An Industry Policy Update: The LDT Hearing, a Dx Reimbursement Win, and a Bold Look at Drug Pricing

Theral Timpson


Congress Questions FDA and CMS on LDT Regulation

Over the past several years we have been closely following the move by the FDA to regulate laboratory developed tests, or LDTs.  Most recently we had Scott McGoohan from BIO on the program summarizing the  group of alternate plans which have recently been presented to Congress.  The sponsors of these plans--the main four being AMA,  AMP, CAP and the Diagnostic Test Working Group--hope to persuade Congress to intervene and change the FDA’s current course.  The plans have been presented both to the House Committee on Energy and Commerce (E & C) and to the Senate HELP Committee.

This week, E & C held a hearing on the topic of LDT regulation and invited as witnesses, Jeffrey Shuren, director of FDA’s Center for Devices and Radiological Health, and Patrick Conway, chief medical officer at CMS. 

There were two important developments at the hearing.  First of all, in preparation for the hearing, the FDA released a report making their case as to why they should regulate LDTs.  This report is something that members of Congress had asked for last year, and this week we got to see a list of  20 examples of non-regulated LDTs that the FDA feels are bad for patients.   Some of the cases involve false-positive tests where patients have been told they have conditions they do not really have. The report argues this "has caused unnecessary distress and resulted in unneeded treatment." In other cases, the LDTs were offered false-negative results and  patients’ life-threatening diseases went undetected. Here, patients have failed to receive effective treatments. 

The examples were all anecdotal and Dr. Shuren got drilled on this by the committee.  Are these stories sufficient evidence of harm? Shuren assured the committee that the FDA does use case studies such as these when validating tests.  He also pointed out that evidence of unregulated tests causing patients harm is actually hard to come by for the very reason that there is no system in place for post market review.  Upcoming LDT guidance will fix just that.  

The second development that struck me is that CMS totally had the FDA's back on this.  Dr. Conway of CMS always agreed with Dr. Shuren and frankly told the committee that CMS doesn’t have the personnel, the resources, or the expertise to provide oversight.  Dr. Conway offered numbers, saying that CMS has only 25 “survey staff,” and they are trained in lab and equipment protocols.  They “do not have scientific staff capable of reviewing complex medical and scientific literature to determine clinical validity,” he said.  “This expertise resides within the FDA.”

All summer we’ve been hearing about these alternate proposals for oversight which mostly call for a "beefed up" CLIA.  It turns out that CMS, the folks who run CLIA, don't want to do it.  Dr. Conway says that they can't and furthermore, it would lead to "inefficient and duplicative" oversight.  It's reassuring to see the FDA and CMS in such full agreement.  We got this one, the two agencies already in place are telling Congress.

So where does this leave us?  Dr. Shuren of FDA was specifically asked when final guidance would be finished and published.  He reluctantly volunteered “early 2016."  Whichever way it goes, there will be more politics involved.  On the one side, when the FDA puts out final guidance, it must still be cleared by the Office of Management and Budget, which was widely believed to have held up the draft guidance by a year.  On the other side, if one or a combination of the proposals before Congress is drafted into a bill, it must, of course, pass the House, the Senate, and the President’s desk (unless Congress musters the votes to override a veto.)

There is a third option.  LDT reform could be done through MDUFA, or the Medical Device User Fee Amendments.  This is a legislated user fee system where medical device companies pay fees to the FDA to fund review activities.  The user fee programs must be periodically renewed by Congress and are next up for renewal in October of 2017.  This would provide Congress with an opportunity to take legislative control of LDTs without a new standalone bill on the topic.  

A new bill  could perhaps take years and the MDUFA option wouldn't work until late 2017.  With the FDA’s final guidance on LDTs out much sooner, will resistance have settled down by then?

CMS Reverses Course on Diagnostics “Disimbursement”

Earlier today I heard from a very happy guest we had on the program a month ago, Peter Maag of CareDx.  When I interviewed Peter he was in a fight for the life of his company as CMS had proposed a decrease in the reimbursement rate of CareDx’s Allomap test for heart transplant recipients.   In an email titled, "Patients Win", Peter wrote today that CMS had reversed course and that reimbursement rates will stay the same.  After a coalition of diagnostics companies and policy experts mobilized to fight against the decrease in rates, CMS chose to go with the “gapfill” method of pricing vs. the “crosswalk” method.  

"How the original decision to crosswalk AlloMap and several other molecular diagnostics to single codes remains unclear," wrote Peter.  "However, it is apparent that the [CMS] Advisory Group was able to listen and amend the recommendation prior to any significant impact to patient care."

This is great news for CareDx and many other diagnostics companies who would have been affected, including Genomic Health, Vericyte, and Myriad Genetics.  Shares of CareDx surged today as much as 40%  after  the news.

As discussed in a recent interview with diagnostics reimbursement consultant, Bruce Quinn, CMS' outdated reimbursement methods will fortunately be changing next year as the result of the new PAMA (Protecting Access to Medicare) legislation.  Pricing in the future will be set in the way it’s done on the drug side of the industry, with a market-based payment system.

Drug Pricing Controversy

As diagnostics move to a market centric approach, unfortunately that approach is being abused by more drug companies than would like to admit it.  The topic is becoming an issue for the presidential election.  In the Democratic debate this past Saturday evening, we heard more attacks on drug companies.  As would be expected, the self-proclaimed revolutionary Bernie Sanders said drug companies are "ripping people off every day."    We expect to hear this kind of lambasting and outrage at debates.   So it was great to hear Hillary Clinton put forth a substantive idea asking,  “why isn’t Medicare able to negotiate drug pricing?”  Many leading physicians and healthcare journalists are arguing for just such reform.

For further insight into the drug pricing issue,  Luke Timmerman of the Timmerman Report had a refreshingly bold and introspective chat  this week with Alnylam CEO, John Maraganore with a call for the industry to  face itself: 

"LT: Who ARE you, really, as an industry?

JM: Yes, who ARE we as an industry? Martin [Shkreli] has got us all asking ourselves, ‘What is it all about?’ Oddly enough, I think it’s been good for the industry. I really do. What we are about as an industry is innovation, and patients. We’re about 21st century cures, not 1950s drugs. Most Americans, I think, appreciate that if you work really hard, and do something that is gigantic, you ought to get rewarded. Most Americans don’t like people that try to get rich quick, those who try to cheat the system. That’s why the distaste in people’s mouths with Turing, and maybe others like Valeant, is so appropriate. It doesn’t fit our work ethic. That’s the stuff we want to teach our children."