Labs React with Criticism to Proposed ADLT Rule

Medicare officials seem prepared to interpret and implement PAMA in an unexpected manner

CEO SUMMARY: Some in the lab industry had high hopes that passage of the Protecting Access to Medicare Act (PAMA) last year would favorably resolve a number of important issues. However, those hopes were dashed following the September 25 release by CMS of a proposed rule setting out how it will collect market test prices and how it will price a certain class of new lab tests that it now calls Advanced Diagnostic Laboratory Tests (ADLTs). Lab experts were quick to point out serious concerns.

WHEN CMS RELEASED ITS PROPOSED RULE for market reporting of lab test prices last month, it contained unwelcome language to describe how it would define certain new tests that CMS calls advanced diagnostic laboratory tests (ADLTs)

In general, lab industry associations and lab test companies found much to criticize about how CMS is proposing to define what it calls multianalyte assays with algorithmic analyses (MAAA) codes or ADLTs, establish coverage guidelines, and set prices for such tests.

The federal Centers for Medicare & Medicare Services issued the proposed rule on September 25 in order to implement two sections of the Protecting Access to Medicare Act (PAMA).

One section is the requirement that labs submit market price data during early 2016, which CMS will use to set prices for the Part B Clinical Laboratory Fee Schedule in 2017. The lab industry reaction to this part of the proposed rule was presented in the last issue of THE DARK REPORT. (See TDR, October 5, 2015.)

The other section of PAMA directed CMS to establish a procedure for handling types of new lab tests that companies are ready to introduce into the clinical market. The intent of Congress was to establish a defined process that CMS would use to evaluate these new lab tests and set prices.

ADLT Definitions

In its announcement about the proposed rule, CMS said, “An ADLT is a laboratory test that is covered under Medicare Part B and that is offered and furnished only by a single laboratory, not sold for use by a laboratory other than the original developing laboratory (or a successor owner), and that meets at least one of the following criteria:

  • “the test is an analysis of multiple bio- markers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result;
  • “the test is cleared or approved by thebFood and Drug Administrationb(FDA);
  • “the test meets other similar criteria established by the secretary.”

These criteria were defined by Congress in the PAMA legislation. What concerns the clinical lab industry is that CMS is creating additional criteria that seem to go beyond the intent of the PAMA language.

In addition, CMS proposes that an ADLT must be a molecular pathology analysis of multiple biomarkers of DNA or RNA; that it must yield a result when combined with an empirically derived algorithm that predicts the probability a patient will develop a certain condition or respond to a particular therapy; that it must provide new clinical diagnostic information that cannot be obtained from any other test or combination of tests and it may include other assays.

ADLT Definition Questioned

CMS also proposed that the test must be novel. “For clinical laboratories, this definition raises a lot of questions and deep concerns,” stated Rina Wolf, Vice President of Commercialization Strategies, Consulting and Industry Affairs for Xifin, a health economics optimization company for labs in San Diego.

“The definition also requires that the test provides results that are not available from any other test. What if one lab has a test it developed and then another lab develops a similar test?” she asked. “Which of those tests would then be granted (or keep) ADLT status? Is it the one that was the first to be commercialized, the second one, or neither? The language of the proposed rule is not clear about this issue.

“Also, what does it mean to say ‘as defined by the secretary?’ she asked. “That could mean anything.”

In addition to concerns about this definition of ADLTs, clinical lab directors questioned a recommendation in the proposed Clinical Laboratory Fee Schedule (CLFS) for 2016 to slash what it will pay for ADLTs. CMS released its proposed CLFS on the same day it issued the proposal to implement the regulations under PAMA.

The American Clinical Laboratory Association said that, if CMS implements its proposed deep cuts to the prices of the nine codes for ADLTs that CMS currently covers, this would hamstring physicians’ ability to determine the best course of treatment for patients.

ACLA said that if these proposed cuts of 33% to 91% were approved in the final CLFS rule, it would conflict with CMS’ precedent for letting its Medicare Administrative Contractors set rates for these tests. (See related story about CareDx and its ADLT on pages 14-16.)

“This proposed rate-setting methodology is inconsistent with the vast majority of stakeholder input and the recommendations of CMS’ own Advisory Panel on Clinical Diagnostic Laboratory Tests,” ACLA wrote.

ACLA President Alan Mertz stated, “Slashing payment of these tests—of as much as 90%—will have a profound impact on the success we’ve achieved thus far, thanks to life-saving diagnostic discoveries. These highly-advanced diagnostics tests are on the cutting edge of science and guide physicians as they treat several conditions afflicting hundreds of thousands of Americans, including heart dis-ease, cancer, and rheumatoid arthritis.”

Watch Out for Crosswalks

“CMS has made a preliminary pricing decision to use a crosswalk system to set payment rates for these tests,” explained Mertz, “while clinical labs prefer the gapfill method that the MACs use to set rates.”

“Congress had reasons to require CMS to assemble a PAMA Advisory Panel. Yet CMS officials seem determined to go their own way,” observed Wolf. “When the advisory panel first met in August, CMS began the meeting by stating that the panel was only to advise and that its recommendations would have no more weight than comments from anyone else.”

Contact Alan Mertz at or 202-637-9466; Rina Wolf at 661-702-8936 or rwolf@xifin.


CMS Creates ‘Advanced Diagnostic Lab Test,’ Then Slashes 2016 Prices for ADLTs by up to 91%

ON THE DAY CMS ISSUED ITS PROPOSED RULE to implement PAMA, the agency also released a proposed Clinical Laboratory Fee Schedule (CLFS) for 2016.

In this proposal, CMS recommends slashing what it pays for a set of nine ADLT codes by 33% to 91% off what Medicare Administrative Contractors currently pay for these assays. Labs have special concerns about this ADLT policy because the PAMA statute defined these tests and provided specific price concessions for when they entered the market.

Each ADLT is basically a multianalyte assay with algorithmic analyses or MAAAs, commented Bruce Quinn, MD, PhD, an expert in Medicare policy and health care reimbursement with FaegreBD Consulting. He noted that, in its proposed rule, CMS inserted a novel requirement for ADLTs that was not in PAMA itself, requiring labs to provide new clinical information for such tests that cannot be provided by other tests or test combinations on the market.

“The statute defines ADLTs basically as sole source MAAA tests, and there is no platform for CMS to create novel sides of the definition,” wrote Quinn in a blog post. “Further, I would argue that, from a policy perspective, it is counterproductive. No one would ever be incentivized to bring out an ADLT in the same general field (Mammaprint versus Oncotype) because the second test would be so disadvantaged nobody would ever create it and invest in it, while the privileges for the first test go on forever.

“Even bringing out an improved test version by the same lab might meet the general ADLT definition but not the special CMS novelty test. Bad idea,” continued Quinn. “I think that CMS was concerned about longstanding algorithms of common use not being ADLTs, but this is the wrong way to do it.”

Quinn pointed out additional problems with CMS’ definition of ADLTs. “PAMA says that an ADLT is a test of DNA, RNA, or protein biomarkers combined with an algorithm into a single patient-specific result,” he wrote. “CMS says that this means that the MAAA (ADLT) must contain RNA or DNA. What? If you state, ‘Measurement of A, B, or C’ is required, it doesn’t mean that, if you measure A or B it is OK, and if you measure C instead it is wrong. It means you can measure A, or B, or C, or any two, or all three. CMS completely lost me in this bit of rulemaking as it interpreted the statute into regulation.”

Julie Khani, Senior Vice President for the American Clinical Laboratory Association, agreed. “When you look at the definition of an ADLT, the PAMA legislation is quite clear. It sets out specific criteria that an ADLT must be an analysis of multiple biomarkers for DNA, RNA, or protein biomarkers or it must be cleared or approved by the FDA or specified by the Secretary of Health and Human Services,” she said. “But in the proposal, CMS left off the part of the definition referring to protein biomarkers. This is a very serious oversight and given the specificity of the PAMA statute, there is no rational explanation for this exclusion.”

Attorney Charles C. Dunham IV of Epstein Becker Green explained in a client alert that PAMA defines an ADLT as a test offered and furnished only by a single laboratory and the proposed rule defines that as not sold for use by a lab entity other than the original developing lab entity (or a successor). But CMS proposes that an entity with multiple CLIA certificates associated with multiple testing locations would not satisfy the definition of a single laboratory, he added. Therefore, as proposed, if the applicant cannot meet the single laboratory definition, the test would not be eligible for ADLT status, even if the test met all other ADLT criteria, he wrote.

“Moreover, under this proposed definition of a single laboratory, the test would not be eligible for ADLT status if a referring lab billed for a test performed by the original developing lab entity as a reference lab. In this case, [CMS pro- poses] more than one lab entity would be engaged in the testing activities and [would thus be] required to report applicable information related to the test,” noted Dunham.


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