third-party payors were waiting for Medicare before they made their own decision," he said. However, the company has changed its opinion on that over time. "We are now of the belief that a Medicare decision, whether it's a Medicare decision at the local level or at the national level, can in fact have a strong influence on that national third-party payor."

Thus, for obtaining broad national coverage decisions from private payors, he said, "we do think making progress with both the local MAC and then, ultimately, with national CMS is going to be an important piece of the puzzle."

The company is also making efforts to sell reimbursable tests abroad. According to Kafka, it is currently setting up laboratory operations in Penzberg in Southern Germany, where its partner Roche Diagnostics maintains a large facility with 5,600 employees. That new laboratory will support all of Foundation's clinical tests and will serve as a regional hub for test commercialization in Europe. In addition, it "will enable our partners at Roche to take advantage of public reimbursement in Germany for broad-based NGS assays in oncology," said Kafka.

Germany's statutory health insurance system recently made changes to its reimbursement catalog, allowing coverage of next-generation sequencing assays for germline and tumor testing for the first time.

One of the reasons Foundation is building the lab in Germany is "so that we can really take advantage of that public reimbursement, which, by the way, is at a very attractive price point," Pellini said.

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