Thursday, May 31, 2018

Behind the Headlines: Forbes' Article on Freenome and CRC Screening Investment

On May 23, 2018, Forbes ran an article by Matthew Herper about how liquid biopsy and AI company Freenome plans to develop a colorectal cancer screening test.  Such tests require large FDA trials (>3000 patients).   Article here.

The natural comparison is to Exact Sciences, makers of Cologuard, a DNA-based stool screening test.  Exact's market cap is over $7B.

Colorectal screening tests benefit from a back door in Medicare's statute, allowing preventive benefits to be created directly by CMS staff through an NCD.   In other cases, preventive benefits need to be created by Congress or need to be first endorsed by USPSTF and then secondarily taken up by a CMS NCD.

I'd illustrate it as below.  The first pathway (at top) and the longest pathway is an Act of Congress.

The second two pathways are the small circles.  Both the statutory prostate screening benefits (for PSA) and colorectal screening benefits (for FOBT and colorectal) contain a phrase allowing CMS to update the benefits as appropriate for new technologies.   Review of the CMS NCD for Cologuard confirms that this is the trap door that Cologuard legally squeezed through as a preventive benefit.

If you're not endorsed by Congress or endorsed by a CMS NCD for a CRC or prostate test, you have only one other pathway:  to sequentially obtain USPSTF endorsement with a high rating (years), and then, later, being taken up for an NCD (at CMS's discretion) and passing.  USPSTF review (including public comment on draft versions) takes a couple years.  Lung cancer LDCT screening went through this extended pathway, with several years passing slowly from the time USPTF took up a review of the issue to the time the NCD was completed.

See graphically as below:
click to enlarge

The business lesson is, by developing a CRC screening test, Freenome can get its product through the "statutory little doors."  If they tried to develop an ovarian or pancreatic or breast or lung cancer screening test, Freenome would need a legislative solution or take several years to work through the slow USPTF review process, presumably after the FDA process, and before the NCD process. 

As a cross-check, see the venturous and impressive commercial investments taken, or being taken, in colorectal cancer screening tests by Exact and Freenome.  (You can even get the FDA and CMS decisions on the same day, as Exact did, through the FDA-CMS parallel review process, which has no parallel in the USPSTF pathway.)  In contrast, lung cancer LDCT trials relied on public NIH investments for which payback was not commercially relevant.  This is good for future victims of CRC, but puts future victims of other cancers at a disadvantage.

On June 1, 2018, Clinical Genomics Technologies, in which Quest is an investor, raised $26M for the development of a liquid biopsy CRC screening test as well as a CRC recurrence test; here.  This brings total funding to $48M.
Relevant statute -

  • 1861(pp) covers CRC screening tests, defined as FOBT, sigmoidoscopy, or colonoscopy, at intervals determined by CMS, along with new technologies approved by CMS.
  • 1861(oo) covers prostate screening, defined as digital exam or PSA test, or, new technologies found appropriate by CMS.
  • 1861(ddd) allows USPSTF approved services to be imported as Medicare benefits via an NCD.  You'd wait a year for FDA, then two years for USPSTF, then another year for an NCD.

The Cologuard NCD states:

Sections 1861(s)(2)(R) and 1861(pp) of the Social Security Act (the Act) and regulations at 42 CFR 410.37 authorize Medicare coverage for screening colorectal cancer tests under Medicare Part B. The statute and regulations authorize the Secretary to add other tests and procedures (and modifications to tests and procedures for colorectal cancer screening) as the Secretary finds appropriate based on consultation with appropriate experts and organizations.