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Initial CMS 2016 Lab Test Pricing Cuts Rates for Several Multi-Analyte Algorithm Assays

NEW YORK (GenomeWeb) – The Centers for Medicare & Medicaid Services last week released preliminary pricing determinations for 2016 for a number of lab tests described by new CPT codes, as well as several multi-analyte algorithm-based assays (MAAA).

CMS determines lab test pricing using the so-called gapfill process, when no comparable technology exists, or the crosswalk method, which pegs payment to rates for comparable technologies and CPT codes. For the majority of MAAAs that the government payor considered, it used the crosswalk method, spurring objections from labs that pricing using this process fails to capture the value of their tests. At the same time, CMS also released its initial plan for implementing a market-based pricing framework for clinical diagnostics, which labs and industry observers picked apart (see story).

In 2016 initial pricing, CMS crosswalked CareDx's AlloMap, an MAAA to identify heart transplant recipients at low risk for rejection, to an existing code describing a genetic test for hereditary non-polyposis colorectal cancer. Using the crosswalk method, the reimbursement for the test was reduced by 77 percent from the currently reimbursed rate of $2,821to $645, CareDx estimated.

The CMS Advisory Panel on Clinical Diagnostic Laboratory Tests had suggested the agency use the gapfill method to price AlloMap, according to CareDx. The company argued that the crosswalk method undercuts the value of AlloMap — a test that has 510(k) clearance from the US Food and Drug Administration, has published evidence from numerous studies on its clinical validity and utility, and is used in 110 of 130 US transplant centers.

CareDx said it is working with industry groups to "ensure value-based reimbursement" for AlloMap and other molecular tests. The firm said in a statement that it "agrees with experts in the field that the approaches to establish national reimbursement for new technology — specifically technology that is inadequately described and valued by existing codes on the current [clinical lab fee schedule] — should not rely on the … crosswalk methodology, in which reimbursement is based on the price of other tests which may or not be comparable."

Additionally, William Quirk, a senior research analyst at the investment firm Piper Jaffray, estimated in a note to investors that preliminary CMS pricing would result in a 63 percent cut, from $575 to $211, for another MAAA: the Vectra DA rheumatoid arthritis test marketed by Myriad Genetics subsidiary Crescendo Bioscience. The reduction, he said, was based on a "fairly simplistic crosswalk to an immunoassay analyte."

Meanwhile, Quirk noted Myriad had some positive news, since initial pricing from CMS suggests a 14 percent increase for BRCA testing (excluding large rearrangement testing), pushing the price from $2,184 up to $2,482. Including large rearrangement testing, however, the price decreases for legacy BRACAnalysis testing by 11 percent, he estimated. 

Veracyte also issued a statement objecting to CMS' preliminary pricing for its Afirma Gene Expression Classifier using the crosswalk method. Afirma GEC gauges the expression of 142 genes and helps doctors determine if a fine needle aspiration sample is benign or suspicious for thyroid cancer. Using the method, CMS issued a price of $2,152, compared to a previous Medicare rate of $3,200, according to the firm.

Meanwhile, using the gapfill process for pricing Genomic Health's Oncotype DX breast cancer recurrence test, Medicare expert Bruce Quinn believes CMS simply got the math wrong. Apparently, in issuing a national limitation amount of $2,900 for Oncotype DX, CMS took the median of 21 CLFS fee zones reporting payment.

But, according to the regulations that CMS has to follow in establishing gapfill pricing, it is supposed to calculate the median based on the pricing issued by the Medicare Administrative Contractors (MACs). Using those figures from six MACs, the price of Oncotype DX would be $3,416. "If CMS had wanted to state the median is the median of each state, or the median of each CLFS fee zone, they could easily have said so," Quinn, senior director at the law firm Faegre Baker Daniels LLP, wrote in his blog. "The plain language" of the law stipulates CMS use "the median of the carrier-specific amounts. Carriers are MACs."

Labs can appeal initial CMS pricing within 60 days, and final changes will go into effect on January 1, 2016.

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