A Molecular Diagnostic Perfect Storm

V.M. Pratt, PhD, FACMG

Regulatory and Reimbursement

• FDA oversight• Coverage and

reimbursement

• Will precision

medicine survive?

2003: Human Genome Completed

• International consortium published draft sequence

http://www.genome.gov/11007569

Public Attitude

• Increased benefit and potential use of genetic testing

• People more interested in own genetic make-up.

European Journal of Human Genetics (2013) 21, 793–799; doi:10.1038/ejhg.2012.271; published online 19 December 2012

US Diagnostic testing impact on health care

• Trend towards more precision medicine

Estimated US spending on molecular diagnostics and genetic testing, 2011

Bench to bedside

Chin et al. Nature Medicine 17, 297 (2011)

New and timely approaches forestablishing analytical and clinicalvalidity as well as FDA and CLIAregulatory review meritconsideration to ensure timely,high quality patient care

Wave of changes in Healthcare• Lack of stakeholder agreement• Increased cost pressures; ambiguous transition to new

CPT codes; more stringent reimbursement decisions• Increased role of CLIA testing with concordant decrease

in contribution of IVD products because of pace of medically validated associations

• Narrower subsets of patients eligible for targeted therapies

• Increased roles of EMR evidence that lacks quality of randomized controlled trials but perhaps sufficient for initially narrowly targeted patient management

FDA

• Companion diagnostic tests• Proposed LDT oversight

FDA Oversight• Ensure safety and effectiveness• “device” to include any ‘… in vitro reagent, or

other similar or related article, including any component’ “(2) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals” (21 U.S.C. § 321)

• Traditionally applied to medical device manufacturers

Draft Guidance for Oversight of LDTs• 60-day to Congress on 31 July 2014• Notice by the Food and Drug

Administration on 10/03/2014 in federal register

• Goal to ensure analytical and clinical validity

FDA Oversight of LDTs: Phased and Risk-based

Operational issues

• Conflicts between CLIA and FDA regulationsFDA restriction of off-label promotion versus

CLIA allows clinical consultation

CLIA regulation versus FDA’s quality system regulation (QSR)

Laboratory service directory versus package insert

Malpractice versus product liability insurance

Regulatory Experts Needed

Jobs Available in Clinical Labs!

FDA Medical Device Process

24-36 mo 3-9 mo 510(k) 3-9 mo121 day ave (2011)

PMA 12-24 mo360 day ave (2010)

IDE (PMA)9-36 mo

12-24 mo

Pre-submission process

FDA submission

Limited Patient Access

Broad Patient Access

FDA Companion Diagnostics

• Drug and test are approved together • Currently promotes one test per one

instrument

Constrains laboratory infrastructure

Labs and Test platforms

• Many tests to a single platform

Reduces capital equipment costs

Reduces maintenance costs

Optimizes competency and training

Utilizes space efficiently

LDPs highly regulated

CLIA CertificationState law (eg, NYSDOH, CA)Accreditation (eg, CAP) ISO 15849

Modification of IVDs

• Often related to specimen type or stability• Now considered LDTs

Will require FDA review in proposed framework

• Permitted under CLIA [CFR § 493.1253(b)(2)]

Laboratory Professional Service

• Designing and validating test• Purchasing manufactured products and

instrument• Interpreting results

Promotes patient safety

CMS

• New MolPath CPT codes• Non/limited-coverage decisions• Lack of reimbursement in 2013• Technology assessments required by

some MACs

CMS

• Pays for approximately 50% health care• Laboratory testing

<5% hospital costs

1.6% of all Medicare costs

Skyrocketing healthcare costs

• Unhealthy lifestyles

Obesity

Lack of exercise

Diabetes, Type 2

IU.edu

Sequencing cost going down

• Relative to cost of human genome

Reagent cost – YES• Infrastructure – NO• Personnel - NO

Avalere study 2012

• Commissioned by ACLA• Compared private market and Medicare rates• Medicare paid lower than private non-

government health plans

CBC: commercial $20.26, CMS $11.02

Drugs screen: commercial $69.48, CMS $25.57

• Payment differences higher in rural areas compared to large metropolitan cities

New MolPath CPT codes

• AMA created new codes in response to payers

Analyte-specific codes (Tier 1)

Level of complexity code (Tier 2)• Implemented 1 January 2013• Placed on CLFS• Gap-filled

Year-long process to determine reimbursement

Coverage decisions

• Some CPTs not applicable to Medicare population (65+)

• Many other insurers (eg, Medicaid, private) follow Medicare decisions

• Reimbursement lower than cost of IVD

Medicaid

• States generally pay for services through fee-for-service or managed care arrangements 

• States may develop their fee-for-service payment rates based on:

- The costs of providing the service

- A review of what commercial payers pay in the private market

- A percentage of what Medicare pays for equivalent services

http://www.medicaid.gov/medicaid-chip-program-information/by-topics/financing-and-reimbursement/financing-and-reimbursement.html

Protecting Access to Medicare Act 2014

• Designates up to 4 MACs to establish coverage policies

• Labs must report market data to determine CLFS prices

Huge fines if fail to report• Constrains Medicare from dropping

prices for any given test (limited to 55% over 6 year period)

PAMA

Year Theoretical reimbursement

Reduction

2016 $100.00 10%

2017 $90.00 10%

2018 $81.00 10%

2019 $72.90 15%

2020 $61.97 15%

2021 $52.67 15%

2022 $44.77 15%

PAMA Advanced Diagnostic

• The test is an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result

• The test is cleared or approved by the FDA

• The test meets other similar criteria established by the Secretary

PAMA Advanced Diagnostics

• Assignment of temporary HCPCS code• 1st 3 quarters reimbursed at list• Application of market rates after initial

period

Requires payback if overpriced

PAMA Advanced Diagnostics

• If FDA oversight of LDTs• Would MolPath panels (eg, NGS tests)

get CPT code?• CMS would have to cover test• Private payors may not cover test

OIG: Comparing Lab Test Payment Rates: Medicare Could Achieve Substantial Savings

HCPCS* Code23

DescriptionNumber of Medicare- Allowed Tests in 2010

Percentage of All Medicare- Allowed

Tests in 2010

Total Medicare- Allowed Amount in

2010

Percentage of Total Medicare- Allowed

Amount in 2010

2011 Medicare National Limitation Amount per

Test

80048 Metabolic panel, total calcium 9,355,762 2.30% $94,325,286 1.90% $11.91

80053 Comprehensive metabolic panel 27,232,042 6.60% $319,935,253 6.50% $14.87

80061 Lipid panel 20,970,947 5.10% $310,596,151 6.30% $18.85

81001Urinalysis, automated, with

microscopy6,709,626 1.60% $30,435,748 0.60% $4.45

81002Urinalysis, nonautomated, without

microscopy4,416,987 1.10% $16,008,487 0.30% $3.60

81003Urinalysis, automated, without

microscopy4,805,501 1.20% $15,435,365 0.30% $3.16

82306 Vitamin D, 25 hydroxy 5,333,420 1.30% $223,366,966 4.60% $41.66

82570 Assay of urine creatinine 4,362,909 1.10% $32,023,975 0.70% $7.28

82607 Vitamin B-12 3,334,018 0.80% $71,897,559 1.50% $21.21 82728 Assay of ferritin 4,361,621 1.10% $84,963,813 1.70% $19.17

83036 Glycosylated hemoglobin test 12,652,264 3.00% $175,307,639 3.60% $13.66

83540 Assay of iron 5,455,091 1.30% $49,960,956 1.00% $9.12 83550 Iron binding test 4,297,065 1.00% $52,653,538 1.10% $12.30 83880 Natriuretic peptide 1,135,239 0.30% $54,491,238 1.10% $47.77

83970 Assay of parathormone 3,582,472 0.90% $211,655,094 4.30% $58.08

84153Assay of prostate-specific antigen,

total 3,651,490 0.90% $96,028,772 2.00% $25.89

84443 Thyroid stimulating hormone 14,728,086 3.50% $353,395,445 7.20% $23.64

85025Complete blood count with

automated differential white blood cell count

31,930,801 7.70% $351,630,565 7.20% $10.94

85610 Prothrombin time 22,020,091 5.30% $123,445,269 2.50% $5.53 87086 Urine culture colony count 4,610,965 1.10% $53,112,711 1.10% $11.36

https://oig.hhs.gov/oei/reports/oei-07-11-00010.asp

2014 PFS

• CMS proposes to bundle all lab testing to hospital outpatient fee visit

Exception is genetic tests

Controls over utilization

Promotes “across the street” testing

Palmetto MolDX Program

• Pilot program• McKesson-owned Z-codes

Assigned based on laboratory and method

Designed to complement current CPT codes

Allows differential reimbursement based on test• Must submit technical assessment to Palmetto

Reviews analytical validity, clinical validity and clinical utility

If labs close, what happens to precision medicine?

• Medical pathology training?• Proficiency testing?• Translation of bench to bedside?• Innovation?

Which one is better?

• Local restaurant• Caters to locale• High quality• FDA regulated

supplies• Health

Department inspection

• National chain• National menu• High quality• FDA regulated

supplies• Health Department

inspection

Conclusion

• Laboratories are important partners in innovative precision medicine

• Changes in regulation and reimbursement will cause labs to shut down → Loss of precision medicine