The Future of Diagnostics Reimbursement with Bruce Quinn

We toss the term "precision medicine" around with ease today, and yet payers continue to refuse to pay for diagnostic tests.

These are tests that might indicate which treatment will work for a specific patient, thereby saving perhaps hundreds of thousands of dollars, not to mention protecting the patient from unnecessary harm. These are tests which prevent invasive procedures such as unnecessary biopsies.

A few weeks ago, we featured the CEO of a leading diagnostics company who has been desperately fighting a recent proposal by CMS to reduce reimbursement of his company’s leading test by a whopping 70 percent. If the cut goes through, the company would probably go belly up.

How does this happen in 2015?  Why, in the golden age of molecular testing, do diagnostics continue to be so devalued?  As a society, why are we undercutting our own investment in biomedical research by not paying for the resulting tests?

These questions led us to today’s guest, Bruce Quinn, a diagnostics reimbursement consultant. Bruce worked five years on the payers’ side and now spends his time helping labs and diagnostics companies get their tests paid for.

Starting with the story mentioned above, Bruce says that the latest CMS proposal to cut rates reflects an old way of calculating reimbursement that goes back to the ‘70s. These old methods such as “crosswalk" and "gap fill” do not work with the sophisticated and costly diagnostics tests coming on the market today. Bruce is hopeful that a new market-based pricing method—similar to that used for drug pricing—which will be implemented as part of the recent PAMA (Protecting Access to Medicare Act) legislation will improve reimbursement rates for the more complex tests. He also warns that it could reduce rates for more simple tests, such as the PSA (prostate specific antigen) test.

Attempting explanation as to why diagnostics are so undervalued, Bruce says that payers have been burned over the years. Many companies and labs say that they are not understood by the payers,  but the payers DO understand them, he says.  The payers just don’t believe them. So what can these companies do? And who will pay for the expensive studies and trials needed to convince the payers?

“The book still remains to be written on how to develop these diagnostics tests with the optimal efficiency and the optimal chance of success,” Bruce says.   “I think people need to recognize we’re still learning how to do it, and we don’t have the answers in hand.  It’s still kind of a white space."

After CMS Announcement, Peter Maag and CareDx Fight for Life

By listening to him, you wouldn’t know that Peter Maag, the CEO of CareDx, was fighting to keep his company from the brink. We booked Peter for the show after news came out that CMS was once again threatening to lower reimbursement rates of established diagnostic tests.

Peter sounds remarkably positive in the face of the recent announcement by the Center for Medicare and Medicaid Services (CMS) that, come January, they would be cutting the reimbursement rate for CareDx's Allomap test by 70%. Because the test is used mostly by Medicare patients, this cut could threaten the company's very existence.

Why is this happening? Ten years ago, yes . . . but why is CMS still jerking diagnostics companies around when these products offer the very promise that President Obama talked about when he announced the Precision Medicine Initiative?

CareDx and the other companies, such as well known Genomic Health and Veractye, have thirty days to reply. Peter has some strong voices backing him up and is optimistic about getting the disastrous change negated.

He’s also very happy about a new test CareDx is working on using cell free DNA from not only heart transplant recipients but also for the transplant organs as well.

If diagnostics companies could focus more on their new products and less on continually fighting for a dime over a nickel with CMS, the future of precision medicine would be much brighter.

Why Internet Traffic Directors Should Sit Down with Biologists: George Poste Talks Complex Systems


George Poste, Chief Scientist, Complex Adaptive Systems; Regents’ Professor and Del E. Webb Chair in Health Innovation, ASU
Bio and Contact Info

Listen (5:51) A paradigm shift to systems thinking

Listen (4:28) Note to those setting curriculums

Listen (4:37) How do we bring the clinical and research worlds closer together?

Listen (8:53) Simulating complex adaptive systems

Listen (2:46) Science only one of the challenges

Listen (5:13) Why the disparity in reimbursement rates for Rx and Dx?

Listen (7:51) Something special happening at ASU

If you’ve ever heard a talk by today’s guest, George Poste, you’ve no doubt come away scratching your head, overwhelmed by the complexity of human biology. As if the science challenges don’t give one enough of a headache, George continues his carpet bombing approach with all that is wrong with our healthcare ecosystem as well.

Back in the '90s at SmithKline Beecham, George realized that the field was way overly reductionist and that we must do more to look at human biology as a system. He made his way to ASU where he then launched the Complex Adaptive Systems Initiative to bring together biologists, engineers, data scientists, and others.

What is a complex adaptive system and how can simulating it help us decipher human biology?

"A complex adaptive system,” George answers, “is one in which the collective behavior of the component parts cannot be predicted by an analysis of one or more of the these component parts.”

Whether you’re looking at global climate or intracellular wiring, George says it’s all about information transfer in a "network architecture."

The architecture of George’s way of speaking is also complex. With frequent use of the “dash”, George mimics in his own sentence structure the systems he’s describing. His syntax tends to bloom like a natural organism.

An example:

“The question now, then, is how can--by understanding the molecular pathways and coupling of those pathways—because we all tend to think in linear terms (you see the diagrams of a molecular pathway tend to be a series of straight arrows, but in fact what it is is a series of pathways that are interlinked)—because the one other feature of complex adaptive systems is that they have enormous redundancy built into them, so that if one bit goes down --you know it’s the classical model of the internet—if you take out a series of nodes, there are whole ways of distributing traffic around that . . . if you extrapolate that to cancer therapy, yes, you may knock out a particular node with your targeted therapy, but what you need to know now is what are the most likely network couplings of that particular pathway for the compensatory redundancy pathways which will kick in that will confer resistance on a cancer cell.”

Did you get all that? The internet is an interesting comparison. So if we bring together some of those engineers who work on routing internet traffic with some biologists they should be able to have a good time, right?

"Absolutely," George says.

As we conclude the interview, he acknowledges that there is something special going on at ASU, a new paradigm and openness to inter-disciplinary work that is unique. How is it fostered and funded? And what can we expect from this approach?

Fasten your seat belts and hold on for the ride. Suspend your need for short, easy sentences, and rewards await. Presenting systems thinker, George Poste.

Podcast brought to you by: National Biomarker Development Alliance - Collaboratively creating standards for end-to-end systems-based biomarker development—to advance precision medicine

Protecting Reimbursement Top Priority in 2014, Says Jim Greenwood of BIO


Jim Greenwood, CEO of BIO

Bio and Contact Info

Listen (2:49) 2013 - the year the IPO window opened

Listen (6:02) What has been your primary concern this year?

Listen (6:00) How can we raise the value of diagnostics?

Listen (7:44) Is there still broad bipartisan support for the NIH?

Listen (5:18) Protecting reimbursement tops the list in 2014

At the end of each year we do a program where we look back over the year and forward to the next. We're very pleased to have Jim Greenwood, the CEO of BIO, the national trade organization for our industry, here to do this show.

As the CEO of BIO, Jim represents the life science industry in Washington. Back in the Clinton and George W. Bush administrations, Jim learned the political ropes as a congressman from Pennsylvania. He's been a member of an ever declining species--a Rockefeller Republican. Jim's centrist political views no doubt make him a great choice to represent an industry which doesn't fall neatly along political lines. This past year he's fought for protecting drug and diagnostic reimbursement and lobbied against GMO labeling. When it comes to the sequester he admits there wasn't much anyone could do as the cuts affected every department in government. He says that the NIH budget should steadily increase but sounds doubtful that we'll see the kind of increase that happened when the human genome was sequenced.

Has the IPO boom in 2013 been a long overdue window, or a bubble? How can we raise the value of diagnostics? And what is his top priority in 2014? Jim openly shares his thoughts on these questions and more in today's interview.

Podcast brought to you by: Chempetitive Group - "We love science. We love marketing. We love the idea of combining the two to make great things happen for your marketing communications."

Is the Dx Industry Ready to Quit this Vicious Cycle? Asks Oncologist


Dan Hayes, Clinical Director, Breast Oncology Program, U of Michigan Cancer Center

Bio and Contact Info

Listen (4:27) A vicious cycle

Listen (3:07) Why don't we value Dx as we do Rx?

Listen (3:31) Three key terms for turning things around

Listen (5:05) CoDx a step forward, but regulation for all tests is needed

Listen (6:44) Have you seen more companies going the CoDx way?

Listen (3:21) A cultural problem?

Listen (5:49) The days of doing LDTs are past

Why aren't diagnostics valued as highly as therapeutics? Often a diagnostic or prognostic test such as the popular OncoTypeDx sold by Genomic Health can protect patients from undergoing unnecessary drug therapy. This saves money throughout the medical system and most importantly, the patient benefits. So why, when drugs often sell at tens of thousands, even hundreds of thousands of dollars per year, are the diagnostics sold so cheaply?

Dan Hayes is an oncologist at the University of Michigan Cancer Center. He's also the co-author on a recent paper, Breaking the Vicious Cycle. Specifically, Dan and his coauthors are addressing this value issue with tumor biomarker tests. But the paper is really a referendum on the diagnostics industry as a whole.

Dan and his colleagues say there is not one single problem, but that the industry is in a vicious cycle that leads to the undervaluing of the tests. In today's interview, Dan goes over the various "nodes" of the cycle (uneven regulation, reimbursement, publications, etc.) and articulates some of the practical suggestions for breaking the cycle.

Is the diagnostics industry ready to grow up and go the same route as the drug industry? It has to, Dan insists.

"The days of academic labs doing LDTs are past," he says.

Podcast brought to you by: Myraqa Clinical Research: The CRO for Point of Care and PMA Diagnostics.

Alan Mertz Sells Personalized Medicine on Capitol Hill


Alan Mertz, President, ACLA Bio and Contact Info

Listen (6:28) Revolution in healthcare colliding with terrible time in the Capitol

Listen (5:54) A growing recognition of personalized medicine in Washington

Listen (6:16) Story of the recent CPT code change

Listen (4:40) Are there still labs that are not being paid for MoDx tests?

Listen (3:01) What is your message to Dx industry?

Today we begin a new series, Going the Companion Diagnostics Way. We’ll be looking at issues around reimbursement, regulation, and development of diagnostics in conjunction with a therapeutic. Talk to anyone in the world of diagnostics, and they’ll tell you the big challenge is reimbursement. And things are getting even worse. Recently Medicare has changed the way tests are reimbursed, but the change has been ineffective and left many testing labs without any reimbursement for several months this year.

Here to talk to us about the Medicare issue and about reimbursement and personalized medicine in general is Alan Mertz. He’s the president of the ACLA or American Clinical Laboratory Association who represents the nation’s leading clinical labs. This means that Alan is the salesman for molecular diagnostics on Capitol Hill. Hear in this interview Alan's summary of the Medicare debacle with new CPT codes and his message to those in the industry going forward.

Podcast brought to you by: Myraqa Clinical Research: The CRO for Point of Care and PMA Diagnostics.

"Not about Owning Genes:" Diagnostics in the Wake of Gene Patent Ruling with Charles Mathews


Charles Mathews, VP, Boston Healthcare Bio and Contact Info

Listen (3:51) Response to Myriad ruling

Listen (8:20) What is your number one message to your diagnostic clients?

Listen (9:16) Diagnostics model becoming more like pharma model

Listen (6:17) How can diagnostics startups be better focused on reimbursement from the beginning?

Listen (4:21) Are you seeing more whole genome testing?

Continuing our series, Commercializing Diagnostics, we speak with Charles Mathews, VP at Boston Healthcare. Specializing in reimbursement issues, Charles is a consultant for diagnostics companies. Recorded just hours after the Supreme Court handed down its unanimous decision invalidating Myriad's gene patents, the interview begins with a discussion on the case and what it means for the diagnostics industry.

Charles points out that while Myriad really paved the way in the industry, few diagnostics companies have been able to "carve out" such IP. In fact he sees a possible silver lining with the ruling, saying that it really matches the way the the science is headed, where there are fewer and fewer single markers and more next gen sequencing and multiplexing assays. These new tests with complex algorithms will be better in a world without individual gene patents, he argues.

Mathews' biggest message to his clients is that they must focus on reimbursement at the beginning. No longer is it about a single biomarker or new technology, but rather clinical efficacy. Evidence of clinical impact is much more important, he says, than hiring a host of IP lawyers. How can a start-up be better focused on reimbursement? And is he seeing more whole genome testing? These are questions Charles faces each day.

Podcast brought to you by: Myraqa Clinical Research: The CRO for Point of Care and PMA Diagnostics.

and by: Roche Molecular Systems,: A proud sponsor of today's podcast.

Revaluing Diagnostics with Alan Wright, Roche Diagnostics

Podcast brought to you by: Myraqa Clinical Research: The CRO for Point of Care and PMA Diagnostics.

And by: BioConference Live: Register for free to the upcoming online Clinical Diagnostics Conference May 29-31.


Alan Wright, MD, Chief Medical Officer, Roche Diagnostics Bio and Contact Info

Listen (9:05) Why do you think diagnostics are undervalued?

Listen (5:46) How are you going about raising the value for Dx?

Listen (8:20) Are the payers proving willing partners?

Listen (5:15) Society has two big decisions to make regarding Dx

Listen (2:53) How does patentability play into the difference between Rx and Dx?

There is an un-level playing field in the world of in vitro diagnostics. First of all, they are valued much lower than a therapeutic despite the amount of research and development that goes into refining a great diagnostic. Second, regulation is all over the board. A diagnostic may or may not be approved by the FDA. Something has to be done to level off this field if we are to see important innovation and the promise of personalized medicine fulfilled.

At least, that's the way our guest for today sees it. Alan Wright is the new Chief Medical Officer for Roche Diagnostics and he address an issue with which Roche has long been struggling. Alan is the former Chief Scientific officer for Caremark and so has a unique perspective from the developer and the payer's points of view. What is entailed in raising the value of diagnostics is the thrust of today's show.

Winning Diagnostic Reimbursement and the Story of CardioDx with Deborah Kilpatrick

Podcast brought to you by: Genia Technologies - Makers of integrated circuits for "Last Gen" DNA sequencing. Biology . . . meet the integrated circuit.


Deborah Kilpatrick, VP of Commercial, CardioDx Bio and Contact Info

Chapters: (Advance the marker)

0:40 Corus CAD™ - a diagnostic for a "huge cardiovascular market"

6:31 CardioDx - fusion between biotech, med device, high tech, and specialty pharma

10:11 The successful path toward reimbursement coverage

18:00 With Medicare approval and new funding, what is your focus now?

20:01 Diagnostics an answer to a troubled healthcare system

25:17 Selling to doctors with misaligned incentives

29:30 Personal journey from defense to diagnostics

Today we begin a series of shows about Commercializing Diagnostics. And we've chosen a company with some successes and great potential, CardioDx, based in Palo Alto, CA. They recently won Medicare coverage for their Corus CAD(™) test which can tell whether a blockage in your heart is causing symptoms such as chest pain or tiredness.

The challenge for diagnostic companies, according to Chief Commercial Officer, Deb Kilpatrick, is in demonstrating with data that the test is better than current methods. In this interview, Deb outlines the path that CardioDx took toward reimbursement and offers her insight for others pursuing what has become the holy grail for diagnostics companies. Indeed, there is now a conference devoted just to this issue of reimbursement. What next for CardioDx, we ask Deborah. This leads to a discussion about the role diagnostics companies can play in the challenges facing the healthcare system today. Will there be 'big diagnostics' along side 'big pharma?'

Going Behind the Headlines with Luke Timmerman, National Biotech Editor, Xconomy

Podcast brought to you by: Assay Depot - the world's largest cloud-based marketplace for research services. With Assay Depot, you can easily find the perfect research service provider and manage your project from anywhere in the world. Guest:

Luke Timmerman, Biotech Journalist Bio and Contact Info

Listen (4:41) Xconomy - covering the innovation community

Listen (5:58) Biotech, a calling

Listen (4:59) What makes a good story?

Listen (7:26) At your best, a reporter can do what for the industry?

Listen (1:59) A green guy

What makes a good story? What difference can a good reporter make in the industry? These are some of the questions we pursued in a chat with Luke Timmerman, National Biotech Editor at Xconomy. Luke was a finalist this year for the Gerald Loeb Award, what he says is the Oscar for business reporting. It's a great achievement for Luke and for Xconomy, which has been covering the "innovation" community for five years now. Luke is known for his up-to-date reports on everything biotech and his Monday BioBeat column where he pursues tough questions for the industry. Timmerman is always telling others' stories. Today's interview turns the table and provides a rare glimpse into his own story.