Personalized medicine is expected to transform healthcare. Its success depends on whether molecular diagnostic tests will allow drugs to be tailored to individuals or patient types, leading to improved drug efficacies and reduced drug side effects. Healthcare payers stand to benefit, because personalized medicine promises to reduce healthcare costs in the long-term. However, if molecular diagnostic tests face overwhelming barriers or an unclear path in securing coverage from healthcare payers, then companies will be less likely to develop them.

Reimbursement Intelligence, a market access consulting firm, conducted research with 50 of the top-ranked managed care health plans to better understand the current and future dynamics of the management and reimbursement of oncology diagnostics. This article reviews some of the key insights from the survey and suggests ways that diagnostic companies can better navigate the complex reimbursement landscape to maximize the clinical utility of the diagnostic tests.

Reimbursement Challenges for Oncology Diagnostics

Molecular diagnostic test developers face 2 critical healthcare payer challenges: (1) obtaining coverage and (2) securing appropriate reimbursement for new tests. Many factors influence payers’ coverage and reimbursement of diagnostic tests (Figure 1).

Figure 1

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After propensity score matching, Table 2 shows that after a first emergency department visit, the test population has higher costs in nearly all subcategories contributing to the net dollars paid PPPM. This could imply that the test population requires higher intensity care on a total claims dollar basis; it is possible to consider them a “sicker” population based on claims. Second, none of the differences in dollars spent for the test group are significant (a = .05), except for “medical physician” and “emergency department.”

In addition, diagnostic developers do not have a clear set of expectations for the level of evidence that is necessary for reimbursement (eg, specific clinical trial requirements, optimal outcome measures).

The robustness of clinical data available for biomarker tests is the strongest predictor of gaining coverage. Results from our Oncology Reimbursement: 2011-2012 Report, which surveyed commercial and government managed care health plans covering >150 million lives, showed that diagnostics in breast cancer receives coverage by 83% of the payers surveyed (Figure 2).1 This is likely because the utility of diagnostic tests, such as testing for the epidermal growth factor receptor (EGFR) or HER2 overexpression, are directly tied to clinical utility.

Figure 2

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As a result, the American Society of Clinical Oncology (ASCO)2 and the National Comprehensive Cancer Network (NCCN),3 the 2 leading on - cology organizations, recently recommended HER2 mutation testing for patients with invasive breast cancer. Indeed, based on our survey, 90% of the payers indicated that clinical guidelines influence their decision to cover an oncology diagnostic test, with ASCO and NCCN guidelines given equal preference.

Clinical utility studies for molecular diagnostics are often not carried out, because they are complicated, expensive, and time-consuming to run, and moreover, they are not directly required by the US Food and Drug Ad ministration (FDA) for the approval of tests. In some instances, however, it may be possible to use surrogate end points (eg, progressionfree survival [PFS] or time to progression) to shorten the cost and duration of such studies.

Nevertheless, payers in our survey indicated that diagnostic tests must demonstrate a higher degree of sensitivity and specificity for them to have greater relevance and wider adoption (Figure 3, right graph, page 35). At the extreme, many of the esoteric diagnostic tests are marketed without FDA review as “home brew” tests under the regulatory oversight of the Clinical Laboratory Improvement Act (CLIA). Therefore, the coverage determination for this category of tests may not even have the benefit of FDA review to determine their safety and efficacy. CLIA standards do not require evidence that diagnostic tests are clinically useful, only that the tests can be performed consistently and accurately.