Yesterday morning we had the pleasure of speaking with Jud Schneider of NextGxDx about the implications of a radically changing regulatory and reimbursement landscape for clinical labs. Jud is the VP in charge of Bioinformatics. NextGxDx is a technology company that brings transparency to genetic testing for providers, payers and laboratories. The event was sponsored by LifeScienceTN which provides education and advocacy for the the life science industry.
A replay is available here. Presentation begins at about 9:00 minute mark.
The conversation focused primarily on two issues; the FDA's proposed oversight of Laboratory Developed Tests and the Medicare reimbursement change brought on by the Protecting Access to Medicare Act of 2014.
LDTs:
- The FDA's guidance currently under consideration is really 10 years old and a lot has changed since it was first written
- Personalized medicine has emerged whose foundation is genetic testing and LDTs
- Absent any regulation, laboratories have relied on the Clinical Laboratory Improvement Act (CLIA) as the regulatory pathway
- There are tests that have gone through the FDA that still have a high false positive result suggesting concerns about unregulated tests may not be addressed by FDA's approach
- The FDA is relying on their belief that LDTs are a device and because of that use the language and classification system of devices
- Reliance on the definition of device instead of a medical service is highly disputed by some in the lab industry
- There is a disconnect on whether or not tests as LDTs use the same assays as a test that has gone through a medical device approval pathway. MYGN as gone thru approval of tests as companion diagnostics in cooperation wtih AZN, to name one example, to ease the regulatory pathway for the associated therapy. In the case of MYGN's BRCA 1 & 2 tests - one is an LDT and one is a companion diagnostic. They do virtually the same thing - look for the same mutations in BRCA 1 & 2 and results of the assays are very similar. If the patient has the germline mutation, has developed breast cancer, the FDA says the patient must get the second, companion diagnostic test.
- The regulatory pathway for a lab under an FDA regime will be a very different process than the CLIA pathway to which they are accoustomed. Many labs may not be prepared for the cost and the time required.
- The volume of tests the FDA may be asked to review is large.
- Lengthy process that ties up resources
- FDA's proposed phased-in approach would mitigate
- The universe of tests is large. There are about 100k LDTs; 65k genetic tests. About 1k tests are likely to be classified as Class III. The registration burden alone is significant.
- About 40% of tests utilize NGS technology which is more compex and at a scale that may not yet well-considered by the FDA.
- Industry would prefer a CMS/CLIA based regulatory regime.
- This is a regulatory system with which labs are familiar.
- Most errors are process errors which is clearly in CLIA's scope. Are we focusing on the right problem?
- Because the FDA process is long and expensive there are some products that have persisted on the market even though the technology has evolved beyond them. The FDA does look at analytical validity, a key component of any assay but does the FDA imply a stamp of approval and therefore clinical utility for the test? The fact these tests tend to remain on the market even though there may be a more effective LDT would suggest yes.
Next Gen Sequencing
- NGS Guidance does indicate the FDA knows these tests are impacting the market.
- NGS will impact the paradigm shift to personalized medicine and other initiatives like 21st Century Cures.
- Release of guidance suggests that NGS may not fit into the devices classes the FDA relies on for regulation.
Companion Diagnostics
- There is broad agreement that there should be some regulation of companion diagnostics
- Particularly important for cancer diagnosis where companion diagnostic will properly assign a patient to the right population associated with that particular cancer.
- Companion diagnostics are critical for treatment with very expensive drugs like GLD Hep C treatment to which certain patients respond very well and where a cost can be avoided for those patients that do not.
- A lot of room for compromise on this issue. Maybe a good starting point for FDA oversight.
PAMA reimbursement
- PAMA represents biggest change to reimbursement in labs since 1980s
- Medicare becomes rate follower not rate leader.
- More market dynamics will come into play
- Payment rates that will be reported and thus used to calculate Medicare rates are in effect right now.
- The form of communication between a lab and the payer is the CPT code. A comparision of CPT codes and the products on the market are not aligned.
- A carrier panel, for example will test for a number of recessive genes for rare diseases but there is no CPT code for tests for several diseases but there is a code for each disease. This problem creates a disconnect with payers.
- Health insurers tend to be more reactive than proactive.
- AMA looking into developing new CPT codes for genetic tests and is now going through quarterly updates instead of annual to accomodate swift pace of change.
- Large dominant players will have a lot of influence in pricing of CDLTs and could lead to consolidation
- There is a dearth of information on ADLTs for determining payment regardless of whether or not it is a MAC trying to gap-fill or a commercial payer trying to determine price.
- Genetic testing market is way out ahead of pricing and payment systems and medical guidance/clinical support systems.
- We don't know yet if payers are overpaying or underpaying for genetic tests. Probably overpaying for CDLTs.
- Congress may intervene on LDT oversight if the FDA moves on it before the end of the term. The conflict between CMS and the FDA is a unique and hard to assess dynamic in the negoatiations.
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