The Personalized Medicine Coalition (PMC; Washington, DC) recently released a report calling for critical changes in payment and coverage policies for companion diagnostics, which would encourage innovation and improve the quality of healthcare for millions of patients. PMC’s new white paper, “The Future of Coverage and Payment for Personalized Medicine Diagnostics,” documents both the progress of personalized medicine and the ways in which some recent coverage and payment policies have discouraged its advancement.

“Over the past decade, we’ve seen considerable growth in the scope and impact of personalized medicine, but we have far to go,” said Amy Miller, PhD, PMC’s executive vice president. “Comprehensive coverage and payment policies are necessary to encourage future investment in personalized medicine. As the paper shows, we have the opportunity to impact change, thus ensuring higher quality care and potentially lowering systemic costs if the right treatments are targeted to the right patients.”

The report discusses three major public policy concerns:

  • Imminent federal pricing of highly innovative molecular tests. Between 2012 and 2014, multiple changes in the system for coding and pricing genomic tests shook the overall system of molecular diagnostic reimbursement, extending as far as a near suspension of federal payments for genomic tests in the first quarter of 2013. Even larger policy decisions will face the Centers for Medicare and Medicaid Services (CMS) in 2014 and 2015. PMC says it is crucial that reimbursement levels, which policymakers set unilaterally, not only ensure access to high-quality tests but also encourage the development of additional innovative tests based on substantial risk-based research and development.
  • Inconsistent standards and paradigms for evaluating diagnostic, prognostic, and predictive personalized molecular diagnostic tests. Health technology assessments represent a rapidly growing area of international government policy, which has accelerated in the past several years as governments seek to contain costs. Although most agree that personalized molecular diagnostics improve patient management and the delivery of care, the PMC report contends that assessments to determine coverage and payment are not clear, predictable, or appropriate, thus discouraging investment.
  • Lack of incentives for genomic medicine. Genomic medicine could have a major impact on several public health areas. But traditional funding, pricing, or reimbursement systems fail to provide enough incentives for its development. These areas include funding the education of physicians, allied professionals, and patients as well as creating incentives to develop new tools that could revolutionize many therapeutic areas.

“Issues for personalized medicine are foreseeable and real,” said Bruce Quinn, MD, PhD, the report’s principal author and a senior health policy advisor at Foley Hoag LLP (Boston). “We need to monitor, evaluate, and contribute to the debate in these three areas to ensure personalized medicine is integrated into the development of Medicare policy in the years ahead. We need a reimbursement system that encourages the improvement of patient care through medical innovation. Patients expect no less.”

The report closes by comparing the public positions of the two most important federal government agencies for the entry of personalized medicine into the healthcare system: FDA and CMS. In October 2013, FDA released a cross-agency document entitled, “Paving the Way for Personalized Medicine: FDA’s Role in a New Era of Medical Product Development,” which discusses the agency’s initiatives to advance personalized medicine. In contrast, CMS’ main public documents in 2013 focused on the cost-cutting proposals discussed in the PMC white paper, without regard to either innovation or improving patient access to care.

“Medicare policies are powerful,” the report stated. “In 2014, Medicare is rolling out a range of new policies with an impact on personalized medicine that remains to be seen. One of these is that the cost of clinical laboratory tests will be bundled into the base payment for office visits and procedures undertaken in the hospital outpatient setting. This is concerning, for example, when an HIV-positive patient has an outpatient office visit—for which the hospital is paid about $92—but requires several hundred dollars of molecular tests. The agency remains uncertain about the valuation of bioinformatics, whether this service takes place in the context of a multi-analyte assay with algorithms (MAAA) or in the context of complex genomic tests, such as next-generation gene sequencing panels.”

I contacted Quinn to get his insider’s view of the report and ask if he has any additional comments about the PMC report.

“One thing I was sorry about with this white paper is that it was commissioned, scheduled, and written in February and March, and the association took several months to review and launch it,” said Quinn. “Therefore, other than a few last-minute redlines, it does not discuss the April passage of the Protecting Access to Medicare Act of 2014 (PAMA) and the establishment of lab test re-pricing. Had the timing been different, probably ten pages would have been taken out and replaced with PAMA strategy and discussion.”

Quinn said that the PMC white paper does not directly distinguish between IVDs and laboratory-developed tests (LDT). However, it does focus on reimbursement needs for new and complex tests that often face both coverage and pricing problems. In contrast, at least some broad areas of IVDs, such as clinical chemistry, face more problems due to commercial price competition than specific federal price setting.

“The main theme of the white paper is that continued marginal pricing of lab tests to the lowest common denominator actually impedes innovation, by recouping investment beyond marginal cost, that could improve the healthcare delivery process and its efficiency,” said Quinn. “I think this applies equally to IVDs as well as LDTs. In addition, there are special bonuses built into PAMA for FDA-approved tests that are delivered directly by laboratories rather than packaged for IVD kits. For better or worse, that is the way the law was written.”

Quinn added that the areas in the PMC report most relevant to IVDs are actually the broadest, echoing the themes that diagnostics can provide more technologies and information that makes the whole arc of healthcare more efficient. He also noted the section of the report discussing that traditional evaluation methods are based on protocols for drugs or head-to-head procedures and are not a good fit for diagnostics.