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Under Myriad, Assurex Looks to Expand Mental Health PGx Testing Indication; Optimize Pricing

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NEW YORK (GenomeWeb) – Coming under Myriad Genetics' aegis — in a deal worth $225 million upfront and $185 million in milestone payments — Assurex is hoping to push its flagship GeneSight Psychotropic test into new indications, gain greater adoption among primary care docs, and improve the test's payment prospects under a new Medicare law. 

Myriad's main interest in acquiring Assurex is GeneSight Psychotropic, a test that analyzes and identifies genetic markers that influence people's ability to respond to drugs for depression, anxiety, bipolar disease, schizophrenia, and other mental health conditions. The test employs a proprietary algorithm that analyzes and weighs different clinically significant genetic variations and determines a person's likelihood of responding to 55 US Food and Drug Administration-approved drugs.

"Myriad’s managed markets expertise will help Assurex expand access to the GeneSight test," an Assurex spokesperson told GenomeWeb. The spokesperson highlighted Myriad's large sales team could help grow test adoption beyond psychiatrists to primary care clinicians and introduce the test into ex-US markets.

The test is currently most widely used among the subset of treatment-resistant patients with major depressive disorder that Medicare has agreed to cover through a local coverage determination (LCD) in 2014. But Assurex also markets GeneSight as a tool to guide therapeutic strategies for people who don't respond well to pain management and ADHD drugs, and has additional studies planned in these indications. 

Assurex has a federal supply schedule contract with the US Department Veterans Affairs and coverage from Blue Cross Blue Shield of New Jersey. The company announced earlier this year that it had performed more than 250,000 GeneSight tests to date, and 15,000 doctors had ordered it. Over a 12-month period ended June 30, the company had $60 million in revenues.

Pharmacogenetic testing companies, plagued by inconsistent physician adoption and insurance challenges, don't achieve blockbuster profits. In this context, industry observers consider Assurex a success story in the space.

Over the years, the company has continued to build the clinical validity, utility, and cost-effectiveness evidence around GeneSight. One of the largest studies to date was with Medco, which compared the pharmacy claims of more than 2,000 psychiatric patients who had GeneSight testing and 10,000 controls. The study found that after a year patients who had PGx testing saved on average $1,000 per year in medication costs and were 17 percent more adherent to their antipsychotic or antidepressant prescriptions. 

Likely on the strength of this and other data, Assurex has done better than many other PGx companies in getting insurers to pay for its tests. Reimbursement, though, remains a headwind for the company and the entire molecular diagnostic industry. During a call with analysts to discuss the acquisition, Myriad CEO Mark Capone noted that his company would help negotiate value-based pricing for GeneSight Psychotropic.

Myriad anticipates an average selling price of $2,000 per test for GeneSight with contracted payors, but Assurex has recognized an average selling price of around $400 per test over a 12-month period ended June 30, 2016. "One of Myriad's primary goals will be to drive appropriate value-based pricing for GeneSight testing with private insurers and state Medicaid programs," Capone said. He estimated that if GeneSight were consistently reimbursed by payors at the $2,000 price tag, it would have netted $300 million over the last 12 months.

"Myriad has extensive experience with national and state payor relations, which is hard for a small company to replicate," said Bruce Quinn, a nationally recognized reimbursement expert who has consulted Assurex and other PGx testing firms.

Based on his reading of the new requirements under the Protecting Access to Medicare Act, Quinn believes Myriad may be able to designate GeneSight as an advanced diagnostic laboratory test (ADLT), if it invests in getting FDA approval or clearance for the test. Capone told analysts that he thought GeneSight could achieve ADLT status.

PAMA defines ADLT as a test performed at a single lab that uses a unique algorithm to asses a panel of DNA, RNA, or protein markers, or a sole-source test with the FDA's nod. An ADLT designation brings with it certain pricing advantages, Quinn said, adding that Myriad has experience obtaining FDA approval for BRACAnalysis CDx.

The GeneSight test doesn't have a specific CPT code right now. However, under PAMA, the Centers of Medicare & Medicaid Services plans to issue unique codes for ADLTs, which would enable payors to distinguish and track the use of such tests separately from "non-branded" diagnostics, and enable Medicare pricing that is closer to commercial payor rates.

Starting in 2018, PAMA will create a new fee schedule where Medicare payment for a clinical lab test will equal the weighted median of private payor rates. It will also create a more predictable schedule for potential pricing cuts. The law stipulates that between 2017 and 2019 Medicare payment for a test cannot be reduced more than 10 percent compared to the previous year's price, or by more than 15 percent between 2020 and 2022. 

"That provides a clear line of sight in terms of not only how to establish a code but ultimately how that would be priced with Medicare as well," Capone said. "I think at this point the pricing for Medicare is pretty clear. It's really through the private payor side that we'll have to continue to work on contracting and value-based pricing."

In addition to improving GeneSight's pricing prospects, Myriad is betting it can significantly grow the adoption of the test, which it estimated has only captured 5 percent of its $3 billion US market potential. Myriad will focus on driving adoption of GeneSight into psychiatric indications beyond depression, such as anxiety and bipolar disorder, which Capone estimated could more than triple the market for GeneSight Psychotropic.

Myriad and Assurex both have large sales teams that can cross-sell each other's tests. Assurex's reps can be helpful in selling MyPath Bipolar and other neuroscience offerings under development at Myriad. Meanwhile, Myriad's 225-person sales team and Assurex's 160 sales reps together plan to target approximately 30,000 psychiatrists and primary care physicians who write half the depression prescriptions in the US.

Myriad's sales team targeting the preventive care space will sell GeneSight in this market where 58 percent of patients with treatment-resistant depression are seen. Sales reps will particularly home in on primary care docs, since they more readily order GeneSight and use the results in their treatment strategies for patients than do psychiatrists. An estimated 16,000 physicians write around 40 percent of the prescriptions for treatment-resistant depression patients in primary care.

"Most patients with major depressive disorder are currently treated in the primary care setting," Myriad spokesperson Ron Rogers said. "In the US, there is a significant shortage of psychiatrists and the problem is getting worse. Consequently, primary care physicians often diagnose and select therapies for patients experiencing depressive symptoms."

However, the current LCD covers GeneSight only when licensed psychiatrists order it to guide treatment strategies for refractory major depressive disorder patients. Assurex is trying to convince Medicare to expand the terms of the LCD to include anxiety and bipolar indications and cover the test when primary care doctors order it.

Assurex is planning to conduct two prospective outcome studies in anxiety for GeneSight Psychotropic, and it is enrolling patients in two out of three studies in bipolar disorder. The company has also planned nine studies in other GeneSight indications such as attention deficit disorder, schizophrenia, and pain disorders.

"The biggest barrier to adoption is habit change," the Assurex spokesperson told GenomeWeb. "Historically, clinicians have not had ready access to pharmacogenomics tools to inform their prescribing decisions. Incorporating the GeneSight test into their treatment protocols requires habit change, which can take time."

Despite the work ahead for Myriad in improving GeneSight's adoption and reimbursement, Myriad expects the company to contribute to its earnings in the latter part of next year. After the acquisition closes sometime before the end of September, Myriad said it will realize three quarters of revenues and expenses from Assurex during its 2017 fiscal year, which ends June 30, 2017. According to Myriad executives, Assurex will be dilutive to Myriad's 2017 earnings but will become accretive in the first half of fiscal year 2018, based on current reimbursement coverage.

Wells Fargo analyst Tim Evans wrote in a note that while Assurex should ultimately contribute to Myriad's earnings in fiscal year 2018, some market observers may view the deal with some skepticism given the limited commercial reimbursement for GeneSight to date and Myriad's experience with Vectra DA, a test for determining whether rheumatoid arthritis patients are at risk for joint damage.

Vectra DA came under Myriad through its 2014 acquisition of Crescendo Bioscience, but has faced challenges in terms of adoption among rheumatologists and Myriad is still working on getting more private payors to cover the test. In the third quarter of fiscal year 2016, Vectra DA revenues increased 17 percent to $12.3 million, but test volume grew at a faster clip, by 18 percent year over year. Myriad attributed this to the test transitioning to a new CPT code, which private payors are still adjusting to.

However, according to Myriad, GeneSight has enough revenue to begin contributing to its earnings in the coming months. "Unlike Crescendo, we can obtain near-term accretion [with Assurex] without additional payor coverage and modest growth alone," Myriad Chief Financial Officer Bryan Riggsbee said during the call with analysts.

Although there are a number of genetic testing firms, such as Genomind and Genelex, that analyze similar PGx markers in the psychiatric setting, Capone told analysts that Assurex's offerings will be hard for competitors to replicate. Assurex has 55 granted patents worldwide and 29 pending patent applications on its tests. In fact, Myriad Chief Medical Officer Richard Wenstrup in 2013 was among the inventors who received a patent for a dosing methodology that underlies GeneSight. 

"Along with patents, there are substantial trade secrets covering the testing process and the algorithm," Capone said. The algorithms underlying GeneSight were developed using a database containing 350,000 patients' genetic information.

"We've seen them get to a scale that we think is very material, and we have line of sight to the company being accretive," he said. 

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