In a July 8th, 2013 letter to the Centers for Medicare & Medicaid Services (CMS), the Personalized Medicine Coalition (PMC) advised that proposed reimbursement schedules for diagnostic medicine will threaten the development of, and access to, personalized medicine and reduce the quality of patient care.

Reimbursement for Diagnostic Medicine

Before 2013, the PMC explains, molecular diagnostic tests were reimbursed through a process in which payments for multiple Current Procedural Terminology (CPT) codes, each describing a part of the test, were “stacked” to arrive at a final payment for a test. Recently, CMS decided to restructure the process, and new reimbursement codes were developed to describe over 100 molecular tests, most of which have been standard clinical use for many years. As a first step to setting payments for these codes, CMS asked regional Medicare Administrative Contractors (MACs) to set new prices through a process called “gapfilling.” As explained by the PMC, some MACs have set prices at about 30 % of what the old code stack provided.

In setting the new pricing, the MACs did not provide information on how the pricing was determined. Many of the new prices, the PMC noted, fall well below the reasonable cost of supplies, test performance, operating a clinical laboratory and often, even the cost to cover interpretation of the test.

Short Term Savings, and Long Term Costs

The PMC pointedly urges that the proposed reimbursement scheme will negatively impact healthcare quality improvements in three ways:

  • it will halt drug-diagnostic company collaborations which, in turn, will impede the development of targeted medicines;
  • it will discourage investment in life sciences; and
  • it will trigger national job loss in the science and technology sector.

The PMC explains that the co-development of a product with a companion diagnostic is still a young field. The co-development of companion diagnostics and targeted therapies requires substantial time and resource commitments for the research and development. The prospect of insufficient reimbursement for these tests, the PMC warns, will reduce investment in diagnostic tests even though the tests hold the potential to provide better health at lower costs.

The PMC also notes that the venture community, which backs many small companies that develop tests, will view policies like CMS’s gapfill payment process as an ominous sign for the future of the life science sector. Lack of adequate reimbursement could chill investment in new companies and technologies that are necessary for the future of personalized medicine.

The proposed payment schedule will also negatively impact the economy through loss of jobs. The PMC membership fears that with payments at markedly reduced levels, clinical labs will go out of business, which in turn also endangers patients and their health care providers’ access to qualified diagnostic medicines.

Health Care Coverage to Improve Access to Personalized Medicine

Much has been written about diagnostic patents and their perceived impediment to the development of, and wide spread access to, diagnostic tests that are key to personalized medicine. However, there has been far less dialogue on the impact that the lack of or insufficient reimbursement of diagnostic tests has on patient access to personalized medicine. While technology patents can limit access to health care if the patented technology is offered at a cost beyond the reach of a deserving patient, insufficient or no insurance coverage will have the same effect, whether or not the test is patented.

The PMC, with its reasoned and thoughtful review of CMS’ reimbursement proposals discussed in its July 8th letter highlights serious issues that hopefully will spark a robust debate about whether the new schedules is short or far sighted. Sufficient and wide spread insurance coverage of these test is needed to improve patient access to patented and patent-free diagnostic medicine.

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