Current Policy Challenges in Genomic Medicine

Abstract

Despite genomic medicine's enormous promise and the virtual certainty that it will revolutionize medical practice, it faces considerable near-term headwinds as physicians and scientists learn how to utilize the terabytes of genomic data that can now be generated inexpensively. Payment policies for molecular genetic testing represent the most immediate challenge. In addition, policymakers and other stakeholders have expressed concerns about the adequacy of laboratory test oversight with threats of costly and burdensome increases in regulation looming in the background.

Patents on gene sequences and associations between genetic variants and clinical phenotypes have been controversial since the field's inception. The US Supreme Court's elimination of these intellectual property constraints on clinical testing paved the way for the introduction of massively parallel sequencing, the potential of which we are only beginning to exploit. However, recently proposed legislation threatens to overturn key Supreme Court decisions, restoring patents as obstacles to progress in genetic and genomic testing. This review discusses the current challenges test reimbursement, regulation, and the prospect of the return of gene patents present for the advancement of genomic medicine.

The Protecting Access to Medicare Act of 2014 and the Clinical Laboratory Fee Schedule

Few issues are of greater importance to the advancement of genomic medicine than payment for molecular genetic tests. Medicare is the largest purchaser of clinical laboratory services in the US, paying for approximately $8.5 billion of tests each year, and its rates influence those of private and other government payers (1). Medicare pricing is central to the health and structure of the laboratory industry. Consequently, many practitioners and laboratories were alarmed when in 2014, as part of a last-minute move to delay automatic physician fee reductions under Medicare's Sustainable Growth Rate (SGR),² Congress enacted Protecting Access to Medicare Act of 2014 (PAMA) Section 216 (2).

The first significant reform to Medicare's payment for clinical diagnostic laboratory tests (CDLTs) since the Deficit Reduction Act of 1984 (DEFRA), PAMA created a uniform national Clinical Laboratory Fee Schedule (CLFS) (3). Before PAMA, 7 Medicare Administrative Contractors (MACs) set prices in 12 jurisdictions for 57 local fee schedules. Local fee schedules were based on historical prices, subject to national limitation amounts (NLAs). Rates were periodically increased to compensate for inflation (4–6).

Medicare and other insurers employ Current Procedural Terminology (CPT^®) codes owned by the American Medical Association (AMA) to identify billed medical services. AMA replaced method-based “stacking codes” used to bill genetics and molecular oncology tests with gene-based CPT codes in 2012. Medicare paid these “molecular pathology” tests at their NLAs (7–9).

Under PAMA, Medicare derives CLFS rates from laboratory-reported payments from private insurers. For each separately paid, Medicare-reimbursed CDLT, “applicable laboratories” report to the Centers for Medicare and Medicaid Services (CMS) the volume performed at each price during specified collection periods, the first of which was in 2016 (2).

CMS calculates the volume-weighted median price for each test from the reported data. Tests are defined by over 1300 CPT or Medicare-generated Healthcare Common Procedure Coding System (HCPCS) codes. PAMA limited yearly payment declines to 10% for the first 3 years and 15% for the following 3 years. CMS sets CLFS prices at tests' volume-weighted medians subject to these limitations (2).

Data collection, reporting, and determination of CLFS prices are repeated every 3 years. A laboratory officer must certify the accuracy and completeness of the reported data. The Department of Health and Human Services (HHS) is authorized to impose civil monetary penalties of up to $10000 per day for each misrepresentation, omission, or failure to report (2, 10).

An applicable laboratory is a laboratory that derives a majority of its Medicare revenues from the CLFS and the Physician Fee Schedule (PFS). For the first data-collection interval, CMS defined “laboratory” as 1 or more CLIA-certified laboratories that bill Medicare Part B under a National Provider Information (NPI) number. CMS excluded laboratories with <$12500 in revenues from the definition of applicable laboratory. Most hospital laboratories (HLs) were not applicable laboratories because hospitals' inpatient and outpatient revenues are typically much larger than their CLFS and PFS payments (2, 10–12).

PAMA created a category of CDLTs designated “advanced diagnostic laboratory tests” (ADLTs). ADLTs are tests developed and furnished by a single laboratory that involve an analysis of multiple biomarkers, including DNA, RNA, or proteins and utilize a unique algorithm to generate a patient-specific result, are cleared or approved by the US Food and Drug Administration (FDA), or meet similar criteria the HHS Secretary establishes. After introduction, Medicare pays ADLTs at list price for 3 quarters. They are subsequently priced at the volume-weighted median of private payer rates like other CDLTs. However, ADLT repricing occurs yearly rather than every 3 years (2).

Because ADLTs initially receive list prices, early Medicare reimbursement is probably higher than if pricing had been established through standard procedures. These higher Medicare rates may positively impact private payer rates and therefore later market-based prices. PAMA may overvalue an ADLT if many insurers consider it investigational and do not cover it, with reported data coming from a small number of payers.

CMS defined ADLTs narrowly and to date has approved few of them. Thus, ADLTs, which represent a nontraditional model for laboratory test development and delivery, have had limited impacts on patient care. Nevertheless, PAMA's ADLT provisions should benefit the small number of companies and laboratories that offer them.

PAMA retained “crosswalking” and “gapfilling” processes for new test pricing until market-based rates are established. CMS crosswalks a test by comparing it to similar tests or combinations of tests to set its NLA. For example, in 2016, CMS crosswalked CPT code 81170 for ABL proto-oncogene 1, non-receptor tyrosine kinase (ABL1)³ kinase domain variant testing to code 81235 for epidermal growth factor receptor (EGFR) common variant testing. When there are no tests suitable for crosswalking, MACs price tests utilizing actual charges, required resources, other payers' prices, and comparisons with relevant tests. Through this gapfilling process, CMS sets NLAs at the median of contractor prices. In 2016, CMS gapfilled the genomic sequencing procedure code 81432 for sequencing of at least 14 genes known to cause hereditary breast cancer and related disorders (1, 9, 10).

Because of the complexity of the rate-setting process, CMS delayed PAMA's initial data-collection and reporting periods and did not introduce PAMA pricing until January 1, 2018, a year after the statutory implementation date. CMS also needed to extend the 3-month reporting interval by 60 days because laboratories had difficulty reporting the required data (10, 12).

CDLT prices decreased for 75% of tests; only 10% experienced price increases. Further, 58% had median private payer rates at least 30% less than their 2017 NLAs. Molecular pathology tests experienced smaller reductions than many of the older, more automated chemistry and hematology tests because they were more recently priced. Still, some higher volume tests like BCR activator of RhoGEF and GTPase (BCR)-ABL1, mixed chimerism, and Janus kinase 2 (JAK2) V617F had volume-weighted medians that were significantly below their 2017 NLAs (4, 13, 14).

Molecular laboratories are typically part of larger laboratory structures and are adversely affected by broader payment decreases. Most hospital outpatient laboratory testing was bundled into Ambulatory Payment Classifications (APCs) within the Outpatient Prospective Payment System (OPPS) in 2014. However, molecular pathology tests are still separately paid from the CLFS. Therefore, reimbursement cuts have direct impacts on molecular labs' finances. PAMA price reductions reduce resources needed to fund operations, purchase new technologies, and hire skilled personnel.

In its 2016 Final Rule, CMS estimated 1200 independent laboratories (ILs), representing 99% of CLFS IL spending, and 12400 physician office laboratories (POLs), accounting for 92% of Medicare's POL expenditures, would report 600 million data points, producing a $390 million reduction in Medicare expenditures in PAMA's first year of implementation (10). Instead, only 1942 laboratories reported data, including: 658 ILs; 1106 POLs; 21 HLs; and 157 laboratories in urgent care centers, federally qualified health centers, inpatient hospitals, and other settings (4, 13, 14).

Although ILs represent only 1% of CLFS-paid laboratories, they received 55% of Medicare's 2016 CLFS payments. IL data were overrepresented by design because most hospital outreach laboratories, which account for approximately 26% of CLFS outlays, were not required to report data. Of the reported applicable information, 90% came from ILs, 7.5% from POLs, 1% from HLs, and 1.4% from other laboratories. The HHS Office of Inspector General (OIG) identified at least 20 high-volume laboratories that failed to provide price-volume information to CMS (4, 10, 13, 14).

Reporting laboratories received approximately 68% of 2016 CLFS revenues. Of 1347 eligible HCPCS codes, CMS obtained data for 95.7%, representing 96.1% of expenditures. The reported data accounted for about $31 billion of an estimated $70 billion (44%) in private payments. Despite objections from some stakeholders that the data CMS used to calculate rates were unrepresentative of the industry, CMS's modeling suggested increasing the number of reporting laboratories would not have significantly impacted payment rates (4, 13, 14).

In some regions, PAMA's 10% limit on NLA price reductions gave payment increases to older chemistry panels that had been priced more than 10% below their NLAs. A November 2018 Government Accountability Office (GAO) report estimated that CMS's use of 2017 NLAs, rather than average prices, as the baselines from which it established the 10% allowable annual price decreases would increase expenditures for these tests by $225 million (3%) in 2018 (4).

Further, Medicare previously employed algorithms called automated test profiles (ATPs) to substantially reduce payments for combinations of 23 individually ordered chemistry tests that lacked CPT panel codes. In 2018, CMS discontinued ATPs, instead reimbursing these tests at their NLAs. The GAO estimated that eliminating ATPs will increase Medicare expenditures $218 million from 2018 through 2020 and projected that use of NLAs as baselines together with elimination of ATPs will increase spending by $733 million during this period (4).

CMS also removed contractor software edits that enforced use of applicable discounted clinical chemistry panel codes when component tests were billed individually but retained National Correct Coding Initiative (NCCI) instructions that permitted laboratories to unbundle the panels. This caused OIG to raise the specter of as much as $10.1 billion in unbundled panel claims from 2018 through 2021. Beginning in 2019 in accordance with CMS instructions, laboratories must bill applicable panel codes, which can no longer be unbundled (4).

The pricing anomalies affecting automated clinical chemistry tests risk negating PAMA's NLA reductions, in effect redistributing spending from newer tests to automated clinical chemistry tests, the presumed excessive payment rates for which provided justification for PAMA's enactment. Although this increased spending on automated chemistry tests may generally help mitigate PAMA's deleterious effects, it will do so in uneven and unpredictable ways. To the extent PAMA fails to achieve goals for reduction of aggregate laboratory spending, Medicare could attempt to decrease utilization through more stringent coverage criteria, which would have serious repercussions for genetic and genomic testing.

HLs are believed to receive higher reimbursement than ILs. However, including HL data seems unlikely to substantially influence CLFS prices obtained from volume-weighted medians with 10% annual limits on price reductions.

Nevertheless, in 2017, the American Clinical Laboratory Association (ACLA) sued HHS, arguing that it violated PAMA by excluding HLs from the statute's reporting requirements. Court rulings in the case have thus far favored the government. However, in apparent acquiescence to industry pressure, CMS created a new reporting entity called a “hospital outreach laboratory” (HOL) for the 2021 through 2023 CLFS cycle (12, 15).

HOLs receive at least $12500 in Medicare reimbursement during the collection period from claims submitted using the CMS-1450 Form 14X Type of Bill (TOB), which is exclusively used for testing performed for nonhospital patients. Because all such claims are paid from the CLFS or PFS, HOLs are applicable laboratories. HLs that perform minimal outreach testing have HOLs that must report all attributable price-volume data to CMS. Thus, CMS has imposed a major new regulatory burden on HLs (12).

CMS estimated use of CMS-1450 14X TOB will increase the number of applicable laboratories by 49%. Because many hospital information systems cannot retrieve the highly granular data PAMA demands, this expansion of reporting laboratories is likely to diminish the accuracy of price-volume data about which stakeholders have already expressed quality concerns.

Many HLs will also have difficulty identifying reportable nonhospital-patient information from private payers that do not use CMS 1450 14X TOB. Molecular pathology tests performed for outpatients are often billed using 13X TOB. These tests are not subject to reporting because CMS restricted reportable information to outreach testing. However, some insurers use 13X TOB for both outpatients and nonhospital patients and hospitals must distinguish these types of testing. As of this writing, applicable laboratories should have completed 2019 data collection for reporting during the first 3 months of 2020. This information will be used to update the CLFS in 2021 (12).

PAMA's price reductions and increased transparency will place downward pressure on the private payer rates used to determine CLFS prices, likely leading to additional rate reductions in future cycles. This downward spiral may have already begun (16).

National Coverage Determination for Next-Generation Sequencing

In 2018 Medicare released a national coverage determination (NCD) for “next-generation sequencing” (NGS) in advanced cancer patients (17). Although MACs make most coverage decisions, CMS issued this NCD after accepting a test for a rarely used FDA and CMS Parallel Review pathway (18).

The applicant, Foundation Medicine (Cambridge, MA), submitted its FoundationOne CDx 324 gene NGS test for parallel review in June 2017. Concurrent with FoundationOne CDx's November 30, 2017 FDA approval, CMS released a draft NCD that restricted payment to FDA-approved NGS tests, denying coverage for non-FDA approved tests outside NIH-sponsored clinical trials. In response to stakeholder opposition, CMS' final NCD allowed local contractors to pay for unapproved NGS tests while covering nationally any FDA-cleared or approved NGS companion diagnostic test with cleared or approved indications in the patient's cancer (17, 19, 20).

The Agency's 115-page final decision memo focused on NGS testing for therapy selection in patients with solid tumors. It did not discuss NGS testing for heritable disorders, hematologic malignances, or infectious diseases but did not explicitly exclude them from its scope (17).

When CMS indicated in a November 2018 announcement that the NGS NCD, including its restriction on coverage to patients with advanced cancers, had been extended to NGS testing for inherited cancer syndromes, stakeholders expressed surprise and consternation. MACs in all 12 jurisdictions had covered NGS testing for hereditary breast and ovarian cancer in early-stage patients. CMS abrogated these local determinations (21, 22).

Individuals with early-stage cancer are much more likely to survive than patients with advanced disease. Hereditary cancer syndromes predispose to the development of additional cancers in the same or other organs. Therefore, early-stage patients with inherited cancers are more likely to benefit from enhanced surveillance and prophylactic measures like mastectomy and salpingo-oophorectomy that may be recommended in patients with heritable breast and ovarian cancer syndromes.

Paradoxically, CMS denied payment for NGS-based inherited disease testing in patients most likely to benefit from it while covering it for patients for whom testing is probably performed too late to take preventive steps that improve health outcomes. Strangely, CMS continues to pay for testing for heritable cancers in early-stage cancer patients by the more expensive, less efficient, and less useful Sanger sequencing method (22).

In response to stakeholder concerns, CMS reopened the NGS NCD for comment, but only “for tests of germline mutations to identify those with hereditary cancer who may benefit from targeted treatments based on the results of the test.” “All other tests,” CMS stated, “are beyond the scope of this reconsideration” (23). This suggests CMS is not planning to cover standard of care diagnostic testing for patients suspected of having inherited cancer syndromes for which there are no targeted therapies, eliminating the opportunity for these cancer survivors to prevent or cure future malignancies. CMS is currently evaluating stakeholder comments about the NCD.

NCCI Policy on NGS

Beginning January 1, 2019, NCCI instructed laboratories to use the unlisted code 81479 for all multigene NGS tests that do not have a panel code, disregarding CPT instructions to bill individual codes for the genes tested (7, 24). Using NGS to sequence fewer genes than are included in existing panel codes and billing 81479 is likely to result in payment delays, unjustified denials, and costly appeals. Because many private insurers follow CPT rules, laboratories must have alternative ways to bill Medicare and private payers, which is cumbersome and poses compliance risks.

Gene Patents

Testing-related patents on gene sequences and relationships between human gene variants and clinical phenotypes have been controversial. Many in the biotechnology industry and the patent bar claim gene patents promoted discovery and encouraged development of novel diagnostic tests. Patient and consumer organizations, pathologists, geneticists, and other laboratory professionals disagreed, contending that such patents increased costs, reduced patient access and choice, decreased innovation, inhibited research, and encouraged development of proprietary databases of medically important findings (25, 26).

The US Supreme Court resolved this dispute in 2 key cases, striking down testing-related patents as unpatentable natural phenomena in both. In Mayo Collaborative Services v. Prometheus Laboratories, Inc., the Court unanimously invalidated patents on the post administration correlation of blood concentrations of thiopurine metabolites with drug efficacy and side effects (27). In Association for Molecular Pathology v. Myriad Genetics, Inc., the Court rejected claims on wild-type and mutated sequences of BRCA1 DNA repair associated (BRCA1) and BRCA2 DNA repair associated (BRCA2). BRCA1 and BRCA2 mutations predispose individuals to breast, ovarian, and other cancers (28).

In Mayo and Myriad, the Supreme Court reaffirmed longstanding prohibitions on patenting products of nature and natural phenomena. In both cases, the Court invalidated patents that created molecular monopolies. When read together, Mayo and Myriad removed intellectual property barriers to developing molecular genetic tests for predisposition to disease, therapeutic responsiveness, medicinal side effects, and tumor behavior. The Court thereby facilitated the introduction of NGS into clinical practice and fostered the advancement, development, and implementation of genomic medicine (29, 30).

Proposed legislation that would abolish the product of nature and natural phenomenon doctrines the Supreme Court relied on to nullify patents in Mayo and Myriad threatens to reverse these decisions. “No implicit or other judicially created exceptions to subject matter eligibility, including ‘abstract ideas,’ ‘laws of nature,’ or ‘natural phenomena,’ shall be used to determine patent eligibility … and all cases establishing or interpreting those exceptions to eligibility are hereby abrogated,” the text reads (31).

There may be a need to strengthen patent protection for isolated, purified, or enriched, naturally occurring biotechnology or pharmaceutical products, as opposed to intrinsic biological relationships or genetic information obtained during testing. However, the proposed legislation has no such limitations. It jettisons over 150 years of patent law and eliminates judicial discretion to determine patent eligibility (32). It is opposed by laboratory, professional, and patient groups as well as members of the software and retail industries (33).

Regulation of Laboratory Developed Tests

CLIA (Clinical Laboratory Improvement Amendments of 1988) and associated regulations establish the federal program for clinical laboratory oversight in the US (34). Advances in genetic and genomic testing, changes in delivery models, and increasing use of test results for therapy selection have encouraged discussions about this system's adequacy (30).

The 1976 Medical Device Amendments (MDAs) to the Food, Drug, and Cosmetic Act established the framework for FDA regulation of medical devices and underlie FDA's assertion of authority to regulate laboratory developed tests (LDTs). FDA has exercised “enforcement discretion” with respect to LDTs because of uncertainty about its authority, concerns about interference with medical practice, resource limitations, disagreements about the need for intervention, and possible harms to patient access (30).

In 2010, the FDA announced it would begin regulating LDTs, a move laboratory service providers strongly opposed. Proponents claim the CLIA regulations are insufficient because they do not require preintroduction third-party test review or proof of clinical validity. However, such assertions have never been accompanied by data demonstrating systemic problems with laboratory testing or a need for FDA involvement. Moreover, CLIA critics often minimize or ignore the role of accreditation and professional standards in ensuring laboratory test quality.

Opponents of FDA regulation argue that LDTs have played invaluable roles in medicine and that FDA regulation would slow new test introduction, impede improvements, and add unmanageable costs, all of which would threaten patient access to testing that is already heavily regulated. They rely on proficiency testing data suggesting most laboratories perform well and that FDA-cleared or approved tests do not perform better than LDTs. They also point to numerous examples of flawed FDA-cleared or approved tests (35).

On October 3, 2014, the FDA released 2 draft guidance documents delineating a framework and process for LDT regulation. The FDA held several public meetings relating to these documents and regulation of NGS in genetics and oncology (36).

The Association for Molecular Pathology (AMP) released “Principles for Oversight of Laboratory Developed Procedures” and a proposal to modernize the CLIA regulations to better address molecular testing and contemporary delivery models (37). Several in vitro diagnostic (IVD) kit manufacturers and large commercial laboratories formed the Diagnostic Test Work Group (DTWG) and developed and promoted a legislative proposal to create a new center within the FDA for regulation of both IVDs and LDTs. Creation of a new center would remove diagnostic tests from the medical device framework, lessening regulation on IVDs while increasing it on LDTs. The House Energy and Commerce Committee translated DTWG's concepts into the Diagnostic Accuracy and Innovation Act (DAIA), which it released for discussion in 2017 but never introduced (38).

Throughout 2016, the FDA signaled that it was planning to finalize its LDT guidance, while the House Agriculture Appropriations Committee directed the FDA to discontinue those efforts and work with Congress on a new pathway to regulate LDTs. “FDA should suspend further efforts to finalize the LDT guidance and continue working with Congress to pass legislation that addresses a new pathway for regulation of LDTs in a transparent manner,” the Committee wrote in its Appropriations Bill Report (39–41). After the November elections, the FDA announced it would not finalize its guidance (36).

In January 2017, the FDA released a discussion paper on LDTs in which it described a “possible approach” to regulation (36). Responding to a Congressional request for comments on DAIA, the FDA reshaped it into the Verifying Accurate Leading-edge IVCT Development (VALID) Act. VALID eliminated DAIA provisions establishing a new diagnostic test center at the FDA. It brings LDTs under FDA jurisdiction and incorporates precertification into its proposed regulatory scheme as a means of lessening the burden of regulatory compliance. It is currently under study in the House Energy and Commerce and Senate Health Education Labor and Pensions Committees (42).

Footnotes

Footnotes

Author Contributions: All authors confirmed they have contributed to the intellectual content of this paper and have met the following 4 requirements: (a) significant contributions to the conception and design, acquisition of data, or analysis and interpretation of data; (b) drafting or revising the article for intellectual content; (c) final approval of the published article; and (d) agreement to be accountable for all aspects of the article thus ensuring that questions related to the accuracy or integrity of any part of the article are appropriately investigated and resolved.

Authors' Disclosures or Potential Conflicts of Interest: Upon manuscript submission, all authors completed the author disclosure form. Disclosures and/or potential conflicts of interest:

Employment or Leadership: R.D. Klein, Association for Molecular Pathology.

Consultant or Advisory Role: None declared.

Stock Ownership: None declared.

Honoraria: None declared.

Research Funding: None declared.

Expert Testimony: R.D. Klein, Association for Molecular Pathology v. Myriad Genetics, Expert for Association for Molecular Pathology.

Patents: None declared.

References