Is Pharmacogenomics Testing Unaffordable for Payers?

ACROSS THE UNITED STATES, labs that perform pharmacogenomic tests complain that both government and private payers are reluctant to issue coverage guidelines and adequate reimbursement for these assays. Yet, this new class of diagnostic lab tests is the foundation of personalized and precision medicine.

Why are government and private health programs taking this tough stand on covering and paying for new pharmacogenomic tests? After all, there is universal agreement among physicians, experts, and healthcare policymakers that the future of modern medicine is to deliver personalized and precision medical services to patients.

At THE DARK REPORT, our investigation into this situation led to a surprising conclusion: Payers fear that the volume of pharmacogenomic tests ordered has the potential to become financially overwhelming. Said differently, if almost any patient who is a candidate for a prescription drug could benefit from a pharmacogenomic test—and the number of those patients is in the tens of millions—how could federal and private health programs find the money to pay for these tests when they are already struggling simply to fund current healthcare services?

If you accept this premise, then the story we report here will make sense. It is about a pharmacogenomic lab testing company in Louisville that has just been hit with a $26 million repayment demand by the Medicare program. This demand is the result of an outside auditor denying 100% of the 30 pharmacogenomic test claims that it audited—then extrapolating that determination to all similar claims over almost three years.

Think about the math. In 2015, it is reported that 4.4 billion prescriptions were written in the United States. That’s about 13 prescriptions for every man, woman, and child. Assume that just 20% of the U.S. population got a pharmacogenomics test before their doctor selected a specific therapeutic drug. That would be 60 million tests. At $200 per test, that would be $12 billion spent on pharmacogenomic tests in just one year! By comparison, Medicare pays $7 billion annually on Part B lab tests.

This example illustrates why health insurers are slow to make coverage determinations and even slower to pay claims for pharmacogenomic tests. Payers recognize the real possibility that a rapid expansion in physician use of pharmacogenomic tests could be the ultimate budget-buster!