California company shows labs the way with low genetic testing cost

Color’s genetic testing cost earns big contracts with insurers

This is an excerpt from a 1,485-word article in the June 5, 2017 issue of THE DARK REPORT. The complete article is available for a limited time to all readers, and available at all times to paid members of the Dark Intelligence Group.

CEO SUMMARY: At a time when most molecular and genetic testing companies are struggling to gain coverage for their tests, this DARK REPORT exclusive analysis shows how a Silicon Valley-based lab company’s business strategy of an affordable genetic testing cost appeals to patients and insurers alike. Three of the nation’s largest payers have already signed on, lured by the low cost, and an easy-to-use Web portal appeals to doctors.

DO SILICON VALLEY EXECUTIVES schooled in the intensely competitive web marketplace understand the market forces driving genetic testing better than pathologists and clinical laboratory directors and the private equity firms that fund their lab companies?

The answer to that question may be yes, based on the impressive managed care contracts that Color (formerly Color Genomics) announced last month. The two-year-old company snared multiple managed care contracts to provide testing for more than 100 million lives for its 30-gene cancer test. Color operates a CAP-accredited, CLIA-certified laboratory in Burlingame, Calif.,

Priced at just $249 for cash-paying consumers, the test is convincing evidence that some of the nation’s largest health insurers appreciate Color’s strategy of setting a patient-friendly genetic testing cost.

Could your genetic testing lab benefit from rethinking its pricing strategy? Please share your thoughts with us in the comments below.

On June 15, Color will become an in-network lab provider for three of the nation’s large health insurers: United-Healthcare, Blue Shield of California, and one other unidentified insurer. These payers will reimburse Color when in-network physicians order its 30-gene test for hereditary cancer risk for patients who meet the insurers’ medical criteria, Color said.

Color’s in-network status gives it immediate access to more than 100 million Americans. For any insurers not under contract, Color will accept out-of-network payment.

In 2015, Color launched a 19-gene cancer lab test for $249 for women who wanted to know their risk for breast and ovarian cancer. Then, in April 2016, Color expanded the gene test to 30 genes and marketed the new panel to men and women seeking to assess their risk for developing eight common hereditary cancers. Although it had expanded the genetic markers in the test panel, Color retained the $249 genetic testing cost.

A Simple, Direct-Pay Model

Last year, Color’s co-founder and CEO Othman Laraki told THE DARK REPORT, “From day one, we have adopted a simple, direct-pay model. We did not put a lot of effort into pursuing insurance payment because our focus has always been on improving patient access to these genetic tests.” (See TDR, July 5, 2016.)

Low prices helped to improve patients’ access to those tests and generated a lot of buzz, with publications such as Forbes, Fortune, The New York Times, TechCrunch, and BuzzFeed writing stories about Color’s low price.

Being savvy shoppers, health insurers noticed and soon came calling. “This is the only time in my career that insurance companies actually started to reach out to us,” stated Darrin Crisitello, Color’s VP of Global Sales, Marketing, and Operations. Because of the complexity of billing inherent in any insurance contract, health insurers will pay more than $249 for the test, but Crisitello would not reveal contracted rates.

“Our $249 price point resonated with insurers, and so we were able to contract with them at rates that are much less than they currently pay to other labs,” he said. “Not only did we get a lot of traction with UHC and Blue Shield, but we’ll have more payers within the next quarter.

“Many lab companies are trying to determine what’s the most amount they can charge for a genetic test or service,” commented Crisitello. “But we have the opposite view about price.”

Physicians Prefer One Lab

The reason to pursue insurance contracts is simple: Physicians who order tests from Color wanted to offer the same lab test to their insured patients. “Physicians want a way to offer genetic tests to their patients that will be covered by the patients’ health insurance plan,” explained Crisitello. “Physicians use other commercial laboratories that take insurance but would rather use one lab for all their needs—if possible.”

Recognizing the value of being physician-friendly, Color built a physician portal to ease the prior-authorization process to make it easier for doctors to order its test. Often, obtaining preapproval for a genetic test can be troublesome for physicians and their office staff.

“We want to make it easier for physicians to order tests so they can spend their time with their patients,” he explained. “Our design, product, and engineering teams aim to offer providers a simple user-friendly experience.

“On our platform, a physician enters patient information,” continued Crisitello. “The system then identifies the insurer’s criteria and the patient’s potential out-of-pocket costs, including the deductible and co-pay.

“This tool streamlines the ordering and approval process for our genetic test because it gives the physician the information he or she needs to decide whether to choose the self-pay or insurance-submission process,” he explained.

Contact Darrin Crisitello at 844-352-6567.


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