This article has been updated to clarify that Myriad Genetics Q3 hereditary cancer testing revenues were largely impacted by pricing concessions to payors, and in small part due to an out-of-network decision by Anthem.
NEW YORK (GenomeWeb) – When Color Genomics launched two years ago, its next-generation sequencing test gauged 19 genes associated with breast and ovarian cancer, and the company priced it at one-tenth the cost of other comparable panel tests, betting that there would be a substantial demand from individuals interested in learning their risk for these diseases who didn't fit insurers' criteria.
Color's NGS panel now gauges 30 genes associated with the risk of eight common hereditary cancers, but the price has remained what it was at launch: $249. The company announced today that starting June 15, the low-cost test will be covered as an in-network test option by several insurers, including UnitedHealthcare, Anthem, and Blue Shield of California, when enrollees meet certain criteria around personal and family history of cancer.
"Color is a self-pay option and has been since we've launched, although we've received a large number of requests from providers to cover patients who do typically meet insurers' criteria," Darrin Crisitello, Color's VP of global sales and marketing, said in an interview. "We wanted to go down that route, and when we spoke to insurers and payors, our price point really resonated with them."
The company is planning to continue to work with private and government payors to expand covered access to its test. So far, the test's low price point has been advantageous in payor negotiations. For example, with Blue Shield of California and a few other insurers, not only is the test in network, Crisitello said, but Color has also gained preferred provider status for BRCA1 and BRCA2 genetic testing, which means that plans will encourage physicians in the network to order testing through the company.
In order to gain coverage, Color had to submit data from a number of studies, many of which are described in a white paper on its website. The company performed clinical validation of its 30-gene panel in 500 samples that breast cancer research pioneer (and unpaid advisor to Color) Mary-Claire King at the University of Washington and colleague Tom Walsh provided in a blinded fashion. The test accurately identified all genetic variants with greater than 99 percent accuracy. Additionally, 640 variants detected by Color's test were confirmed by Sanger sequencing, which did not identify any additional clinically relevant variants in the samples.
Researchers from Color and the University of California, San Francisco also published a paper earlier this year in Breast Cancer Research & Treatment, in which they validated the 30-gene panel on 200 patient samples previously identified to harbor 159 BRCA1/2 mutations, as well as mutations in other hereditary cancer risk genes. The test was able to correctly identify all clinically actionable mutations, and even found a pathogenic mutation in samples that other labs had not.
Based on this data and the attractive pricing, Crisitello said that Color has been able to gain in-network status for its test with insurers in a fraction of the 18-to-24 months it typically takes labs to achieve this. "But, this isn't a story about becoming in network," he said. "This is really about the disruption of the traditional laboratory/insurer dynamics."
Last year, the Centers for Medicare & Medicaid Services priced CPT code 81432, describing NGS tests for hereditary breast cancer-related disorders, at $925. While most of the labs in the hereditary cancer testing space are now using NGS to assess BRCA1 and BRCA2 and other hereditary cancer risk genes, some test providers are still billing Medicare and private payors with CPT Codes for traditional BRCA genetic testing priced at more than $2,500.
"I think what a number of companies are billing CMS are exorbitant for BRCA testing," Crisitello said. As next-generation sequencing has allowed companies like Color to perform genetic analysis and interpretation at a fraction of what it cost a few years ago, insurers have taken note and wanted in on the savings.
Myriad Genetics, the leading provider of BRCA testing, has said that existing contracts with insurers allow the lab to bill using higher priced traditional CPT codes. However, the company earlier this month said that a 10 percent decline in third quarter hereditary cancer testing revenues was largely due to the fact that Myriad made pricing concessions in renegotiating long-term contracts with payors. Another factor, though a minor one, according to Myriad, was that it recently became an out-of-network lab for Anthem, which caused revenue recognition delays.
Myriad has maintained that low-cost providers are sacrificing test quality and patient safety, and claims its test is still in network with 95 percent of commercial plans. The company is also attempting to balance out-of-network decisions like Anthem's by partnering with physician services organizations and growing test volumes within academic institutions.
Nonetheless, there has been a notable shift among payors to lower-cost service providers, particularly in hereditary cancer risk testing. However, molecular diagnostic companies like Invitae are betting that prices will continue to go down across the genetic testing industry, and has adopted a pricing scheme that charges $475 per indication for self-pay individuals, $950 for in-network contracts with third-party payors and institutions, and $1,500 for out-of-network payors and non-contracted institutions. The company's strategy is to scale up the number of genes it analyzes, while lowering its cost of goods sold, so it can offer payors and patients more options at a lower cost.
Color's business model is predicated on the similar vision of the genetic testing market. "One of our goals is to not only work with commercial payors but also CMS to substantially reduce the cost of testing for government payors," Crisitello said.
Ultimately, companies like Color and Invitae believe that in order for genetic testing to become more integrated in mainstream healthcare, it has to be accessible and affordable to more people. For example, based on research that has shown that 50 percent of women with deleterious mutations in BRCA1/2 have no family history of the disease, University of Washington's King has been advocating for population screening for women starting at age 30. In the short term, King's research and urgings have inspired some organizations to offer free screening programs and spurred the launch of lower-cost providers like Color.
But for insurers to come on board with King's screening recommendation, the cost of testing has to come down a lot more. Mechanisms, such as prior authorizations, are there so insurers can make sure that they are paying for tests only in situations that fit coverage criteria and guidelines and that patients aren't getting tested unnecessarily. But these mechanisms are also there because of the high cost of genetic testing, Crisitello observed.
"As we start to see pricing come down," he is hopeful that "those restrictions from payors will also start to become a little less stringent."