Behind the Headlines: Forbes' Article on Freenome and CRC Screening Investment

On May 23, 2018, Forbes ran an article by Matthew Herper about how liquid biopsy and AI company Freenome plans to develop a colorectal cancer screening test.  Such tests require large FDA trials (>3000 patients).   Article here.

The natural comparison is to Exact Sciences, makers of Cologuard, a DNA-based stool screening test.  Exact's market cap is over $7B.

Colorectal screening tests benefit from a back door in Medicare's statute, allowing preventive benefits to be created directly by CMS staff through an NCD.   In other cases, preventive benefits need to be created by Congress or need to be first endorsed by USPSTF and then secondarily taken up by a CMS NCD.

I'd illustrate it as below.  The first pathway (at top) and the longest pathway is an Act of Congress.

The second two pathways are the small circles.  Both the statutory prostate screening benefits (for PSA) and colorectal screening benefits (for FOBT and colorectal) contain a phrase allowing CMS to update the benefits as appropriate for new technologies.   Review of the CMS NCD for Cologuard confirms that this is the trap door that Cologuard legally squeezed through as a preventive benefit.

If you're not endorsed by Congress or endorsed by a CMS NCD for a CRC or prostate test, you have only one other pathway:  to sequentially obtain USPSTF endorsement with a high rating (years), and then, later, being taken up for an NCD (at CMS's discretion) and passing.  USPSTF review (including public comment on draft versions) takes a couple years.  Lung cancer LDCT screening went through this extended pathway, with several years passing slowly from the time USPTF took up a review of the issue to the time the NCD was completed.

See graphically as below:

click to enlarge

The business lesson is, by developing a CRC screening test, Freenome can get its product through the "statutory little doors."  If they tried to develop an ovarian or pancreatic or breast or lung cancer screening test, Freenome would need a legislative solution or take several years to work through the slow USPTF review process, presumably after the FDA process, and before the NCD process. 

As a cross-check, see the venturous and impressive commercial investments taken, or being taken, in colorectal cancer screening tests by Exact and Freenome.  (You can even get the FDA and CMS decisions on the same day, as Exact did, through the FDA-CMS parallel review process, which has no parallel in the USPSTF pathway.)  In contrast, lung cancer LDCT trials relied on public NIH investments for which payback was not commercially relevant.  This is good for future victims of CRC, but puts future victims of other cancers at a disadvantage.

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Addendum
On June 1, 2018, Clinical Genomics Technologies, in which Quest is an investor, raised $26M for the development of a liquid biopsy CRC screening test as well as a CRC recurrence test; here.  This brings total funding to $48M.
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Relevant statute -

• 1861(pp) covers CRC screening tests, defined as FOBT, sigmoidoscopy, or colonoscopy, at intervals determined by CMS, along with new technologies approved by CMS.
• 1861(oo) covers prostate screening, defined as digital exam or PSA test, or, new technologies found appropriate by CMS.
• 1861(ddd) allows USPSTF approved services to be imported as Medicare benefits via an NCD.  You'd wait a year for FDA, then two years for USPSTF, then another year for an NCD.

The Cologuard NCD states:

Sections 1861(s)(2)(R) and 1861(pp) of the Social Security Act (the Act) and regulations at 42 CFR 410.37 authorize Medicare coverage for screening colorectal cancer tests under Medicare Part B. The statute and regulations authorize the Secretary to add other tests and procedures (and modifications to tests and procedures for colorectal cancer screening) as the Secretary finds appropriate based on consultation with appropriate experts and organizations.

Very Brief Blog: Rohr et al. on Value of Diagnostics in Healthcare

We frequently hear the number that lab tests are 2% of healthcare costs but drive 70% of decisions.  The first number is true; the financials are a matter of record.

But the "70%" of decisions is both very widely quoted and occasionally critiqued as an "urban myth" without a good original source.

• Update:  See another large study on the decision impact rate of lab tests; at Ngo et al, J Appl Lab Med, 1/2017, here.
• For my prior blog on concerns that 70% impact is just an "urban myth," here.
• For an article that 25% of tests are overused, 45% underused, Zhi et al. 2013, here.

Rohr et al. PLOS One

This month, Dr. Fernando Chaves, global head of medical affairs at Ortho, has an op ed at MedCityNews about the value of diagnostics (here).  Moreover, he cites a paper that's new to me, Rohr et al. 2016, which reported that 66% of decision making was based on IVDs.  Find Rohr et al. at PLOS One, here.

Notably, 80% of the doctors interviewed estimated that >5% of healthcare costs were expenses for diagnostics, so they markedly overrate the size of the lab industry and its small role in total costs.

For impact on decision making, see Rohr et al. Table 2, below.  The study was funded by Roche.

Inaccurate tests: From $1 to $6 to $1B

In another interesting Roche-funded study with Ventana contributors, authors Vyberg et al. assert that for every $1 saved by labs using "cheaper reagents" in IHC, costs to the health care system are $6.  See here.  See similarly Garrison et al. here, estimating the annual US socioeconomic loss (including lost QALY) due to inaccurate Her2neu results at $1B.

Very Brief Blog: A New Graphic for the Progress of Genomics (Prokop, Hudson Alpha)

The Hudson Alpha Institute was recently in the news for a new program involving broad genomic sequencing of newborns with suspected genetic disorders (Genomeweb here.)     See also an interesting review article by Prokop et al. (many authors at Hudson Alpha; Prokop is now at MSU) on "Genome Sequencing in the Clinic: Past, Present, Future of Genomic Medicine." 

The review appears in Physiologic Genomics May 2018 (epub; PMID 29727589; here.)  I've clipped the full abstract below the break.

There's a notable illustration on the history of genomics, beginning with Darwin, winding to the right for the 2003 human genome sequencing, and then winding back to the left with events up to 2018. 

Prokop 2018 (Physiol Genom PMID 29727589)

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Brief Blog: Myriad Acquires Counsyl

In a press release May 28, 2018, and a conference call May 29, Myriad Genetics announced it is acquiring Counsyl for $375M.

• See summary at Genomeweb, here.  
• See Myriad press release, here.  
• A brief note from Zacks Equity Research is here.

Counsyl's lead test is the Foresight test, for 175 carrier screening conditions.  Counsyl also has the NIPT "Prelude" test.   Counsyl had raised a new funding round of $80M in 2017.

The combined women's health sales force is 225 from Myriad, 80 from Counsyl.  In its press release, Myriad notes there are roughly 900K carrier screening panel tests per year in the US and 1.3M NIPT tests per year.

Prior Acquisitions

Prior acquisitions by Myriad include Crescendo Bioscience in 2014 for $245M and Assurex in 2016 for $225M. 

Myriad's March 2018 balance sheet included about $100M in cash as well as $320M in goodwill and $470M in intangible assets.  Over the past month, Myriad's share price has risen from about $28 to about $36.  Myriad was up 3% in early trading on May 29.  Myriad's share price had sagged during the first months of the year, from about $40 in January to about $27 in April.

Competitor Natera slipped 2.5% in early trading, although it is still up +20% over the past couple months. 

Recall that Invitae acquired Good Start Genetics and Combimatrix in 2017.

CPT Codes and CMS Changes

In this summer's pricing process for new CY2019 CPT lab codes, CMS will be handling a new  consolidated single CPT code for expanded carrier screening, and several revised CPT codes for BRCA testing.  See the codes in play, here.

Medicare's Obscure New Requirement to Report "All FDA Cleared or Approved Tests" (???)

Reading through California Clinical Lab Association meeting minutes this month, I ran across a truly unusual entry that had escaped my attention, and that I hadn't seen mentioned elsewhere.   It requires reporting of "all new cleared or approved laboratory tests" to CMS.  Note that this process is entirely separate from the ADLT process.  It sounds like even a cleared or approved sodium test would have to be reported, if I read it correctly. Wacky?

Where This Odd Document Is Found

1. CMS has a home page that is an entry point for all its CLFS related webpages and documents.  Here.
2. CMS has a link on the left side to PAMA REGULATIONS.   That takes you here.
3. PAMA regulations is an increasingly lengthy webpage.   The first section (as of May 28) discussed recent PAMA-based pricing results, including filling in missing PAMA values by gapfill.
4. The next section requests nominations to the Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests.  OK.
5. There follow some document links about the PAMA collection process (e.g. how-to guides).
1. ADLT stuff.  Finally, near the bottom of the PAMA web page, you get to a small naked link that takes you to the ADLT pages.   Here.   When CMS released ADLT application forms and guidance this spring, that got a fair bit of attention.   CMS also recently announced that it had completed the application review for the very first ADLT, the Foundation F1 CDx test, which will become an active ADLT on July 1, 2018.
6. OK, let's be sure you are still on the home page for PAMA regulations here.   
7. There is a link called, "Notification to CMS of an FDA Cleared or Approved Clinical Diagnostic Laboratory Test."    That's the one that surprised me today.   Here.
8. Now you should be on a short web page with the same title (Notification of...).  I'll clip the text below but basically it is a couple paragraph of text asserting that PAMA (now SSA 1834A) requires CMS to "ensure" that unique HCPCS code is assigned to a laboratory test cleared or approved by FDA.   (I had always assumed that CMS could create such codes on request).  CMS says that "a laboratory or manufacturer, that is, a notifying entity" MUST NOTIFY CMS of ANY cleared or approved laboratory test [unless already notified via the ADLT process].  
1. Usually the notifying entity would be a manufacturer since the great majority of FDA authorized lab tests are IVDs from a manufacturer.   
9. In review, what you've got for these instructions is one web page here and one PDF document here.

It seems to me CMS could accumulate an awful lot of G codes for every newly approved sodium or potassium test, let alone genetic or other complex tests.   I assume there will be "more to come" on this topic as it rolls out in the Advamed/IVD and Lab communities.

Up til now, I thought that PAMA allowed applications for PLA or G Codes for FDA cleared or approved tests, but did not require them.  Seems odd if a lab would need to submit, for example, its sodium test claims on three different G codes if they were done variously on three different brands of analyzers, e.g. three different FDA cleared tests.  

Note, an alternate interpretation and a simpler one is that the FDA cleared or approved test merely needs "A" unique HCPCS code, so sodium tests do have a "unique" code, at least, for being a sodium test per se.    If this is the correct interpretation, then CMS is just trying to avoid use of unlisted codes for any and all new FDA tests.  I'm not sure that's what they mean, though, especially looking through some of the back-documentation as cited below.  They require "a unique level I code" and there would be easier ways to describe what they want, such as by examples.  Even in this case, it sounds like you'd still have to notify CMS of your new cleared sodium test, even if you and CMS believed that the existing "sodium test" code was "unique" enough.  

web page

pdf screen shot

The relevant statutory text is here:
For...each existing clinical diagnostic laboratory test that is cleared or approved by the Food and Drug Administration for which payment is made under this part as of the date of enactment of this section, if such test has not already been assigned a unique HCPCS code, the Secretary shall—(A) assign a unique HCPCS code for the test; and (B) publicly report the payment rate for the test.

With regard to implementation, they discussed at 81 Fed Reg 41074 (June 23, 2016) the example of multiple approved KRAS tests reported under one code.  "The current HCPCS code is not unique...we are required to ensure that FDA-cleared or -approved versions of the KRAS test are assigned their own unique codes."  Adding: "Commenters advised against assigning unique codes to every FDA-cleared or -approved test."  To this comment, CMS reaffirmed that a unique code must be issued and must describe "only a single test."  As new codes, they would enter the summer crosswalk/gapfill process.  And "...details will be specified in subregulatory guidance."

Insight

CMS has flagged this issue in past rulemaking, as just cited, with the public  example that each FDA authorized type of KRAS test would require its own code.   CMS may be going through the motions of posting this expectation, while laying low with this almost unimaginably exhausting coding process while waiting for a legislative fix.   Nobody wants 60 different codes for sodium tests.  Unlike PAMA price reporting, CMS has no penalties that I can see for failing to do what it asks here.  Also, CMS made no remark in PAMA rulemaking about the industry costs of getting different codes for each and every different FDA IVD whether cleared or approved, which would be colossal time and staff costs.   And if it were to go through, PAMA data on the resulting erratically used codes would probably be extremely noisy, resulting in $1 sodium tests and $12 sodium tests.

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In rulemaking, CMS addressed the costs of implementing PAMA price data collection (p. 41093ff) but concluded estimation was impossible.  CMS did not attempt to address the cost of applying for new codes and implementing new codes for every known CDLT under FDA clearance or approval (e.g., the 60 sodium tests, and so on.)
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Below the break. CMS web page text as of May 28, 2018.

Bad Blood: FDA Site-Visited the Army re Theranos; FDA Met Directly with Mattis Himself in 2012

There is a boom in new stories about Theranos, triggered by the May 2018 publication of journalist John Carreyou's book about the saga. See e.g. a story about the book and the saga this month on Sixty Minutes, here.

The FDA played a significant role.  There are 17 references in the book to Alberto Gutierrez, then director of the diagnostics regulatory division.   (There are 63 occurrences of "FDA.")

Around August 2011, Elizabeth Holmes took an occasional to directly introduce herself to Genl. Mattis (the current Secretary of Defense) "at the Marines Memorial Club in San Francisco."  (Carreyou doesn't tell us this any more about this particular backstory; it sounds like an audacious cold call.)   This brief encounter between Holmes and Mattis led to routing of potential procurement through an Army official, Lt Col. Schoemaker, who was an attorney who had FDA experience and he was concerned about potential developments between the DoD and Theranos.

Shoemaker informed Gutierrez at OIVD/FDA about Shoemaker's concerns about Theranos, and Gutierrez forwarded those concerns to CMS/CLIA (page 152).  This eventually led to a blow-up with Genl. Mattis at Department of Defense.

On page 156, it is August 23, 2012, and both Lt Col Shoemaker and the FDA's Dr. Gutierrez are together in Tampa, Florida (a 950 mile trip from FDA at Silver Spring, MD), and taking a meeting with General Mattis.   It will be three years in the future (October, 2015) when Theranos starts to melt down. 

Mattis had been asking "who the hell is Schoemaker?" and seems to have taken the Florida meeting with a senior FDA official with some annoyance.  It was far from his last contact with Theranos: Mattis joined Theranos as a board member "immediately after retiring from military service" in July 2013 (as noted here as part of a March 2018 article at Vox; see also here).

• August 2011:  Unscheduled meeting with Holmes and Mattis (the prototypical cold call)
• December 2011:   Military meetings at Theranos' DC attorneys' office about Theranos' "regulatory plan"
• August 2012:  Shoemaker & Gutierrez @ Tampa to see Mattis in person
• 2013:  Mattis joins Theranos board 

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For screen shots of the meeting, here.

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On July 28, 2015, a timepoint when Theranos was well aware of the investigative work against it by WSJ journalists, Elizabeth Holmes published an op ed in WSJ supportive of all LDTs undergoing FDA review. 

Four Convicted in Federal Criminal Case: Leaking and Using CMS Policy Secrets

This isn't new news, but in early May, four individuals were convicted in federal court of either leaking or using confidential CMS policy information prior to its release, with resulting financial gains.

The convictions were announced for David Blaszczak, a policy consultant, Christopher Worrall, a then-current CMS employee, and two staff at Deerfield Management hedge fund, Theodore Huber and Robert Olan. 

See May 4, 2018 DOJ press release here.  See May 7, 2018 trade press at Healthleaders Media, here.  Reuters here.

During the trial, Bloomberg had run an article about the strongly conveyed testimony of former CMS deputy director Jonathan Blum, on how stringently he tried to convey confidentiality rules (here).   

Bad Blood: Did FDA Inappropriately Leak Non-Public Theranos Information to WSJ?

There is a new boom of Theranos stories tied to the May 22 release of John Carreyou's book on the Theranos saga and the role played by the WSJ.   (See here and here; there are dozens of other stories.  Matthew Herper discusses the book from the viewpoint of a fellow journalist who was also covering Theranos.)

One thing I picked up on were Carreyou's discussion of the senior offical at FDA who provided WSJ with "background" on the FDA technology reviews and Theranos investigations, apparently before they were public. 

• Before quoting from Carryou's book, let's recall how the government views leaks of FDA and CMS information:  
• In 2014, WSJ wrote several articles about prepublic leaks of CMS policy information (here and here).  
• In May 2018, four individuals convicted in federal court of participating in CMS prepublic information leaks (here).   
• Bloomberg ran a 2018 article about how upset CMS administrator Jonathan Blum was when leaks occurred at his agency, and how he would read his staff the riot act about agency information leaks were illegal (article here, transcript here.)

Now, let's look at what Carreyou writes in his new book.

FDA Source Seems to Make Inappropriate Leak
On page 310, "I called a source of mine who was high up int he FDA's medical products division."  Initially, the FDA official agrees with Carreyou's insight that a then-new FDA approval of a single Theranos herpes test was a one-off approval.  That sounds fine: it's a viewpoint on a public fact.

But then the FDA official added: "the clinical data the company had submitted to the agency for [other tests] were poor and wouldn't pass muster."  OK, stop right there.

That sounds like speaking out of school, by releasing confidential FDA/company information.  Surely release of that information is hardly a safe harbor just because it is "on background" and to a reporter.

I've always understood that FDA can't release prepublic, decisional information about a product under its review.  For example, an FDA reviewer can't tell a reporter or an investor that he's reviewing a Phase III Lilly drug based on its product data files, and that next week, the product will be disapproved by the FDA.

Finally, the source then pointed out to Carreyou that it was hard for FDA to take action against Theranos, because Theranos was chummy with the Obama administration.   I'll give that a pass.  It's not secret information about a company's submissions that couldn't be released, for example, under FOIA.  Senators and other officials regularly remark that can't do "X" because of some aspect of public opinion or party positioning. The remark might make someone at Theranos, at FDA, or at Executive Branch squirm, but it's not secret information.

The FDA Source Comes Back with More Secret Leaks
The source comes back on page 321/322.  Carreyou had had trouble reaching him by phone, we're told, but "this time he picked up the phone."  Now speaking "on deep background" the FDA senior official tells the reporter that the FDA "had recently conducted a surprise inspection of Theranos's facilities in Newark and Palo Alto....the agency had declared the nanotainer an uncleared medical device and forbidden Theranos to continue using it."   If that wasn't yet public, it doesn't sound like it should be made public to reporters who dial up.

On this occasion, the FDA official had more information for the reporter.  The FDA informant told Carreyou that CMS was inspecting Theranos as well.   Carreyou writes that he quickly worked up this information for the next day's paper (October 16, 2015).   (Later, CMS CLIA would require Theranos's lab closed and barred Elizabeth Holmes from lab ownership/management.)

I'm not sure on what day the FDA suppression of the Nanotainer was publicly released by FDA, but the FDA official would hardly be speaking of the issue on "deep background" if it had already been released by the FDA.   (Data on FDA inspections was publicly available by October 27, 2015).

While Theranos may have had a lot to feel guilty about, its paranoia was in fact partly real, if senior FDA officials were giving confidential internal agency decisions  to reporters (or for that matter, to hedge funds). 

Rereading the October 16, 2015 WSJ Article Today:  
Differences Suggest Access to Insider FDA Staff, But No Access to Insider CMS Staff

The October 16 WSJ article is attributed overall to "people familiar with the matter."  At the time, that might have been recent, or even current, Theranos employees; hypothetically, it could have been Elizabeth Holmes' admin.   But now, in the book, we learn the source was literally a senior FDA official.

I also noted this: Regarding inside CMS info, Carreyou made the point on October 16 to tell his readers that he couldn't confirm the CMS investigation status with CMS staff - they refused to talk to him about internal matters of CMS.  But regarding inside FDA info, he didn't feel he needed to tell his readers that the FDA information wasn't confirmed by FDA - which implies by comparison he did have FDA confirmation (albeit off record) of the FDA actions. 

Here's the bottom line.  Regardless of whether the products were those of a publicly traded company (like Siemens) or a private company, I don't think FDA was supposed to release confidential internal file information to anyone, neither a reporter nor an investor.  I suspect from the Journal's viewpoint, it's like leaked Pentagon Papers or leaked Democratic National Committee emails; it might be illegal to leak them but once they are leaked, they become news for all.

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For Carreyou book screen shots (p. 310, 321, 322) here.

Carreyou discusses his "deep background" FDA informant in a podcast Inside the Hive, released June 8, at minute 9; see here and here.

CMS Posts Final Expanded Code List for June 25 Crosswalk/Gapfill Meeting

In April, CMS announced June 25, 2018, as the date for the summer public comment crosswalk-gapfill meeting for 2019 CPT lab codes.  May 24 should be the final update of the code list to be debated, as the list should be finalized 30 days ahead of the June 25 meeting.

At this webpage, scroll down for Code Lists and choose the one Updated May 24, 2018.   (The direct link straight to the zip file should be here.)

There are an eye popping 100 agenda items now, including a set of PLA codes released by AMA on June 1, through 0061U.   The update adds about 18 PLA codes (agenda 83-100).

• Registration is required by June 11 via a registration site.
• As of May 29, 2018, there were 137 spaces left.   
• If submitting a presentation, it has the same due date, but you submit to an email, not the registration site.   
• If you have someone in your party who is a FOREIGN NATIONAL, rapidly contact CMS staff as there are special procedures to follow.   

CMS will hold a two day meeting of its lab test advisory panel July 16-17 by national webinar.

For more details see my earlier post.

CMS Releases Provider & Lab Specific Utilization by CPT Code for 2016

Beginning in 2014, CMS has annually released comprehensive data of Medicare payments to each physician and lab in the U.S. based on CPT codes. 

On May 23, 2018, CMS released this data for CY2016 for Part B data.  Data for each year from CY2012 to CY2016 are available.

• See the CMS database webpage here; click on CY 2016.

Or on this webpage, click on "Interactive Dataset."  Finally, get to a webpage where you click "View Data" box to see the full dataset in a web view.  You can filter and view data on line, or filter to a subset of data and then export (download) in Excel.

• As a sample view into the database, I filtered for labs using any of these codes (81162, 81211, 81213).  81162 is the comprehensive code for BRCA 1&2&DupDel analysis.  81211 is BRCA 1&2 sequencing and 81213 is BRCA 1&2 DupDel analysis only.  (Note: These codes are being markedly revamped for the CY2019 codebooks).  
• Total Part B BRCA spend was $67M.
• Alternately, you could filter for the whole code range of Mopath CPT codes, which gives a 1500 line Excel spreadsheet (180 kb).  
• Total Part B Mopath spend was $463M.

In the cloud:

• See an Excel spreadsheet of this filtered BRCA data in the cloud, here.
• See an Excel spreadsheet of all MoPath data in the cloud, here.
• See a 100MB Excel spreadsheet of all Lab Code data in the cloud, here.
•    For the latter, Google allows download but probably not view.

BRCA SNAPSHOT

Total payments for these BRCA codes was $67M.   Total payments to Myriad Genetics were $32M, or 47% of the Medicare total BRCA payments.  The data is granular: for example, there were exactly 4,218 payments to Myriad for code 81213.

click to enlarge

TUMOR GENE PANEL SNAPSHOT

CMS did an elaborate NCD for NGS testing in cancer last winter, finalizing it in March.  For CY2016, there were only 6,889 services for gene panel testing under codes 81445, '50, '55.  Payments totalled $4.0M, or less than 1% of CMS MoPath payments.   Of that, almost 75% went to only two payment lines.   These were Caris 81445 ($792,000) and Genoptix 81450 ($2.1M). 

In addition, Foundation Medicine was paid under different NPIs for its Cambridge MA and Morrisville NC labs.  While it billed a few small codes (81275, Kras, $78,000) from Cambridge MA,  its payments were largest for 81479, $3146, for 622 units of service, totalling $2,124,752, billed in North Carolina.   Added with the 81445-55 data, this brings 2016 Medicare payments for gene panel testing in tumors to only 7500 uses among circa 30M patients in Medicare Part B.

ALL MOPATH CODES: SNAPSHOT

All Mopath codes tallied $463M. 

Exact Sciences Cologuard and Genomic Health Oncotype DX Breast were nearly tied for the top position, at $62M and $60M respectively.  Exact was paid for 123,729 patients.  These two tests at these two companies garnered about 25% of all Medicare mopath payments. 

Next, Crescendo Vectra test had 49,702 payments for $29M.  Assurex test was paid via the "81479" unlisted code, with 13,062 payments for $2,181, totalling $28M.  

12 codes were paid $10M or more, and these 12 codes garnered 65% of all payments for MoPath.

click to enlarge

ALL LAB DATA! 

Download the 100 Mb spreadsheet if you like.  This is all CPT codes in the 80,000 series X all submitting providers.  The spreadsheet has about 90,000 rows.   I tally payments at $5.8B. 

80053, Comprehensive Metabolic Panel, had the most billings one code at one provider location, at 1,319,197 services provided by Labcorp, with a submitted charge of $45.26 and average payment of $9.10.

I get the highest average "submitted charge" for a lab test as $15,759.52 for code 81445 from Caris.  CMS average payment was $430.55.   Castle Biosciences was paid $1.3M for 330 cases of 84999, submitted charge $8024 and payment $4100.

Very Brief Blog: IJRO Issue Highlights to Growing Intersection of Radiotherapy and Genomics

I recall that back in the 2000's decade there were a few reports of ways that genetic testing might help shape decisions for radiotherapy.  For example, there are some genetic variants that make clinical radiotherapy for more toxic to a few of us than to the rest.

In June 2018, the International Journal of Radiation Oncology, Biology, Physics, aka "Red Journal," has five special articles on the current status of precision medicine in radiotherapy.   While the main articles are subscription only, there is a summary of each of the main articles open access here.

While the HTML won't be perfect, I've clipped full titles and links from the table of contents after the break.

Topics include:

• An overview by Kirsch (4pp)
• A second op ed by Marks et al. (3pp)
• An association-supported review and report on genomically guided radiation therapy by Hall et al. (8pp)
• A report on big data and radiation therapy by McNutt et al. (7pp)
• An article on the intersection of advanced imaging and radiation therapy by Jaffray et al. (7pp)

Very Brief Blog: Girish Putcha Deck on Clinical Utility & Payers 2018

Girish Putcha MD is both the Chief Medical Officer of Freenome and the Director of Laboratory Science at MolDx.  He presented an interesting 42-page deck at the Pathology Executive War College in New Orleans on May 2.   The deck is "branded" and logo'd as Palmetto MolDX" while also stating that "all opinions expressed are my own."  See the open access deck online here.

He emphasizes the importance of careful definition of an intended use and intended use population.

He highlights three special issues arising in the past year as (1) tissue agnostic indication for Keytruda; (2) 510(k) clearance for MSK IMPACT test; and (3) the CMS NCD for NGS in advanced cancer.

Regarding tissue agnostic indications and Keytruda, he highlights the very limited amount of data available on the Keytruda labeling at the time of tissue agnostic accelerated (provisional) approval.

Humorously, he introduces the CMS with a slide showing the famous "Serenity Prayer" (Grant me the patient to accept what I cannot change...)   He notes that tests like MSK IMPACT had guaranteed coverage in the NCD draft version (albeit with burdensome CED) and have only potential LCD coverage in the final NCD.   He notes that MSI and TMB are "inside" the FMI F1 CDx test, but "not" listed as CDx per se.   

He makes a number of points on regulation of lab tests:

• He asks rhetorically, if CMS can require FDA approval for tests, can MACs do so (if they want to).
• Regarding "regulation," he notes that Exact Sciences with an FDA approved test has a market cap of $6B, much higher than companies with LDT tests (Genomic Health has a market cap of $1B).  
• He notes that physicians said CLIA '88 would be very bad with patients and trash access to lab tests, but it didn't.  

He closes by asking for robustly researched, regulated, and evaluated tests with appropriate reimbursement to support the same. 

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For reinforcing recommendation for more highly validated and also higher reimbursed diagnostics, see Hayes 2014 here.

Brief Blog: FMI F1 CDX TEST WINS FIRST "ADLT" DESIGNATION RELEASED BY CMS

Section 216 of the 2014 PAMA law set in motion a repricing of the Medicare lab fee schedule to market average prices based on trienniel surveys.  However, it also created a new test category called Advanced Diagnostic Laboratory Tests (ADLTs), which must be sole-source tests and are priced and repriced annually.   CMS released instructions for the ADLT process in March 2018 (here).

On May 21, 2018, Foundation Medicine issued a press release that the FoundationOne CDx test had been awarded ADLT status from CMS (here).   Under AMA Proprietary Lab Analysis (PLA) code 0037U, the test will be priced at $3500 for three quarters beginning July 1, 2018.  Thereafter, it will be priced annually at its median private payer price.

The stock was up 7%, reflecting a market cap bump of about $200M.   A bit surprising, since the ADLT status was a shoo-in as far as I could tell.  Much of that was between 10 am and 1 pm, so it took the market a while to absorb the news.  (No need for nanosecond stock trades.  You could have slept in, bought at 10, and sold at 1.)

CMS updated its ADLT homepage (here) with a new PDF document, "List of Approved ADLTs," which current has one test listed, 0037U (CMS PDF here).

Small Puzzles Remain

FDA Approval is the Simpler of Two ADLT Routes to ADLT Status
Statute and CMS regulations create two types of ADLTs, the first being a sole source algorithmic test (e.g. MAAA), and the second being a sole source FDA approved or cleared test.   FoundationOne CDx is in the second group, where CMS approval as an ADLT should be pro forma.   For MAAA-type ADLTs, CMS created rather complex rules about the history of the test's development, licensing, and "uniqueness" that haven't been tested yet.*   CMS has stated, however, that ADLT applications will be reviewed by its standing laboratory advisory committee.

Initial Payment Clearly at "List Price" Per CMS
Multiple sources in CMS guidance state that the initial 3 quarters of an ADLT test payment will be at "list price."  For example:

• Rulemaking at 81 FR 41100 (June 23, 2016) created 42 CFR 414.522, stating that "The payment rate for a new ADLT during the new ADLT initial period is equal to its list charge." (Here, PDF page 65).   
• CMS also notes that SSA 1834(A)(d)(1)(B) "defines the term 'actual list charge' to mean the publicaly available rate on the first day at which the test is available for purchase by a private payor."  (Here, PDF page 5, 81FR41040).   
• In its March 2018 guide to laboratories making ADLT applications, CMS stated similarly "Once a new ADLT initial period begins, payment for the new ADLT is made based on its actual list charge amount for the entire duration of the new ADLT initial period [3 quarters]."  See here, PDF page 22.   

I put this under the "small puzzle" column because in its press release, FMI states CMS will provide reimbursement at $3500 during the initial period.  Generally, publicly available sources have quoted the FMI list price as considerably higher, e.g. $5800.   I've also seen FMI's average payer payment stated at circa $2400, and I've noted that you can impute its overall net average payment closer to the range of $1000 per test (e.g. 10,000 clinical tests for $10M per quarter clinical revenue).  For PAMA calculations, CMS does not count "zero" payments. 

One answer to the puzzle - reading the instructions scrupulously - is that FMI could have set the F1 CDX list charge at $3500 literally on day one, and a higher price (say, $5800) on day two forward.  There is a clawback if CMS payments per test during the first three quarters prove to be too much higher than the later-calculated private payer rate during the same period; the tactics and strategies for this get complex (here).


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Nerds see here for eye-crossing license-based exclusions from ADLT status; these apply to MAAA-type but not FDA-type ADLTs.


 

Very Brief Blog: New Report on Rate of Closings and Mergers in US Oncology Practices

As reported by ASCO POST on April 23, 2018, the Community Oncology Alliance released its 2018 practice report - showing the continuation of a dramatic shift of oncology care towards hospitals and hospital-owned practices.

See ASCO POST here.   See the 2018 report (PDF) here.   The topic is inevitably tied to 340B drug purchase programs; see NEJM 2018 here and Congress Energy & Commerce Committee 2018 here.

In highlights,

• 423 clinics closed
• 658 acquired by hospitals
• 168 merged or acquired other than hospitals

Also,

• 359 more clinics were "struggling" and
• 45 clinics stated they were referring Medicare patients elsewhere.

In the figure below "blue" dots are practices acquired by hospials and "purple" dots were merged or acquired.  

Consolidation of oncology providers can also affect practices for detailing and providing oncology drugs and diagnostics.


 

Very Brief Blog: FDA Retracts Opportunity Offered Only to Mark McClellan's Institute

On May 17, 2018, John Carroll's blog Endpoints News collated and discussed a recent story that emerged from Politico and WaPo and other sources.

Mark McClellan, former head of both the FDA and CMS, and Scott Gottlieb, current head of FDA, are two of the stars of the Washington health policy world.

A few weeks ago, FDA published a request for proposals with the government prerogative of making it a "sole source" offer - to McClellan's Margolis policy center, located at Duke with a DC branch.

FDA reversed course "after it became aware" that potentially other centers could apply for the funding, which is to help FDA convene public stakeholders and experts on matters of interest, such as improved structured risk-benefit assessment.    As WaPo noted, the award budget will be $4.2M.

• See Endpoints News, here, May 17.
• See Politico, here, May 16.
• See WaPo, here, May 16.
• WaPo notes that FDA made a single source grant to Brookings Institute Engelberg Center in 2013 (here).[*]

In WaPo, Jerry Avorn, a Harvard health policy expert and frequent contributor to NEJM and JAMA, stated his surprise that FDA would view the topic as one leading naturally to a sole-source RFP.

The Actual RFP

The original RFP (RFA FD 18 013) was withdrawn from its online status but is available on Google Cache (as of 5/20/2018) here and a cloud copy of the original here.  Note a simple remark on page 8 that entitie(s) eligible to apply are: "Duke University - Margolis Center."

It was reissued as award FD 18 025, online here.  The new application cycle is May 17-July 18.  See "Part 2, Section I," for research objectives, specific research interests, and the anticipated approach. (I've also posted a cloud copy here.)   The award budget is stated as about $850K in each of 5 years (FY2018 - which will nearly be over by the award date), 19, 20, 21, 22).

Topics include - well, almost everything the FDA does, in a lengthy bullet point list, from "enhancing regulatory science and expediting drug development" to "enhancing the use of real world evidence" and "the patient's voice in drug development and decision-making."

The two areas receiving the most highlight, in paragraph form, are enhancing PFDD - patient focused drug development - and structured risk-benefit assessment.

Structured Risk Benefit

While "regulatory science" is a very broad domain, the core principle is to make risk/benefit decisions, such that benefit is greater than risk.  This is tortuous for several reasons.  For one thing, risks and benefits are incommensurate - Viagra has one set of benefits, but a completely different sets of risk (e.g. stroke).[**]  Scientifically, when is one great than the other?   For a second thing, trial design and statistics are completely different.  Benefits are usually very tightly defined endpoints with hard statistics (survival increases 8 weeks ± 1 week.)  Risks are random, unpredictable, and have little statistical weight because they are ad hoc and observational - two patients had a heart attack, one had new migraines, and one had a stroke.  

Traditionally, FDA advisory boards see a 100 slide presentation of benefits, get a coffee break, see a 100 slide presentation of risks, then chat for a while and vote.   That's hardly "structured."  FDA has posted some "qualitative structured" templates, but the ones I've seen are hardly more than putting benefits in a list on the left and risks in a list on the right - presumably what people were doing in their heads anyway.   (The technique was published by Benjamin Franklin in 1791).  

For some current FDA thinking on structured risk benefit, see here here here and here.  For an 18 page 2017 Duke/Margolis white paper on the topic, here.

I wrote about the topic in this blog in 2014 (here).  I revisited in 2015 regarding flibanserin, not to promote flibanserin but to note how openly disparate the "risks" and "benefits" were.

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[*] The 2013 award was to study a range of bullet-point initiatives (similar to the current award) with special focus on patient reported outcomes, on structured risk/benefit, and on standardizing and evaluating REMS.  That award amount was $700K for one year, similar to a one-year budget in the new grant.

[**] In case it's not obvious, the risk benefit "equation" would be highly subjective, such as whether 12 sexual encounters per year are worth (say) 3% risk of stroke.  (Discuss and explain your answer.)

Very Brief Blog: CMS's Web-Friendly, Searchable Hospital DRG and Payment Data

CMS has number of web-searchable, big data provider databases.  I've written about the one for physicians and labs.  There's also one for ordering physicians for DME and one for hospitals.

Home page for inpatient hospital data is here.  (For other options, see the column at left on this CMS page).  As of May 2018, the most current data year is 2015.

I briefly explain how to get into the data and download it in a short footnote.[*]

If I've got this right, for Heart Transplant, DRG 001, there were 1,633 cases among 74 institutions.  7 hospitals had 40 or more Medicare heart transplants, the top four being Advocate in Illinois, St Lukes/Baylor in Texas, Barnes in Missouri, and Cedars in Los Angeles.  $360M was paid, for an average of $220,711 per case (standard deviation about $60,000).  

The famous charge:payment ratio ranged from 2:1 for Tufts to 12:1 for Temple.  All sorts of tidbits - e.g. Mother Mayo in Minnesota had 26 cases, but Mayo Arizona had 28.

Recently there have been new calls for more transparent Medicare data, such as hospital charges and drug prices, and admittedly, this is stuff for experts or at least people facile with Excel.  But still, it's publicly available today on open websites and can be accessed in a few seconds as I've shown above.

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For a May 16 investigative article in the Houston Chronicle on the #2 volume center, St. Luke's/Baylor, see here.

I believe the physician data is all CPT codes and the DRG data is all DRG codes.  The Outpatient data for some reason lists only 28 of the many APCs, though.

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[*]  Home page for hospital data is here.   Click on "Interactive Dataset...FY2015."  At the next page, click on the box "View Data."  You've now got a table-format web view of what's a huge dataset.   Let's filter it.  Click on the "Filter" box.  Click, "Add a new filter condition."  Change DRG Definition to "...Starts With" and type 001.  It now displays all heart transplant DRG utilization by hospital.  Click on "Export" and export as Excel.  Finally, I immediately save the CSV file as XLS.

Very Brief Blog: Genomic Health Announces Date of Service Investigation

In its May 9, 2018, 10-Q filing with SEC, Genomic Health notes it is cooperating with an investigation into Medicare "date of service rule" compliance.

• 10-Q here.
• Search for: date of service; several hits in the 64 page PDF document.
• GHDX is up 6% in the week since mentioning the investigation.
• The May 9 document was subsequent to its May 2 investor call.
• Brief Genomeweb report here.  I believe it's open access.

In recent news, from March, there was also a compliance investigation of Myriad Genetics billing (Bloomberg here; also here).   As often occurs, there is a parallel shareholder lawsuit (here).  Myriad share price is up 20% since mentioning the investigation.

Also in March, Natera Inc. settled a Department of Justice investigation into compliance with a $11M payment.  Press release here. Natera share price is up 26% since the press release.

Very Brief Blog: Access the Medicare Drug Spending Dashboard (Part B, Part D, Medicaid)

In the past week, much news about how the Administration may reduce drug costs, including several speeches by HHS Secretary Alex Azar.

Mentioned is a newly updated "Drug Spending Dashboard" at the CMS website.

• Access it here.  
• Note different pages available for Part B, Part D, Medicaid.
• Brief article at CNN.com here.

Brief Blog; Medicare Opens NCD Process for CAR-T Therapies

On May 16, 2018, CMS opened a National Coverage Determination process for CAR-T therapies, based on a request from United Healthcare dated February 22, 2018.

• The NCD tracking sheet is here.
• The UHC letter is here.
• The letter specifically refers to creating a "level playing field" for Medicare Advantage plans in regard to these costly drugs.
• The letter proposes on-label coverage with a flexibility for important valid uses that may not be on the FDA label.   
• Coverage at BioPharmaDive, here.

The timetable includes an initial open comment period (on the topic; there is no draft NCD yet) from May 16-June 15, 2018.   CMS will hold a "MedCAC" public meeting on August 22, 2018.

The draft NCD is expected February 26, 2019, and the final NCD (after a comment and review period) is expected May 17, 2019.

Of note, CMS had a relatively extended and skeptical range of criticism in April 2018 inpatient rulemaking, in response to a request for new technology add-on payments (NTAPs) for Kymriah and Yescarta.  See the relevant pages in the cloud, here.  (Somewhat scarily, on page 20189, CMS referred to the diseases under treatment as "hematopoietic carcinomas."  Ouch.  Carcinomas are normally other classes of cancers, excluding leukemia and lymphoma.)

The last NCD and MedCAC on a cancer drug covered Provenge for on-label uses in 2011, here, here.

I've clipped the CMS announcement of the NCD process below.  The lead analyst is Katherine Szarama, PhD; the lead medical officer is Lori Paserchia MD.

Brief Blog: National Academies Releases a Report on Paying for Costly Illness; Chance to Revisit Drug Pricing Report 2017

On May 16, 2018, the National Academy of Sciences released a 71-page ebook on "Financing and Payment Strategies to Support High Quality Care for People with Serious Illness."   Find the ebook here.  The underlying workshop was held in Washington at NAS last November, here.

May 2018: Financing and Payment Strategies EBook

Returning to the opening topic of the new May 2018 ebook on health financing.  The "Financing and Payment Strategies" ebook, planned and executed more cohesively under one administration, is much shorter and has chapters like "challenges and lessons of fee-for-service" and "challenges and lessons from global budgeting arrangements."  The ebook does not have panel consensus recommendations but includes several pages of individual recommendations as remarked on in the course of the meeting, by individual participants.  

December 2017:  More Ruckus Over NAS EBook on Drug Pricing Options

With all the visibility to last week's speech by President Trump on U.S. drug pricing, we should recall that National Academies also released a 235-page ebook on drug pricing last November 30, 2017.   That report was based on a December 13, 2016 conference (e.g., planned under Obama administration), here, here. 

The November 2017 release included a one-hour conference (video here).  Find a unique cloud transcript of the videoconference, here.   On December 13, 2017, there was an Energy & Commerce hearing on drug pricing; website here, Politico here, WaPo here.

Find a summary of the Making Medicines Affordable November 2017 release, citing six trade journal articles, condensed at Kaiser Health News, here. 

  
Drug pricing recommendations included:

• Accelerate market entry, including generics and biosimilars
• Consolidate government purchasing power and apply it
• Improve drug valuation methods
• Greater transparency of cash flows in drug supply chain
• Discourage DTC advertising
• Modify & mitigate cost burdens for patients
• "Eliminate misapplication of funds in federal discount programs" e.g. 340B
• Target incentives for rare diseases only to rare diseases
• Align physician prescribing with value

The drug pricing book took one year to appear, longer than the usual NAS timetable of four to six months.  The ebook contains a 20-page dissenting view by Michael Rosenblatt and the late biopharma entrepreneur Henri Termeer.  The dissent chapter appeared, in part. in NEJM here.  Rosenblatt is a physician executive at Flagship Pioneering.   The ebook also contains a shorter, 5-page "minority view" with remarks such as, "Patients are left at the mercy of coverage and pricing decisions that are completely unknown to them."  

Jump from December 2017 to May 2018.    

In Mid-May 2018, NPR highlighted 3 facets of the new Trump proposals as (1) more transparency for supply chain channels and PBM discounts, (2) shift some costly drugs from Part B (average sales price) to Part D (negotiated Part D plan price), and (3) make it much easier to find Medicare and Medicaid drug prices.  (These prices are often available today on CMS websites and fee schedules most easily found by experts.)  

 
A transcript of a speech by HHS Secretary Alex Azar on the drug topic May is here; a second speech on May 16 is here.  Trade article here.  Both speeches & trade article in the cloud here (7000 words.)  Redline comparing the two speeches is here.

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NAS notes that both books are conference reports of diverse panels and do not represent positions of NAS itself.

Since both ebooks are about health pricing, it might be of interest to compare with the May 16, 2018, New York Times article on the US healthcare price explosion after 1980 by economist Austin Frakt - here.

The same week as the NAS report on healthcare costs and strategies, the Urban Institute issued a plan for subsidized insurance that would reduce the uninsured by 16 million, here.