Friday, November 17, 2017

CMS To Abandon Longstanding Chemistry Panel Pricing in 2018

CMS has long had complex, manualized rules (not present in regulations) for pricing clinical chemistry panels. These panels are a "big deal" - $700M a year, and panel pricing saves AT LEAST $50M a year (see my article here), but may save several times that, because of current behavioral incentives not to report partial panels.

CMS will discard its longstanding chemistry panel pricing in 2018.   While CMS says it will "continue to review the issue," based on 2016 data already available, payments for analytes will go up at least by $40-50M dollars and potentially more, because there will be brand new massive incentives to submit partial panels of analytes for line item payments that are multiples of the panel price.  Why bill a 10 analyte panel for $15 when just 9 analytes will pay $40?

CMS writes,

How will CMS determine the price of automated testing profiles (ATPs) under the private payor rate-based CLFS payment system?

 For CY 2018, payment for tests that were bundled into ATPs will instead be made at the individual HCPCS code level. In other words, we will pay for each appropriately billed HCPCS code based on the CLFS amount for the specific code billed by the laboratory.

Moving forward we will continue to consider the efficiencies of ATPs and the appropriate payment methods for these tests under the new private payor rate-based CLFS.

Medicare administrative contractors will continue to apply editing to ensure that if a laboratory panel HCPCS code is submitted and is payable, an individual laboratory HCPCS code that is part of the same panel is not also paid separately


CMS RELEASES FINAL PAMA LAB FEE SCHEDULE FOR CY2018

On November 17, 2017, after market close, CMS released the final PAMA fee schedule for 2018.   This is a new lab fee schedule based on market rates surveyed over the past year.

CMS also issued final crosswalk/gapfill determinations for new codes for 2018.

See all files online at CMS, here.

CMS commented that it is still working on an ADLT application, which is overdue.

Very Brief Blog: CMS Releases Proposed Rulemaking for Medicare Advantage CY2019

On November 17, CMS released annual proposed rulemaking for Medicare Advantage, with updated proposals for CY2019.

The document (713 pp) is online here.   Comments are open until January 16, 2018.   For an early trade journal summary, here.  

CMS expects beneficiary costs to drop, more choices to be available, and enrollment to increase almost 10% to 20.4M.   CMS is also trying to shift cost savings in drug plans to be passed through to beneficiaries rather than to first benefit PBMs.  The rule handles both Medicare Advantage health plans and Medicare Part D drug plans, although the former usually include the latter.

In other news, a House "Medicare Extenders Bill" - a perennial exercise - is in the works.  This is a recurrent grab bag of small renewable "fixes" to the Medicare Act.  Here.

Thursday, November 16, 2017

Brief Blog: Links, White Paper for "Digital Therapeutics Alliance"

In late October 2017, a new digital health organization, the Digital Therapeutics Alliance, was launched.   See trade press at MobiHealthNews here, at Dive Health here.

The organization now has an elaborate website, here.



The Digital Therapeutics Alliance is also holding its European launch in conjunction with the November 16-17 "Frontiers Health" conference in Berlin.  See press release here.

Concurrently, the Alliance has supported a 32-page white paper on digital medicine, "The Future Is In Policymaking, Paying, and Protecting."   The home page to download the white paper is here.







Wednesday, November 15, 2017

FDA Creates New Pathway for NGS Tests in Tumors under 510K Clearances

On November 15, 2017, the FDA and Memorial Sloan Kettering Cancer Center (MSKCC) announced a landmark new approach to NGS diagnostic test approvals.   The pathway will be a special 510(k) approval for genetic tests in tumors. 

Previously, FDA had declined to approve such tests under 510(k) because of the assumption, by the FDA, that the genes reported would serve as drug selectors, and must be approved under the PMA route.  For for the first time, tumor genetic tests will be certified on accuracy rather than requiring a direct correlation between the accurate gene analysis and a clinical outcome.   Just as glucose or sodium tests are approved based on accuracy, this is a positional outcome that was going to come sooner or later for the FDA, but the timing was unpredictable (whether 2014, 2017, or 2020). 
The posture the FDA strikes is that the tumor gene analysis (e.g. finding an EGFR mutation or ALK rearrangement) is reportable to the doctor and cancer patient but "is not conclusive for use of a therapy" under a 510(k) test, whereas a PMA test of the same gene with same method and same result would be "conclusive" for therapy.   FDA has decided to live with the fact it has two nearly identical sounding product categories (PQM (of the PMA type) and PQZ (pf tje 510k type)).  Maybe someone at FDA used to say, "We couldn't do that," and now someone else has said, "Sure we can.  We just did."
  • See press release at FDA, here.  
    • See the FDA's new one-page "Fact Sheet," here.
      • The Fact Sheet explicitly compares PMA clearance of Thermo Fisher Oncomine Target Dx and 510(k) clearance of MSKCC IMPACT.  
      • Only the PMA test can make clinical companion diagnostic claims.  (Oncomine approved under Class III Product Code PQP, here.)
      • Apparently, a 510(k) test can assert genes with "evidence of clinical significance" or the lesser "potential clinical significance."
      • Regulatory Category is 21 CFR 866.6080, "NGS Tumor Test," and was created in April 2017.  To my eye, it's found at FDA.gov but not at the federal CFR, which is quirky.
      • IMPACT uses "Product Code PZM," different than the Oncomine product code PQP.  
        • For some deep dive comments and links on 866.6080, PQM, and PQZ, see side blog here.
  • See news at OncLive, here.   At RAPS, here.  At Medscape, here.  At Endpoints News, here.  At Genetic Engineering & Biotech News, here.
    • See Genomeweb (subscription), here.
  • Specific to the IMPACT clearance and classification:
    • The FDA immediately released its 57-page Decision Summary (here).
    • The De Novo 510(k) Classification Order (7p) is here.
      • This legally downclassifies the product (and future product category) from PMA Class III to 510(k) Class II via the de novo reclassification and clearance method.
The newly reviewed test, IMPACT, includes 468 genes and MSI testing.  Earlier in November, MSKCC had highlighted its role in the first approval of a drug and gene combination based on a "basket trial," here

FDA recently announced a "precertification" approach to approval of genetic health risk germline tests (here) and a precertification approach to some digital health software (here).

The 510(k) clearance pathway is closely linked to New York State Department of Health approval.  FDA states:
Moving forward, laboratories whose NGS-based tumor profiling tests have been approved by NYSDOH do not need to submit a separate 510(k) application to the FDA. Instead, developers may choose to request that their NYSDOH application, as well as the state’s review memorandum and recommendation be forwarded to the FDA for possible 510(k) clearance. 
The full FDA press release is clipped below the break. 

The tumor sample is apparently run with a matched normal DNA sample "when available" (or else an "unmatched" normal DNA sample.)  The FDA intended use statement is:
The MSK-IMPACT assay is a qualitative in vitro diagnostic test that uses targeted next generation sequencing of formalin-fixed paraffin-embedded tumor tissue matched with normal specimens from patients with solid malignant neoplasms to detect tumor gene alterations in a broad multi gene panel. The test is intended to provide information on somatic mutations (point mutations and small insertions and deletions) and microsatellite instability for use by qualified health care professionals in accordance with professional guidelines, and is not conclusive or prescriptive for labeled use of any specific therapeutic product. MSK-IMPACT is a single-site assay performed at Memorial Sloan Kettering Cancer Center.
Publications for the IMPACT test include Zehir et al. (May 2017, Nature Medicine), finding that 37% of 10,000 patients had an actionable mutation.   Mandelker et al. (September 2017, JAMA), conducted universal screening for germline risk mutations in 1000 patients who were undergoing tumor gene testing anyway.   They found many more germline risk genes than would have been found if only a subset of patients (getting tumor testing) had had guideline-based germline testing.

Very Brief Blog: Technology for Precision Health Summit, SF, December 12, 2017

Health 2.0, a HIMSS "innovation company," brings the Bay Area a one day conference called "Technology for Precision Health."   The venue is the Julia Morgan Ballroom in the SF financial district.   Registration is $899.[*]

Conference website here.   Agenda here  Promo for the conference at THCB, here.

The conference summary is here:
     Precision Medicine has come a long way in the last 10+ years thanks to advances in diagnostics, computing, and consumer tools. The ongoing quest to better understand disease predisposition and prevention through genomic and environmental factors is key to increasing the quality and length of life. Technology for Precision Health will explore how technology can help.
     How can we think differently about gathering, analyzing and sharing information? Which incentives can be offered to structurally change the system toward longer term care of patients? Which mechanisms will empower patients with their data and create virtuous partnerships with providers to truly drive value? Conference delegates will learn about the latest tools in Precision Medicine and Health as well as be part of the discussion on new ontologies and policy changes needed to bring these technologies to patients.



_____

[*] A discount is offered for joint registration in this summit and the January 8-10, 2018, Medtech and Digital Medicine Showcase conference that parallels JP Morgan in SF.

Tuesday, November 14, 2017

Very Brief Blog; Ceratto & Halamka Release Book on Precision Medicine

This fall, Academic Press has published a new serious book on precision medicine by Paul Cerrato and John Halamka.   Halamka is CIO of Beth Israel Hospital in the Harvard system. 

The book is available from Amazon here

See interviews with the author at MedCityNews here,  and at Healthcare IT News, here.


Brief Blog: AMA Supports New Policies for Precision Medicine

See an article in the November 14, 2017 FierceHealthcare covering a new 15 page report by the AMA House of Delegates supporting better access to precision medicine. 

  • FierceHealthcare article, here.
  • Full AMA report online at AMA, here.
  • Cloud version of the 15 pages re: Precision Medicine, here.
The report in part collates existing AMA positions on precision medicine, and adds new material.   For example, the new report highlights AMA's (and CAP's) support for the "LCD Clarification Act," see prior blog here.   The report discusses AMA's (e.g. CAP's) unhappiness with some Palmetto GBA (i.e. MolDx) LCDs.   

The report recommends some homework for AMA:  collating and merging 7 existing policies in precision medicine.   It also cites some allied topics, such as the need for precision medicine integration with EHR's and digital health.   The report concludes with 13 recommendations and has a 22 publication bibliography.    


Thursday, November 9, 2017

Very Brief Blog: Most Active Investors in Diagnostics & Tools (Silicon Valley Bank Report)

At the SoCal Bio digital health conference this week I had the chance to talk to staff from Silicon Valley Bank, who pointed me to their mid-year investments report.   The report is available online here.   A screenshot show the most active investors in diagnostics & tools, by number of deals.

AME Cloud Ventures is led by Jerry Yang, co-founder of Yahoo.  Investments in genomics include Color Genomics, uBiome and Whole Biome.  Khosla Ventures manages investments in genomics firms like Color Genomics, Genalyte, Guardant, and Whole Biome.

click to enlarge

Footnote: San Diego-based  Genalyte is the company working on a one-drop-of-blood compact fast multi analyte test that isn't Theranos.

Wednesday, November 8, 2017

Very Brief Blog: Nature Reviews: Flurry of Articles on Tumor Evolution and Resistance

Nature Reviews publishes a flurry of articles on tumor evolution and drug resistance.  Some appear in Nature Reviews Cancer, focusing on biology; others in Nature Reviews Clinical Oncology, focusing more on therapy.

An open access article by Maley et al reviews "evolutionary and ecological features" of cancers.  This is an open access article that includes proposals for new terminology and standards.  Here.

Dagogo-Jack and Shaw review the general topic of tumor resistance and heterogeneity, here.   Rotow & Bivona review development of resistance specifically in NSCLC, here

Along this line, see also a new paper by Blakely et al. in Nature Genetics on the complexity of EGFR and passenger mutation profiles in NSCLC; here and Genomeweb here.    

Her2 Patients Should Be Subdivided
Also in the field of precision and biomarkers, Gingras et al. argue we have to get into subdivisions and precision within the class of Her2-positive cancers, here, describing the status quo as "lost in translation" and creating a plateau in patient benefit that we shouldn't accept.  Nishino et al. update readers on the current state of checkpoint biomarkers (and confusion) in immuno-oncology, here.

$205M for Women's Molecular Diagnostics: $125M Progenity, $80M Counsyl

Within hours of each other, two molecular labs focusing on women's health raised collectively $205M.

Counsyl raised $80M (here).  Progenity raised $125M (here). 

In other news, on November 7, a publicly held company in germline genetics, Invitae, had a stock pop of 13% based on growing revenues (here.)   Invitae announced a $73M private placement offering a couple months ago (here).  Germline genetics company Ambry recently sold to Konica Minolta in a deal valued up to $1B (here).

Tuesday, November 7, 2017

FDA Announces "Pre-Certification Route" to Genetic Test Approvals for Germline Risk Tests

On November 6, 2017, FDA announced a new rout to review of "genetic health risk" germline tests.

Detailed article at MedCityNews, here.  Genomeweb here.  The FDA's press release, here.

Flagged Online at FDA on September 26

Gottlieb actually flagged this Pre-Cert approach clearly in late September, but few picked up on it.  See my blog entry on September 26, here.  In a speech at Advamed, which was reported by MedCityNews and others at the time, Gottlieb said that "we need some legislation" on LDTs. 

However, if you dug around on the FDA website at the time, you could see the "official prepared remarks" -- which were a little different from the actual speech.  Here's what we found at the time.

In the "official prepared remarks," online at FDA.gov, Gottlieb had a script for talking about the newly released "pre cert" process for digital health software, and was to have remarked verbally that this would be a "basis for a modern legislative approach" to LDTs.  However, this sentence didn't appear to occur in his verbal remarks from the Advamed podium.

For an FDA press release on the Digital Health Software Pre Certification Program, see here.

FDA's Key Text Released November 6

Returning to the new genetic health risk (GHR) framework, here's a quote from the new FDA press release:
Today, the FDA is taking steps to implement a novel regulatory approach for the regulation of GHR tests that applies proper oversight in a flexible, new way. It builds on the important lessons we learned from the FDA’s authorization of the first GHR and carrier screening tests sold directly to consumers. Specifically, today the agency issued a notice of its intent to allow GHR tests to be exempted from premarket review under certain conditions. If and when finalized, manufacturers of these types of tests would have to come to FDA for a one-time review to ensure that they meet the FDA’s requirements, after which they may enter the market with new GHR tests without further review. The agency also established special controls for these tests in a separate de novo classification order, which outline requirements for assuring the tests’ accuracy, reliability and clinical relevance and describe the type of studies and data required to demonstrate performance of certain types of genetic tests. This approach is similar to the proposed firm-based, pre-certification model that we developed for digital health technologies.

These Important Wheels Starting Turning in February 2015

Note that this process builds on groundbreaking approaches to genetic test policy created for 23andMe a couple years ago.   We described this as a sea-change in the FDA's approach to molecular approvals in a deep dive essay back in February 2015.

Labs Could Get More Money Under PAMA Law Than They Lose !!

This is a sexier title for the prior article.   In famous scene from the movie and musical "The Producers," the accountant says, "Under the right circumstances, you can make more from a flop than a hit."

Labs lose several hundred million dollars under PAMA price cuts. But ACLA has argued that PAMA overrides a panel pricing policy for clinical chemistry tests.   These panels are a big deal, logging $710M in payments in CY2016.   The arcane panel price rules cost industry about $45M in CY2016 relative to a la carte analyte prices, and they would recover this money immediately under PAMA if panel prices rules stop in 2018.

But wait, there's more.  If there was any rise in the delivery and billing of the newly and colossally profitable N-1 panels paid at a la carte prices, CMS could pay out another $70M, or even more, depending on the popularity this approach - or the bravery of labs in submitting this type of a la carte analyte code stack.   Why bill a ten-analyte, $15 panel if you can bill a 9-analyte, $40 panel?  And, oh, say, 30 million of them?

See the prior article for charts and details, here.

2016 CMS Savings Under Chemistry Panel Pricing Rule; Strategic Impact in 2018

In 2016 and 2017, at the summer Clinical Laboratory Fee Schedule meetings, CMS discussed the impact of pending PAMA pricing law on its use of special "panel pricing policy" in clinical chemistry.  CMS has manualized policy (not statute or regulation) that caps the prices of analytes at no more than the price of a corresponding panel.   For example, if a 10-analyte panel is $20, and each analyte is individually $8, and you order 9 analytes, you might hope to be paid 9x$8 or $72, but CMS has special calculations that will cap your price at less the $20.   The CMS rules are complex, but that's enough to understand this article.

In August 2016, NILA and ACLA argued that CMS must discontinue panel pricing rules if and when PAMA sets the laboratory fee schedule in January 2018.  Rather, CMS must pay each code at the PAMA price.  While it may take courts and lawyers to decide, I think ACLA has a pretty good argument.

How much would this cost CMS?   I think there are two answers, one is calculable and one could only be guessed at.   We used 2016 utilization data, released recently by CMS.

In 2016, CMS spent $709,291,438 on clinical chemistry panels.  The vast majority of this was for codes 80053 (comprehensive metabolic panel) and 80061 (lipid panel), which totaled 85% of all panel spending at $604,854,656.


Exactly Calculable Savings from Panel Rule

CMS spent $43,026,852 on payments for the 24 analytes  in 2016.   However, if they had been paid at their fee schedule rates, payments would have been $87,262,430, about twice as much.  Cash savings appear to be $44,235,578 per year for the panel policy. [FN *]

click to enlarge

But Don't Miss The Impossible to Exactly Predict Impact

The above savings are in the existing panel pricing system, where labs have no incentive at all to submit claims for, say, 9 analytes on a panel of 10.   However, if the panel pricing rule vanished like a Penn & Teller trick (the PAMA Panel Vanishing Act), then labs would have a lot of incentive to submit analytes that don't match a panel definition and price.  For example, now, if you drop one code from a $20 panel, you get (say) $18.   Without the panel pricing rule, if you drop one code from a $20 panel, you might get $50 or more at the a la carte rate (e.g. 9*$6). 

This new perverse incentive could affect anywhere from 0% to 100% of the sixty million panels tested in 2016.   While it represents an absolute extreme, if every panel shown in the top figure was submitted as "N-1", the paid cost of the $709M of panels easily double to $1.5B or more, and this would be perfectly allowable since payments would either be on the PAMA code panel price, or the sum of all the individual analytes at their PAMA a la carte prices.[FN **]

Of course, despite the new incentive to submit "N-1" panels, labs in the US wouldn't submit all the panel tests at "N-1" a la carte prices.  So let's say this second effect is 10% of panels, or 10% of $700M, or about $70M.   The two effects together would tally about $110M.   Or more? [FN***]  All this offsets a substantial part of the several hundred million dollar savings caused by the rest of PAMA.

Point of Care Too

Another example is that today, if a point of care test company makes a kit that matches an existing ten test panel, a physician office lab will get about $20 from Medicare for it.  But if ACLA is correct that CMS must pay each analyte at its list price in 2018, if the device company makes an N-1 or nine-test panel, the physician might get, say, 9*$6 or $54 for that.

Excel for the above in the cloud, here.

Comparison to BRCA Panels

CMS performs roughly 25,000 BRCA tests per year.   If they are all coded at the 2018 rate for BRCA1-BRCA-2 as 81162, this would be 25,000 * $2253 or $56,325,000 payments.   If they were all paid at the BRCA Panel Rate (10 genes including the 2 BRCA genes), this would be 25,000 * ($838+$542) or just $34,500,000 payments, giving CMS a CY2018 savings of $21,825,000.   

(If BRCA were stack-coded as 81211+81213 that cost would be 25,000 * ($2396+$553) or $73,725,000 payments, so the savings under the panel code policy would rise to $39,225,000Recall from above that savings from the whole national panel chemistry pricing policy in 2016 were $44,235,578.  (If the new Secretary of Health would use either type of savings, he could pay for an extra $400,000 of charter jet flights every 3.6 days and it would be revenue-neutral.)

PAMA and MAC data for 2016 show that BRCA testing was: variably billed as 81211, or as 81211+81213, or as 81162, or sometimes 81432+81433, but other times 81432, the latter probably only under a MolDx policy that "prohibits payment for dup del analysis unless only it is dup del payment for 81213 on top of 81211").  CMS 2016 billing patterns used the full spectrum of somewhat ambiguous current CPT coding choices:




Policy Note

If ACLA is correct that lab tests must be paid at literal fee schedule prices under PAMA law in 2018, it could affect several MolDX local policies that variably act to upgrade and downgrade payments from fee schedule rates (here).

___

[FN *] Actual direct cash savings might be a bit less because some states pay a bit less than the fee schedule normal price.  However, I believe this is a small effect on a few codes in a few states, whereas the total affect is 50% over all codes and all states.

[FN **] Relative to 2016 fee schedule prices, in 2018, both panel and a la carte prices will typically drop 10%, but again, this is not a main driver of the large effect I'm discussing.  Note that 2018 utilization could probably be 10% higher than 2016 utilization.  I've used 2016 prices throughout the clinical chemistry section of this blog.

[FN ***] Hundred million dollar values aren't without precedent at all.  Recall that in 2014, CYP genetic testing shot up to $270M before being fought back down to only $25M in 2016.  CMS doesn't detect unprotected vulnerabilities quickly.   It has no current defenses against N-1 testing, because until December 31, they've paid 10% less, not 300% more.

Monday, November 6, 2017

Counsyl Raises $80M For Genetics

In an announcement November 6, 2017, COUNSYL announced it has raised new $80M in funding.

Press release here.  Funding is from NYC-based Perceptive Advisors.



Counsyl Celebrates 10 Year Anniversary 

With New Financing and New Board Member


SOUTH SAN FRANCISCO, Calif.--()--Counsyl today announces 10 years of growth with $80 million in financing from Perceptive Advisors, a New York-based life sciences investment firm, and the addition of Lily Sarafan, chief executive officer of Home Care Assistance (HCA), to the company’s board of directors.
“We’ve dedicated the last decade to developing products and services that provide actionable information to guide women and their families as they make important health decisions,” said Ramji Srinivasan, co-founder and chief executive officer of Counsyl. “This financing will support our continued growth with an eye toward making expanded carrier screening as routine as taking folic acid, non-invasive prenatal screening as routine as an ultrasound, and hereditary cancer screening as well-known as a pap smear.”
[More after the break]