The adage that no news is good news does not always hold, and makers of companion diagnostics (CDx) may feel that the pace of developments in the areas of coverage and reimbursement qualifies as bad news. Public and private payers in the U.S. are hard at work developing systems to deal with those questions, but makers of those tests have a considerable wait ahead in the search for a clear and comprehensive framework for that last step in getting their wares to market.

The trek from R&D to the bedside requires that the sponsor of a molecular diagnostic test deal with regulatory issues as well as patent considerations, which were addressed in previous installments in this three-part series. This article explores the third leg of the tripod on which makers of CDx rest their hopes, which were raised at least somewhat with the passage of the Protecting Access to Medicare Act of 2014 (PAMA). That legislation requires labs to update the Centers for Medicare & Medicaid Services (CMS) on the rates they pay for lab tests as part of a program to improve reimbursement rates for existing tests, but any boost in reimbursement will not take place until 2017 at the earliest.

Makers of molecular diagnostics are by now well aware of the need to demonstrate clinical utility, which is not part of an FDA review of the test. One test maker has managed an FDA/CMS parallel review of its test, the Cologuard by Exact Sciences Inc., of Madison, Wis., but even makers of therapeutic devices don't expect parallel reviews to become routine, an expectation the agencies themselves attempted to quash when announcing the program. Thus, parallel review is unlikely to exert industrywide effects on how device makers design their trials.

Coverage with evidence development (CED) would seem a natural fit for CDx given the complexities of demonstrating clinical value, but CMS has offloaded much of the burden of molecular diagnostics to Palmetto GBA, of Columbia, S.C. The sticking point is that several have opined that the statute is fuzzy as to whether Medicare administrative contractors, or MACs, such as Palmetto are empowered to authorize CED trials.

Louis Jacques, formerly the head of the coverage and evidence group at CMS, testified at a July 2014 congressional hearing that as the statute then stood, CMS "only implements CED through the national coverage determination process." And CMS itself seemed to echo that view in its Nov. 20, 2014, final guidance for CED, stating, "the definition of local coverage determination (LCD) in the Social Security Act does not support the use of CED."

CMS had floated a revised local coverage decision process for molecular diagnostics in the draft 2015 Medicare physician fee schedule (MPFS), which among other things would have required the MACs to turn around a decision in 30 days rather than 45.

Jo Ellen Slurzberg, of JR Associates in Reseda, Calif., told Medical Device Daily, "I think CMS was trying to straddle the desire to make efficient and timely decisions with the vetting process," but she mused, "it's hard to make everyone happy when you're trying to meet both those goals."

"I think some of the pushback [against the MPFS turnaround proposal] was around making sure there was sufficient time to fully vet" a coverage proposal, Slurzberg continued, noting that specialty societies often need more than a couple of weeks to go over coverage proposals. She said there was also some concern about the transparency of the process CMS had floated. The idea of a leaner LCD procedure may not be kaput, though. "It appears it will be revisited and that they'll propose something in the future," Slurzberg predicted.

'A QUICKLY EVOLVING UNIVERSE'

PAMA requires CMS to collect private payer data in 2016 with an eye toward amended reimbursement rates the following year. But Judy Rosenbloom, principal at JR Associates, said CMS is unlikely to do anything with payment rates in the meantime. She said the agency will "want to take the time to look at outside payments," after which CMS will "be able to establish a foundation for how they'll use private payer rates."

Slurzberg commented that private payers "have traditionally used the Medicare physician fee schedule as a jumping-off point" for their payment rate set-points, but she noted that private payers "negotiate mightily for clinical lab tests, and are often very specific about whether patients have to go to a reference lab" or to some other testing site. "Medicare actually pays far better for many tests," Slurzberg remarked.

"CMS has been tip-toeing down this road," where molecular test payment rates are concerned, Slurzberg observed, adding that "the concern is that they will keep tip-toeing" rather than decisively arrive at some sort of framework that is economically feasible for the industry.

Slurzberg noted that much of the payer angst regarding molecular and other diagnostics was that the code-stacking problem grew rapidly as new tests came onto the market. "You'd see these stacks of 20 and 30 codes," and because payers had little information as to what the prescribing physician had in mind when ordering those tests, "it was very difficult for Medicare and private payers to identify why a test was done and whether there was clinical utility."

Most payers don't pay for rule-out tests, Slurzberg continued, stating that physicians are sometimes in the position of searching for a diagnosis and thus may resort to a diagnostic process of elimination. She said private payers have made more noise about the situation than CMS, but she added that when genetic/DNA code tests came into being in substantial numbers, "you had these giant code stacks and they were very lucrative."

Palmetto GBA may or may not be staffed to review what some have described as an impending tsunami of molecular diagnostic tests poised to hit the market. But, Slurzberg said, "you don't have to make a coverage decision for every single test," explaining that many tests are nominally paid and can be bundled.

Rosenbloom added, "The way Palmetto has been handling this is to assign edits or unique identifiers," and therefore, "it's more of a software issue than a manual review."

Slurzberg noted that CMS may want to handle the review of a few tests that are expensive or seem to run a serious risk of over-utilization, which the agency could address by requiring providers to report their use of such tests, thus allowing the agency to track utilization.

"This is a quickly evolving universe. I think there's more pressure than ever before to define the utility of a test," Slurzberg stated, a condition abetted by the fact that "many tests, based on their regulatory clearance, do not make a definitive diagnosis."

A test used for informational purposes "is a gray area" for payers, she added.

Despite the overwhelming fuzziness of the current picture, Rosenbloom said there is an alternative to parallel review on the one hand, and the completely disconnected applications to the two agencies that serve as CDx gatekeepers on the other. "You still have the choice of inviting CMS and FDA to work together regardless of whether it's a formal program," she stated.

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