CEO SUMMARY: In recent years, insurers have raised the bar and become much tougher when making coverage and reimbursement decisions for molecular assays, genomic, and genetic tests. Yet several lab testing companies are having good success at demonstrating the validity and clinical utility of their assays. Among them is Foundation Medicine, of Cambridge, Mass. In an exclusive interview, its president and COO shares several important lessons learned from winning favorable coverage decisions.
THREE YEARS AGO, after the introduction of new molecular CPT codes, genomic and genetic testing companies struggled to get paid. At the time, government and private payers saw the new codes as an opportunity to introduce tougher criteria when making coverage and payment decisions.
One consequence was that few labs got paid for their molecular test claims during the first four to five months of 2013. (See TDRs, March 25 and April 15, 2013.) Since then, it has been difficult for labs to get favorable pricing for new molecular and genetic tests.
Today, most clinical laboratories offering molecular genomic tests report that payment for these assays is less than ideal. A small number of lab companies say, however, that the slow, painstaking process of educating payers’ medical directors about the value of such tests is working.
While labs pursue this educational process, medical directors for commercial and public payers have, in turn, required laboratories to demonstrate the clinical utility of their lab tests.
One example of a lab finding some success is Foundation Medicine Inc., in Cambridge, Mass. In a first-quarter conference call with stock analysts last month, CFO Jason Ryan reported that increased test volume boosted total revenue for the quarter to $30.4 million, a 58% increase over the $19.3 million recorded in the same period last year.
Test Volume Boosts Revenue
“During the first quarter we reported 8,985 clinical tests, a 14% increase over the same period last year and an 8% increase from Q4,” noted Ryan. “Reported tests included 7,957 FoundationOne tests and 1,028 FoundationOne Heme tests. The average reimbursement per clinical test recognized in revenue was approxi- mately $3,100, down slightly from the $3,200 in Q4.”
Just last fall, one published report showed Foundation was, “hampered by a lack of coverage decisions from Medicare and no contracts with most commercial payers, resulting in payment delays and tens of thousands of unpaid tests.”
The question now is whether the first quarter numbers represent a turnaround. CEO Michael Pellini, MD, told financial analysts that what distinguishes Foundation Medicine (FMI) from other companies offering genomic-based testing is the clinical validation it provides to payers and providers. Demonstrating clinical utility may in fact be the key to long-term success for FMI and other genomic testing companies.
FMI’s assays are “highly validated,” Pellini said during the earnings call. “In the first 12 weeks of 2016 alone, we published nine manuscripts in high-quality peer-reviewed journals and delivered 41 podium presentations and posters at various medical and scientific meetings,” he added.
In an interview with THE DARK REPORT, FMI President and COO Steve Kafka said efforts to establish relationships with payers have produced notable successes. This year, FMI started testing members of Horizon Blue Cross Blue Shield of New Jersey, and recently agreed to do so for members of UnitedHealthcare, the nation’s largest health insurer.
“Since 2012, we have worked with insurance companies and with the Medicare program to educate and provide the evidence they require to make coverage decisions,” Kafka said. “One of the earliest coverage decisions was from Priority Health in 2014. Since then, we’ve had a number of other regional plans initiate contracts or coverage decisions with us.”
Financial Effect of Testing
On January 1, FMI began collecting data for Horizon with Horizon’s data partner, COTA, to establish the financial effect of testing Horizon members with FMI’s FoundationOne test. Last fall, Palmetto GBA, a Medicare Administrative Contractor, said it would cover the FoundationOne test.
“UnitedHealthcare will cover tests for patients newly diagnosed with stage four non-small cell lung cancer,” explained Kafka.
Chief among the lessons learned in obtaining favorable coverage decisions from payers is that it takes time and data to obtain such agreements.
“We call ourselves a ‘molecular information company’ because we believe our work is about more than running tests and delivering results,” he added. “What we do is put information into the hands of decisionmakers, meaning physicians first and including the patient’s insurer.”
What steps are necessary to obtain positive coverage decisions? “There is no single playbook or a set of criteria to present to health insurers, but we do know there are three critical factors that every testing provider needs to show,” answered Kafka. “First is analytical validity. Does your test actually do what you say it does?
“Second is clinical validity. Is there an actual clinical implication?” he continued. “The third critical factor is clinical utility: Is there a benefit that comes to patients as a result of this test?
“In addition to these three criteria, the lab needs a patient-centric approach and that means partnering with payers to serve their patients,” Kafka explained. “We’ve learned that the medical directors at health insurers are patient-centric. Thus, they are looking for partners—including labs—who are patient-centric as well.
“These are not adversarial relationships,” commented Kafka. “They are the health insurer and we are the vendor bringing new solutions to cancer patients in ways that meet payers’ needs. We do that with new diagnostic technology that has evolved along with our understanding of cancer as a disease.
“Over the past 10 years, we have come to understand that cancer is a disease of the genome,” explained Kafka. “It is no longer considered a disease exclusively of a particular tissue of origin.
Key to Reimbursement for Molecular Genomic Tests Is to Document Clinical Utility and Educate Payers
FOR FOUNDATION MEDICINE, education is the key to getting health insurers to pay for comprehensive genomic profiling (CGP).
“With payers, we know we must make a significant investment in education to help them understand two issues,” stated FMI President and COO Steve Kafka. “First, payers want to know how to distinguish a comprehensive approach from other testing modalities. Second, they want to know how we define quality and clinical utility for each genomic test.
“One way to define quality and utility is to never put physicians in the position of guessing what to test,” he said. “Therefore, our comprehensive genomic profiling approach looks at the totality of the relevant cancer genome. We look across the known set of cancer-related genes, and that’s a large number of genes. But it’s more than reviewing large numbers of genes. It involves interrogating all classes of genomic alterations.
“When we say we ‘interrogate’ genes, that means looking across the entire coding region of each of the genes in question,” added Kafka. “This enables us to identify all classes of genomic alterations known to be altered in cancer, and we sequence them at great depth to identify the actionable alterations, insertions and deletions, base substitutions, copy number alterations, and fusions.
“That’s a bit technical, but the point is that comprehensive genomic profiling is not easy to do, especially compared with most other genetic testing,” he said.
“For physicians, it means they can be confident that we’ve left no stone unturned for their patients,” commented Kafka. “If there is a genomic alteration present regardless of the class; if it’s an insertion or deletion or if it’s a copy number alteration, for example; regardless of the class, we’ll find it. And we do so with near 100% specificity and sensitivity.
“Also, it’s important to note that we’ve shown this validity in our peer-reviewed publications and just last month, the U.S. Patent and Trademark Office issued FMI a patent for ‘Optimization of Multigene Analysis of Tumor Samples,’ ” announced Kafka. “The patent covers the company’s methods of analyzing a cancer patient’s tissue or blood specimen to detect multiple classes of genomic alterations. Foundation Medicine has similar patent applications pending with the European Patent Office and other jurisdictions outside the United States.”
“For example, it’s not just lung cancer, it’s ALK-mutated lung cancer or it’s EGFR+ lung cancer,” he noted. “In fact, cancer is not a single disease. Actually, it’s a collection of dozens—if not hundreds— of individual diseases. There cannot be a single guidebook for cancer because cancer is not a single disease.
“At the same time, it’s impractical to do several hundred prospective studies of patients for every different kind of cancer,” he observed. “Such studies would require hundreds of millions of dollars and would take a long time to complete. And, during the years of such studies, patients would not be benefitting from these genomic insights.
“What we have learned is that the business model for molecular lab tests needs to catch up with our knowledge of cancer biology,” Kafka commented. “Or, put another way, how we pay for these tests needs to catch up with the science. That requires innovative thinkers such as those working at UnitedHealthcare and at Palmetto.
“Recently, Horizon Blue Cross also contracted with FMI for its comprehensive genomic profiling (CGP) approach,” Kafka said. “This is an approach that we pioneered to understand each patient’s unique cancer.
Personalized Medicine Vision
“For health insurers and providers, this personalized medicine vision is still new,” he said. “And, as with anything new, our lab needs to go through an educational process with payers, providers, and regulatory agencies. While it’s new for them, it is not new for us. We’ve done this since Foundation Medicine was founded six years ago.”
The clinical and business strategies of Foundation Medicine offer important insights to pathologists, lab executives, and venture capital investors. FMI provides evidence that it is possible to succeed when launching new proprietary genetic and genomic assays, but only if the lab understands how to meet the value propositions of the various stakeholders, including physicians, patients, and payers.
Evidence of Clinical Value
Of particular importance are the resources that Foundation Medicine is investing in clinical studies to demonstrate and document the accuracy of its assays and the clinical relevance of these assays when used in patient care. The publication of these studies in credible, peer-reviewed journals, along with presentations at scientific meetings is a cornerstone in FMI’s strategy to gain acceptance for its proprietary tests.
That is the evidence physicians need in order to obtain better outcomes with their patients. It is the same evidence that health insurers require to make favorable coverage decisions and establish adequate reimbursement for these genomic and genetic tests.
Contact Steve Kafka or Kimberly Brown at 617-418-2215 or IR@foundationmedicine.com.