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Medicare facing cancer care cuts

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Oncotech was an American laboratory providing individual chemoresponse testing as a service to patients and physicians since the mid-1980s. It was co-founded by Drs. Robert Nagourney and Larry Weisenthal. They each left the company in the early 1990s, over disagreements with the controlling investors (4 venture capital companies) over the management and directions of the company. Dr. Weisenthal remained supportive of the company, over the years, and played an important role in securing and, later, retaining reimbursement by Medicare for their services. Drs. Nagourney and Weisenthal each started their own small private laboratories to offer related cell culture testing services.

Oncotech continued operations as a privately-held, venture-capital controlled company until February of 2008, when it was acquired by a Danish biotechnology company called Exiqon, Inc. for $45 million (US) in Exiqon securities.

Exiqon replaced the Oncotech CEO and installed its own management team, continuing to operate Oncotech as a wholly-owned subsidiary, with a business model centered around providing chemoresponse assays on a (US) national basis — importantly to Medicare patients.

In the case of Weisenthal Cancer Group, they opted out of Medicare, effective July 1, 2008, because the reimbursements received from Medicare did not cover our costs of providing our services (although they are still required to file a Medicare claim on your behalf).

Exiqon Oncotech, however, depended on Medicare reimbursement to support its business model. In the USA, Medicare coverage decisions for many types of medical services are made at the regional level (Local Coverage Decision or LCD), by the private insurance companies with which Medicare contracts to administer services to Medicare beneficiaries. Previous Medicare contractors for California made the determination that chemoresponse assays qualified as a Medicare covered service. These included the TransAmerica and National Heritage Insurance (NHIC) companies. Most recently, an insurance company called Palmetto was awarded the contract to administer Medicare services for California. Palmetto made the decision to discontinue Medicare payment for chemoresponse assays in California.

Last week, Exiqon Oncotech announced that it was discontinuing operations, because of the withdrawal of Medicare reimbursement for its services. This was an entirely understandable, if regrettable, decision. What was in no way understandable — or defendable, for that matter — was the way that they ceased operations.

Exiqon Oncotech sent out notifications to its client physicians that it was ceasing operations, virtually immediately. On a single day this past week, they received two dozen specimens from human tumor biopsies via FedEx and other couriers. All of these specimens were simply sent back to the hospitals and clinics which sent the specimens. Physicians were told that there were no other laboratories who could perform the tests requested.

While it is true that no other American laboratories have chosen to utilize Exiqon Oncotech’s non-proprietary technology for chemoresponse assays, it was well known to Exiqon Oncotech that there are a number of highly experienced, well qualified, well-published American laboratories which provide this service, utilizing different, but at least comparably valid, technologies (cell-death as opposed to cell-growth endpoints).

There have been only two previous, investor-backed, clinical laboratory companies which provided chemoresponse assays as a service to patients, only to make the decision that their business models were no longer viable. These companies were Analytical Biosystems and NuOncology Laboratories. When these latter companies ceased operations they did so in an orderly fashion, giving their clients adequate advance warning and winding down operations at a pace which enabled them to provide testing for those patients and physicians who had already planned and depended upon receiving these services, and these companies were open and helpful in providing their former client physicians with contact information for other laboratories within the US which continued to provide chemoresponse assay services.

In the case of Exiqon Oncotech’s two dozen tumor specimens simply marked “return to sender,” It can scarcely be imagined anything more irresponsible. In many of those cases, doubtless the physicians and/or surgeons discussed in advance with their patients the importance of sending their biopsies for cell culture analysis. In some cases, the surgical procedure may have been performed primarily for the purpose of this analysis. In other cases, the patients were doubtless comforted by knowing that this testing was to be performed.

Business is business, but, at a certain point, business is also about people, and cancer business is, or should be, about cancer patients.

Many are saddened by the shuttering of Oncotech’s doors, 25 years after its founding, and are ashamed at the way in which those doors were apparently shutterd.

It should be noted that the Medicare contractor for the state of Pennsylvania continues to provide coverage for chemoresponse assays and that there is an experienced laboratory in Pennsylvania (Precision Therapeutics) which both provides the assays and accepts Medicare reimbursement as payment in full. California laboratories continuing to provide chemoresponse assays with functional profiling (without Medicare reimbursement, possibly requiring patient payment for services) include Rational Therapeutics, Anticancer, Inc., and Weisenthal Cancer Group.

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I think the thread title you have chosen is misleading. Based on what you've written, this was not a Medicare decision, but one made on a regional level by a contractor. It would be nice if these policies did not vary from state to state.

All that aside, chemoresponse assays have not proven to be of much use in the real world. Your opinion that these tests can be part of the doctor's tool box for deciding on therapies is not convincing evidence that they should be done, or covered by Medicare or insurance. If the results of this testing were proven to impact the treatment decisions, this would be a story.

Tailored therapy for ling cancer? Yes please! But this testing hasn't lead the way. I hope I change my opinion soon, but not yet.

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This has been a double sign of irresponsibility, not only on what Oncotech did, but on what Palmetto GBA did.

The previous CMS administrator for Medicare in Southern California (NHIC) spent almost the entire 2006 doing a extensive, transparent tech assessment of chemoresponse assays and made the decision that the assays were a perfectly appropriate medical service, worthy of coverage on a “non-investigational” basis.

What was of particular significance this time (as compared to approval for the resistance part of the testing in 2000) was that they abandoned the artificial distinction between “resistance” testing and “sensitivity” testing and provided coverage for the whole FDA-approved kit.

Why it was a local coverage decision (LCD) and not a national coverage decision (NCD)? Medicare has only about 20 doctors and 40 total clinicians working in its coverage office.

Also, Medicare doesn’t have a single oncologist on staff, yet since the year 2000, they issued 165 restrictions and directives on the use of cancer drugs and diagnostic tools. Private insurers (like NHIC), on the other hand, employ thousands of doctors and nurses to do this.

Medicare wants to put off-lable drug decision making (which some 60% of cancer drugs are) in the hands of compendia writers in the private sector, many of whom are on the payrolls of the companies that make the drugs. I am just wondering if this had anything to do with what Palmetto GBA is doing?

It amazes me that they don’t emphatically mandate this testing as a requirement for obtaining chemotherapy reimbursement against ill-directed treatments. Evidence in support of these tests is more than sufficient to justify them, particularly in light of the Duke University impact study of chemoresponse assays on the treatment costs for recurrent ovarian cancer.

Impact of a chemoresponse assay on treatment costs for recurrent ovarian cancer.

Havrilesky LJ, Krivak TC, Mucenski JW, Myers ER. Division of Gynecologic Oncology, Department of Obstetrics and Gynecology, Duke Comprehensive Cancer Center, Duke University Medical Center, Durham, NC.


We sought to estimate mean costs of chemotherapy treatment for recurrent ovarian cancer with or without use of a chemoresponse assay.

Study design

We estimated mean costs for 3 groups: (1) assay assisted: 75 women who received oncologist’s choice of chemotherapy following chemoresponse testing (65% adherence to test results), (2) assay adherent: modeled group assuming 100% adherence to assay results, and (3) empiric: modeled from market share data on most frequently utilized chemotherapy regimens. Cost estimates were based on commercial claims database reimbursements.


The most common chemotherapy regimens used were topotecan, doxorubicin, and carboplatin/paclitaxel. Mean chemotherapy costs for 6 cycles were $48,758 (empiric), $33,187 (assay assisted), and $23,986 (assay adherent). The cost savings related to the assay were associated with a shift from higher- to lower-cost chemotherapy regimens and lower use of supportive drugs such as hematopoiesis-stimulating agents.


Assay-assisted chemotherapy for recurrent ovarian cancer may result in reduced costs compared to empiric therapy.

PMID: 20417480

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  • 3 months later...

The cell-based assay utilized by the recently defunct Oncotech was the EDR (extreme drug resistance) assay, a soft agarose tritiated thymidine assay, which is a direct descendent of the old original Salmon/Von Hoff Human Tumor Stem Cell or clonogenic assay of the late '70s/early '80s. This is the assay ASCO talks about in their infamous 2004 tech assessment of CSRAs (chemo senstivity and resistance assays). Over twenty year old material that had been discredited twenty years ago.

Dan Von Hoff was the most prominent member of the 2004 ASCO technology assessment panel on Cell Culture Assays (three hundred or so papers published with the clonogenic assay; Director of the Arizona U Cancer Center; past President of AACR, ASCO Board Member, etc.). For years, Von Hoff went around the country, telling people how the clonogenic assay was the next great thing.

If one thought that he was only trying to sell people on the idea that clonogenic assays should be studied in a research setting, isn't totally accurate. Von Hoff wanted to get fresh tumors to do drug development contract research. So he sent out mass mailings, offering free assays, beseeching oncologists to help their patients (from one of his mass mailings). Note that this was totally outside of the confines of a clinical trial.

Dan Von Hoff is one of the greatest organizers of clinical trials in the history of clinical oncology. Yet he did not successfully organize and complete a single randomized trial to test "assay directed" versus "physician's choice" chemotherapy treatment. And this is one of the most energetic and prolific clinical investigators of our time. Yet he "sold" his assays, not as a clinical trial, but aggressively as a service to patients.

Von Hoff had been going around the country for years, speaking before all sorts of groups, and speaking out against the use of cell culture assays in patient management. When his own pet technology was finally discredited, he basically said that if he couldn't do it, then no one else should be able to do it either.

Many eminant scientists made major attempts to get prospective, randomized trials off the ground in the cooperative groups, without success. They spent many years getting the best data that anyone's ever been able to get with cell culture assays in solid-tumor cancers (hugely significant correlations with assay results and long term patient survival; median survivals in platinum-resistant disease more than twice as good as reported anywhere else in literature).

The so-called ASCO expert panel who did this tech assessment included only three investigators who had ever worked in the field of cell culture assay technology: Dan Von Hoff, Anne Hamburger and a German named Hanauske who worked with Von Hoff in San Antonio. All three were old-line "Human Tumor Stem Cell" (clonogenic) assay workers, who (along with Salmon) convinced the oncologic community that clonogenic assays were the only valid approach to chemosensitivity testing (no one had ever heard of apoptosis back then).

The newer studies of apoptosis occurred during the heyday of the oncogene discovery period in cancer research, where oncogene products were frequently found to be associated with cell growth and where cancer was most prominently considered to be a disease of disordered cell growth. In contrast, the concept of apoptosis (programmed cell death) had yet to become widely recognized. Also unrecognized were the concepts that cancer may be a disease of disordered apoptosis/cell death and that the mechanisms of action of most if not all available anticancer drugs may be mediated through apoptosis.

When problems with proliferation-based assays emerged, there was little enthusiasm for studying cell death as an alternative endpoint. These factors explain the abandonment of research into cell culture assays by American universities and cancer centers by the mid-80s. However, clinical laboratories began to offer cell culture assay with cell-death endpoints as a service to patients in the USA by the late 1980s, and studies of cell culture assays continued in Europe and Asia.

The clonogenic assay failed and it dragged down the whole field of inquiry along with it. So basically, the panel consisted of various oncologists who knew nothing about the technology and data, along with three proponents of a long-ago discredited approach which had nothing to do with the technologies (assays with cell-death endpoints), and with no one at all who understands anything at all about the newer technologies and published data pertaining to them.

In the tech assessments, the authors invented a brand new criterion for validating a laboratory test. The existing standard had always been the "accuracy" of the test. This is true for every single test used in cancer medicine, from estrogen receptors to bacterial culture and sensitivity testing to panels of immunohistochemical stains to diagnose and classify tumor to Her2/neu and CA-125 to MRI scans, CT scans, PET scans and on and on. Yet they never even attempted to review the voluminous literature which defined the "accuracy" of cell death assays, and instead restricted their analysis to a consideration of papers which tried to address the issue of whether the use of the assays actually improved patient outcomes. They lumped together the old and long abandoned technologies (clonogenic assay, subrenal capsule assay, etc.) with the cell death assays. And yet, even in their own review, there were five studies with cell death assays and patient outcomes that were improved in four of the five studies and one negative study wasn't even relevant, because the authors did their tests on subcultured cells (as opposed to "fresh" tumor cultures) and tested the cells in monolayers (as opposed to three dimensional cell clusters). They ignored all studies having to do with "accuracy," the criteria used in tech assessments of all previous laboratory and radiographic tests, and only included studies dealing with "efficacy," a standard never met by any laboratory or radiographic test.

Were they to have reviewed studies showing that the use of estrogen receptor improved treatment outcomes, they would have found no publications at all. Were they to have reviewed papers showing that the use of panels of immunohistochemical stains to subclassify tumors improved treatment outcomes, they would have found no publications at all. Were they to have reviewed studies showing that treatment outcomes were improved through the use of MRI scans or PET scans or CT scans to monitor growth and shrinkage of tumors (for the purpose of influencing the decision to continue the same chemotherapy or to change chemotherapy), as opposed to simply following patients with history, physical, simple plain radiographs, and simple lab tests, they would have found no publications at all.

A "valid" tech review would have started with the published "accuracy" of the tests, and would have included in excess of 2,000 published correlations, in all types of neoplasms from acute leukemia to breast cancer to ovarian cancer to colon cancer and so forth, every single one of which showed that patients treated with drugs "active" in the assays had significantly higher response rates than patients treated with drugs which were "inactive" in the assays. They would have noted a half dozen papers which also showed that patients treated with drugs "active" in the assays also enjoyed significantly longer survivals. They would have made note of the preliminary studies which supported the concept that the use of the assays influenced treatment decisions which resulted in superior outcomes. A "valid" technology assessment would have concluded that the weight of the available evidence supports the decisions of individual oncologists to make at least selective use of these assays in their clinical practices.

What is it that ASCO was saying? Cell culture assays should not be used outside the confines of a clinical trial setting. The same people who maintain that assay-directed therapy should not be used until proven in prospective randomized clinical trials, are the same people whose entire careers are utterly dependent upon mega-trials funded by pharmaceutical companies (that, plus fees from speeches they give for these companies), are the same people who control the clinical trials system, the grant review study sections, and the journal editorial boards. Why else would they want this technology tested under the clinical trial setting?

Opponents of cell culture assay testing can blow all the smoke screens they want, but the fact is that every single time advocates for cell culture assays have been given fair consideration by an impartial, non-ASCO adjudication, the decision has been made that this testing is a perfectly appropriate medical service, worthy of coverage on a non-investigational basis. It is only when ASCO or the insurance industry has been appointed itself as the judge/jury/prosecutor/defense rolled into one and not invited input from all "relevant" parties that the decisions have been unfavorable.

Opponents of cell culture assays are insesently confused with the old "clonogenic" chemosensitivity assays, the one that Dan Von Hoff had been discredited long ago. When most academic oncologists refer to "chemosensitivity testing," they are virtually always referring to and thinking about the "human tumor stem cell" assay or "clonogenic" assay. Yet this technology hasn't been used by any private sector laboratory for more than twenty years. Nor has it ever been advocated the clonogenic assay as the best cell culture assay. But Von Hoff had tried to sell it, not within the confines of a clinical trial, but as a service to patients.

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It was noted above, the Medicare contractor for the state of Pennsylvania continued to provide coverage for chemoresponse assays and that there is an experienced laboratory in Pennsylvania (Precision Therapeutics) which both provided the assays and accepted Medicare reimbursement as payment in full.

The California laboratories that continued to provide chemoresponse assays with functional profiling (without Medicare reimbursement, possibly requiring patient payment for services) included Rational Therapeutics, Anticancer, Inc., and Weisenthal Cancer Group.

It looks like Novitas Solutions, Inc. (formerly Highmark Medicare Services) has arbitrarily made the decision, like Palmetto, GBA did in California, to discontinue Medicare payment for chemoresponse assays done by Precision Therapeutics in Pennsylvania.

The rationale for the non-coverage decision is totally bogus. It's a shame. The biggest thing is that the "expert reviews" upon which they rely on made no attempt whatsoever to determine the "accuracy" of the tests being evaluated.

They all used the phony, made-up criterion of test "efficacy" -- demanding rigorous proof that the use of the tests improves outcome -- which is a standard not achieved by any of the large number of laboratory tests currently used to assist in treatment/drug selection in oncology -- or for that matter, in medicine in general.

The only criteria ever used to evaluate laboratory or radiographic tests has been the accuracy of the tests. And this criterion was totally ignored in the reviews. They just made up their minds in advance that they didn't want to pay for the tests.

ASCO made up its mind in advance that it didn't want to have anything to do with the tests (for a lot or reasons, including the certainty that it would siphon patients away from their clinical trials). So they erected an impossibly high bar.

One of the major reasons academic cancer institutions don't like in vitro chemosensitivity test is that it may be in direct competition with their randomized controlled clinical trial paradigm - a fiercely defended relic of their ignorance.

Cell culture assay measure the "efficacy" of anti-cancer drugs. The randomized clinical trial measures the "efficacy" of anti-cancer drugs. And the new molecular testing rates the "efficacy" of population research vs rating the "efficacy" of drugs "actually" tested against an individual's cancer cells.

The oncologist’s trade group, American Society of Clinical Oncologists (ASCO) says oncologists should make chemotherapy treatment recommendations on the basis of published reports of clinical trials and a patient’s health status and treatment preferences. All the rigorous clinical trials identified are the best treatments for the “average” patient (do cancer cells like Coke or Pepsi). But cancer is far more heterogeneous in response to various individual drugs than are bacterial infections. The tumors of different patients have different responses to chemotherapy.

The ASCO tech assessments say that chemotherapy sensitivity and resistance assays (CSRAs) should not be used outside the confines of a clinical trial setting. The same people who maintain that assay-directed therapy should not be used until proven in prospective randomized clinical trials, are the same people whose entire careers are utterly dependent upon mega-trials 100% funded by pharmaceutical companies (that, plus fees from speeches they give for these companies), are the same people who control the clinical trials system, the grant review study sections, and the journal editorial boards.

No wonder ASCO doesn’t recommend the use of CSRAs (no matter how good they are) to select chemotherapeutic agents for individual patients outside of the clinical trial setting. Besides the authors of these tech assessments trying to invent a brand new criterion for validating a laboratory test, they’d like to have these tests in clinical trials. Tens of thousands of scientists pushing a goal of finding the tiniest improvements in treatment rather than genuine breakthroughs that fosters redundant problems and rewards academic achievement and publication above all else.

Why is ASCO (and others) protecting the status of treatments which are only marginally and minimally and inconsistently effective? This prevents serendipitous and fortuitous discovery. Truly effective treatment don’t need prospective randomized trials. Even ASCO points out, because the number of available chemotherapeutic agents has increased enormously over the past few years, the emphasis on the rationale for these assays have never been stronger. As the number of possible treatment options supported by completed randomized clinical trials increases, the scientific literature becomes increasingly vague for guiding physicians.

With all these uncertainties, would it be wrong to make a clinical decision based on CSRAs? Should it be denied to patients who walk in the door asking for it? Patients who want this testing, after a thorough discussion about the peer-reviewed studies and experience that supports it, should not be hindered by restrictive ASCO policy. I never heard that ASCO had been knighted a regulatory agency.

Until the controlled, randomized trialist approach has delivered curative results with a high success rate, the choice of physicians and patients to integrate promising insights and methods like chemoresponse assays, remains an essential component of this kind of treatment technology.

Michael Castro, M.D., stated on the Rational Therapeutics blog, "In 1992, the Church publicly forgave Galileo for his “crime” of the heliocentric theory…a lesson in the slow pace of circumspection by authoritative bodies… seems we haven’t yet overcome an analogous religious intolerance in medical oncology and I’m not holding out for an apology from ASCO any time soon, but eventually it may come… Certainly, the insistence on population medicine at a time when the technology for individualized medicine has arrived borders on religious intolerance, not the scientifically curious patient advocacy patients want and naively expect… I’m afraid this intolerance is buttressed by the economic incentives of giving drugs to as many individuals as possible – a double problem…."

https://www.novitas-solutions.com/polic ... 32571.html

World renowned Oncologists are challenging the cancer industry to recognize a Chemo-Screening test (CSRA) that takes the "guesswork" out of drug selection. One of the reasons medical oncologists dont like in vitro chemosensitivity tests is that it may be in direct competition with the randomized controlled clinical trial paradigm.


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  • 2 years later...

Robert A. Nagourney, M.D.

An article by Scott Gottlieb, MD, in Forbes (Medicare Nixes Coverage for New Cancer Tests), described Medicare reimbursement for new molecular diagnostics. As many readers are aware, there have been a growing number of diagnostic tests developed and marketed over recent years designed to identify and monitor the progress of cancer. Many of these tests are multiplexed gene or protein panels that identify prognostic groups using nomograms developed from prospective or retrospective analyses. The 21-gene Oncotype DX and related Mammoprint, are among the most widely used. Related tests for lung, colon, and other cancers are in development.

With the explosion of assays designed to personalize cancer care, comes the expense associated with conducting these analyses. Medicare, as the largest provider of medical insurance in the United States, is at the leading edge of cost containment. Not surprisingly, HHS has a jaundiced view of adding tests without clear cost benefit.

The issue is far broader than cost analysis. It goes to the very heart of what we describe as personalized medicine. Every patient wants the right treatment for their disease. Every laboratory company wants to sell their services. Where the supply and demand curve meet however, is no longer set by market forces. In this instance, third party reimbursers set the fee and the companies then need to determine whether they can provide their service at that cost.

The problem, as with all economic analysis, is meeting patient’s unlimited wants with limited resources. Two solutions can be envisaged. On the one hand, medical care progressively moves to a scenario of haves and have nots wherein only wealthier individuals can afford to obtain those drugs and interventions that are beyond the price range of most. On the other hand, care is rationed and only those treatments and interventions that rise to the highest level of evidence are made available.

While the subject of this article was sophisticated diagnostic tests, it will only be a matter of time before these same econometric analyses begin to limit the availability of costly drugs like highly expensive targeted agents. In a recent editorial published in blood, leading leukemia experts pointed out that 11 of the 12 recently approved drugs each cost $10,000 or more per month.

As we examine the rather grim prospect of unaffordable or rationed care, a glimmer of hope can be seen. Using expensive and relatively insensitive molecular diagnostic tests to select expensive targeted agents could be replaced by less expensive testing platforms. The dramatic, yet brief responses observed for many targeted agents reflect the shortcoming of linear thinking applied to the manifestly non-linear human biology, characterized by cross talk, redundancies and unrecognized hurdles. To address these complexities phenotypic analysis (the phenotype being the end product of genomic, transcriptomic and proteomic events) provide global assessments of tumor response to drugs, combinations and signal transduction inhibitors. These more discriminating results identify cellular response at the level of biology, not just informatics. While it is theoretically possible that high-throughput genomic analyses using neural networks and high throughput computer analyses may ultimately provide similar information, it is unlikely that most patients will have ready access to a Cray computer to decipher their results.

We need to stop working hard and start working smart. The answers to the many questions raised by the Forbes article regarding resource allocation in cancer treatment may already be at hand.

* The Cray computer is an American supercomputer

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Scott Gottlieb, MD

Medicare has sharply changed the way it pays for diagnostic tests, cutting payment rates and curtailing coverage for some new tests altogether.

The makeover in the way that Medicare reimburses molecular diagnostics has been foreshadowed for years, but was abruptly put into effect this summer.

Affected are the kinds of tests that probe for gene and protein markers found in our body’s tissues. These tests help doctors diagnose a multitude of diseases and monitor our response to drug treatments. They are used in a variety of medical settings. Some of their greatest promise has been in personalizing the treatment of cancer by tailoring drug therapies to a person’s unique tumor type.

The labs that perform the test are the same outfits that market them. The tests are typically sold as a laboratory service, rather than marketed as a medical device.

The new payment system has cut payment rates across the board, by an average of about 20% (and as high as 80% in some cases) from 2012 levels. Most of the new rates are being based on the work of one Medicare contractor, Palmetto GBA.

Hardest hit by the change, however, are many new diagnostic tests that aren’t yet a part of routine medical practice or may only benefit a small patient group, often with rare disease states. These diagnostics are being dubbed “tier 2” tests since they weren’t assigned discrete “codes” under the AMA’s new coding scheme.

In many cases, that also means that they haven’t been assigned a payment rate.

These tier 2 tests can try to file for Medicare payment under a so-called “miscellaneous” code for new tests. But that is often a dead end. In many cases, Medicare carriers have stopped paying for novel “tier 2” altogether, even tests that were previously reimbursed under the old scheme.

All of these tests typically probe for novel markers, or for a panel of (multiplexed) gene or protein markers whose combination of outputs are used to make predictions about things such as the potential for cancer to spread or respond to a medicine.

Previously, these tests were reimbursed under a “code stack” system that based payment rates on a sum of the cost of each of step used in conducting a particular test. Code stacking had a lot of problems. For one thing, the payment rates didn’t reflect the clinical value of a test, just the cost to perform it. The system also obscured from Medicare’s view what the agency was ultimately paying for.

When a bill arrived at Medicare, it merely listed the different markers that a particular test was probing for, and the laboratory steps being taken to identify these genes or proteins. Ultimately, the “code stack” didn’t reveal to Medicare what the test actually set out to do, and how doctors were using it.

So Medicare is replacing the ambiguous code stacks with a new set of discrete CPT codes that identify each common test by its own billing number. These codes are established by the American Medical Association at the behest of the Medicare agency. The AMA CPT Editorial Panel, which administers the development of new codes (but not reimbursement) for Medicare and all payers, made its first serious effort to come up with a new list of discrete codes back in 2010. After a long delay, the first tranche of 116 “tier 1” discrete codes finally went into effect January 1st.

As I wrote in an earlier article for Forbes, reimbursement for many of the tests were put on hold altogether while Medicare figured out what payment rates it wanted to assign to its new codes. Those rates are now starting to emerge, and the money is finally starting to flow again, although not all of the tests that fall under these “tier 1” codes are being reimbursed.

But the situation is even worse for tests that didn’t get one of the new codes. These novel tests don’t fit into one of Medicare’s new buckets. Many aren’t getting paid for.

This is having a profound impact on investment, and in turn, continued innovation and development. The policy change ends the established model for how novel tests got introduced into medical practice. With no suitable alternative, the new scheme will thwart the introduction of novel diagnostics and limit bets on new technology.

Labs traditionally don’t get paid for research and development. Nor are the sunk costs of R&D fully baked into the price of newly launched diagnostics. In this way, the pricing of diagnostic tests is very different than the pricing of drugs.

Except for a few exceptions, the intellectual property supporting a new diagnostic test is easy to engineer around. So it doesn’t support premium pricing for a new test.

As a result, most diagnostics get priced based on some measure of the cost of performing a test, not the cost it took to develop the novel diagnostic. So paying for diagnostic tests early in their product life cycle, before the clinical utility of a new test was fully demonstrated to Medicare’s approval, was a way of funding that R&D.

Early adoption of tests, often by clinical thought leaders at academic medical centers, wasn’t just a way to offset the cost of developing a new test. It also gave doctors a chance to start incorporating a new test as a part of medical practice. It enabled some doctors to practice medicine at its cutting edge. Typically academic doctors expert on a new marker were able to deploy a test and refine its role in medicine.

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Absent a new process for financing the development and introduction of new diagnostics, a lot of promising innovation could be put on hold. Yet all of these tests are an integral part of efforts to “personalize” the delivery of care — a branch of medicine that is supposed to improve clinical outcomes, and hopefully lower costs.

In this way, Medicare threatens to undermine the very sort of personalized medical practice that Congress and the Administration is trying to underwrite by reforming regulations at the Food and Drug Administration and through parts of Obamacare.

There’s also a much broader principle at stake: Medicare as a business partner.

The old coverage model had flaws. But it had been static for years. The payment model conditioned expectations and formed the basis for investment in new test.

Medicare’s abrupt change to that payment model has created a lot of uncertainty that’s putting new investment on hold.

The problem is that Medicare is no ordinary payer. Private payers emulate the agency’s coverage decisions. So Medicare’s ends up setting the market standard.

If the political class wants to put most of the reimbursement of healthcare under the thumb of government, it needs to pay particular care to how its coverage and payment policies affect incentives to new innovation. Medicare isn’t just another payer looking to ratchet down on payment rates in the name of cost containment.

Its decisions end up having a profound impact on investment and development of new products. In short, if Medicare is going to flex so much power owing to its broad reach and government mandates, it needs to be mindful of its impacts.

Medicare’s payment changes are reverberating through the medical marketplace. It has created all kinds of problems for patients and doctors.

Sometimes, doctors’ won’t have enough tissue to run tests on a tumor in series, one at a time as the treatment or diagnosis evolves. Doctors need to use the small sample they have to get all the information right up front. But some of these sorts of “multiplexed” tests that probe for multiple gene mutations off the same sample of tissue are precisely the novel sorts of tests that are in a gray area right now.

Whether test will get covered also depends on where the laboratory doing the test is located, creating a very uneven marketplace for providers and patients.

Some regional Medicare carriers such as Palmetto GBA (which covers California; and North and South Carolina) have set rates that are close to the previous payment levels received by the largest labs for the simplest versions of common tests (versions that might only probe for one or a few variations of a marker). The molecular labs for LabCorp (NYSE:LH) and Quest (NYSE:DGX) are each located in Palmetto’s geographic area. So the carrier has more experience than others in the coverage of molecular diagnostics. Palmetto has also been more flexible than other Medicare contractors in continuing to pay for some “tier 2” tests.

But Medicare carriers in other parts of the country have been much slower to set rates for the 116 standard tests, and are denying coverage altogether for tests that don’t have one of the unique codes. For example, the Medicare carrier CGS, which oversees parts of the Midwest, is telling companies that it won’t pay for molecular tests that haven’t been incorporated into standard treatment guidelines, been substantiated by major clinical articles, and have become a routine part of practice.

That means just about any new test won’t get covered, and even some established tests might not fit the narrow criteria CGS is using.

A list of some of the tests that Medicare won’t pay for can be found on the Palmetto website. Palmetto is one of the few carriers publishing its “non-coverage” decisions.

At the core of this is a more central debate: What level of evidence should a test demonstrate before Medicare will pay it for.

What Medicare is saying, through carriers like Palmetto, is that tests need to show “clinical utility” before the agency pays for it. That means that labs need to prove that the test results will change treatment in a way that improves patient outcomes.

At first blush, this might sounds reasonable. But it’s an imprudent standard that’s at odds with the way that diagnostic tests get used as a part of the practice of medicine.

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Diagnostic tests typically supply information that’s fitted into a mosaic of other data. All of this information, combined, helps inform an overall judgment about a patient’s condition and a proper course of treatment. It’s rare that the result of a single test is – in isolation — determinative in guiding a treatment decision. It’s even less common that the outcome of a single test will itself improve a patient’s outcome.

To take a simple example, consider a stethoscope that helps a physician hear a patient’s lungs. The information gleaned from that exam may help the doctor judge that a patient has pneumonia, or heart failure. But by itself, the stethoscope exam can rarely nail the diagnosis, nor select the right treatment.

The stethoscope yields incremental information that helps tip the balance of a physician’s judgment in one direction or the other. It adds to the clinical mosaic.

The problem is that Medicare’s new requirements thwart the introduction of almost any new test. If a test has to show that it improves clinical outcomes before it gets introduced to doctors and patients, it won’t get introduced in the first place.

The way that the best molecular tests have traditionally become a mainstream part of practice is through deliberate validation from real world use by providers with expertise around a particular marker. The tests are often first performed by a small number of clinical experts who deploy the tests at academic centers of excellence.

By allowing molecular tests to enter the market, they can gain adoption among a small number of clinical thought leaders who are closest to a particular marker. This process of slow introduction and integration into practice has enabled new technology to gain the sort of validation the Medicare program seeks. That is how tests for now more mainstream markers KRAS and EGFR first earned more widespread acceptance. It’s a model that has worked to enable new science to be deployed into clinical practice, by doctors best equipped to make good use of them.

The Medicare agency may think that this process has led it to pay for some molecular tests that didn’t pan out, or reimburse tests before the science fully supported their use. They would be right.

Yet molecular tests represent only about 1% of total spending on laboratory services. It is a fraction of a fraction of the agency’s annual spending.

That doesn’t mean it should be ignored. But the modest spending means that Medicare has the ability to be cautious in how it addresses this category of spending, especially given the potential for this technology to lower costs by enabling the more targeted delivery of medical care. The agency’s abrupt decision to step back from the prior structure has put the market for new technology into turmoil.

If proof of clinical utility is required before the Medicare agency will reimburse a new test then most of these technologies will simply go undeveloped.

This was always the risk to product developers once the new coding scheme went into effect. Medicare was always likely to use its new codes in a punitive fashion, to set coverage policies around the clinical circumstances where certain tests could be used, and what tests it didn’t believe merited any coverage. Now Medicare will be in the position of setting the standard for diagnostic testing, rather than leaving these decisions to be meted out by patients, providers, and the marketplace.

The new transparency this coding system affords is a powerful tool to the agency. It gives Medicare the leverage to further embed itself into decisions around when it judges certain tests to be clinically useful. And when it doesn’t want to pay for them.

Dr. Gottlieb serves as a director to two diagnostic companies that work in clinical areas that have not been affected by the new payment policies.

Citation: Medicare Nixes Coverage For New Cancer Tests. Scott Gottlieb, Forbes. June 05, 2013.

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Scott Gottlieb stated in the Forbes article that most of the new rates are being based on the work of "one" Medicare contractor, Palmetto GBA.

Efficacy doesn’t mean proof that treatment decisions are changed; efficacy means that you prove that patient “outcomes” are improved as a result of the changed treatment decisions. It hasn’t been proven to improve outcomes and that is what is meant by “efficacy” in this context.

The standard used to judge the utility of laboratory and radiographic tests has always been “acceptable accuracy of clinical correlations” and “clinical utility.” Demanding (for demanding sake) proof of “efficacy” as opposed to proof of “accuracy” is completely unprecedented for laboratory tests in cancer (you just don’t make up another criteria for the sake of making it up).

Cancer is a disease which has always been managed on the basis of “best evidence” and not on the basis of “conclusive evidence,” which is lacking in virtually all situations in clinical oncology, including those situations in which clinical trials to identify the best treatment for the “average” patient have been performed and published and meta-analyzed.

Back in 1999, the Medicare Advisory Panel concluded that cell culture assay tests (functional cytometric profiling) offered “clinical utility.” After listening to detailed clinical evidence, the Medicare Coverage Advisory Committee found that these assay systems can aid physicians in deciding which chemotherapies work best in battling an “individual” patient’s form of cancer.

Although Medicare had been reimbursing for the cell culture drug “resistance” part of the tests since 2000, it wasn’t until the beginning of 2006 that they abandoned the artificial distinction between “resistance” testing and “sensitivity” testing and provided coverage for the whole FDA-approved kit. Their decision had been made that the assay is a perfectly appropriate medical service, worthy of coverage on a non-investigational basis.

Until Palmetto GBA came along in 2010!

Even though the new Medicare contractor, Palmetto GBA, arbitrarily reversed positions to reimburse the assays, the previous CMS administrator for Medicare, NHIC, let the cat out of the bag. They cannot try to put it back in. Previous Medicare contractors for California made the determination that chemoresponse assays qualified as a Medicare covered service, with the decision that the assays were a perfectly appropriate medical service, worthy of coverage on a "non-investigational" basis. Too many patients know about something the cancer establishment tried to keep under a breadbox for too many years.

It was Medicare contractor Palmetto GBA, which is a subsidiary of Blue Cross/Blue Shield of South Carolina, that provides coverage for several states, unexpectedly posted a notice on its web site that it would no longer pay for Roche's Avastin medication for treating breast cancer after January 29, 2010. But Palmetto GBA did an embarassing about face and rescinded its decision.

Palmetto GBA also provides coverage in Ohio, West Virginia, Nevada, California and Hawaii, apparently acted too hastily. Some have said that Palmetto did not go through the usual motions before posting its decision, which was quickly scrubbed from its web site, and allow for public comment. And its action annoyed officials at the Centers for Medicare & Medicaid Services (CMS), since Roche's Genentech unit is appealing the decision by the FDA, which assured patients that Medicare would continue to cover Avastin while the appeals process played out.

Did Palmetto's indiscriminate action, without having an extensive, transparent tech assessment of the evidence annoy officials at CMS? No! Did Palmetto GBA do an embarassing about face and rescind its decision? No! CMS allowed Palmetto GBA to arbitrarily and capriciously stop reimbursements to cancer patient services. Business is business, but at a certain point, business is also about people and cancer business is about cancer patients.

It looks like Novitas Solutions, Inc. (formerly Highmark Medicare Services) has arbitrarily made the decision, like Palmetto, GBA did in California, to discontinue Medicare payment for chemoresponse assays done in Pennsylvania.

The rationale for the non-coverage decision is totally bogus. It's a shame.

According to this same Dr. Scott Gottlieb, former senior official at CMS, CMS doesn't have a single oncologist on staff, yet since the year 2000, they've issued 165 restrictions and directives on the use of cancer drugs and diagnostic tools. And CMS has radically expanded its authorization for use of cancer drugs by putting off-label decision making in the hands of compendia writers in the private sector, many of whom are on the payrolls of the companies that make the drugs.

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  • 2 weeks later...

There is no stopping the cuts to Medicare's reimbursement of cancer drugs mandated by the federal budget sequestration, according to a June 3 letter from the Centers for Medicare and Medicaid Services (CMS) to members of the US Congress.

The cuts have infamously caused cancer clinics across the country to turn away Medicare patients.

The letter from CMS to members of Congress who had appealed for a workaround of the cancer-specific cuts was first reported yesterday by the Huffington Post.

In the letter, CMS explained to Congress that it does not have the ability to exempt the cancer drug reimbursement from the general across-the-board cuts.

The letter was prompted by a request in April from US Representative Pete Sessions (R-Texas) along with 123 other members of Congress. They asked CMS if the cancer drug payment cuts were a violation of law or if they could be eliminated by "any available flexibility," according to news reports.

The cuts are "self-defeating," said Ted Okon, MD, executive director of the Community Oncology Alliance (COA) in April. In an interview with Medscape Medical News at that time, he explained that Medicare patients who are turned away from private clinics will have to go to hospitals to seek treatment, which will result in higher Medicare costs.

The sequester cuts apply to payments for Medicare Part B drugs and the 6% administrative fee. Before the cuts, Medicare reimbursed clinics the cost for those drugs at their average sales price plus a 6% fee for administrative services. The sequester cuts reduce that services fee to 4.3%, and reduce the reimbursements for the drugs as well.

Even before the current cuts, this payment scheme failed to adequately reimburse community cancer clinics for the total costs of essential therapies, according to a press statement from the COA and other cancer organizations. There are significant operating expenses related to procuring, storing, preparing, and handling Part B drugs, the statement said.

Excerpt From the June 3 CMS Letter:

"The Department of Health and Human Services assessed whether the law allows discretion to administer the sequestration reductions in a manner that is different from the across the board approach that has been used to implement it. We do not believe that we have the authority under the Budget Control Act of 2011 to exempt Medicare payment for Part B drugs. Exemptions from the sequestration are specified in 2 U.S.C. sections 905(g) and (h) and 906(d)(7), which do not encompass payment for Medicare Part B drugs. The Office of Management and Budget memorandums M-13-03 and M-13-06 referenced in your letter pertain to any flexibility regarding the agency's budgetary resources for internal operations such as the hiring of new employees. This is separate from the agency's administration of Medicare payments, which are subject to the sequestration reductions, as noted above."

Citation: No Stopping Sequestration Cancer Cuts, Says CMS. Medscape. Jun 06, 2013.

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Robert A. Nagourney, M.D.

Before I attended the ASCO meeting in Chicago, I penned a blog about a Forbes magazine article that described increasing restrictions placed on access to newer diagnostic tests for patients covered by Medicare.

Among the presentations that I attended at ASCO, (more to follow), was a study entitled “The cost per patient of deviations from evidence-based (EB) standards of oncology care.” The presentation caught my eye as it addressed the cost of care associated with adherence to evidence-based guidelines versus treatment plans that varied from these guidelines. Utilizing a database developed to analyze the cost of treatment, these investigators explored costs incurred when physicians used treatments that were not within the confines of the evidence-based formulae.

A total of 2,775 consecutive patients had their treatment plans (TPS) submitted and 730 (26 percent) of these patients were described as receiving, “unjustified, non-Evidence Based Treatment Plans.” The authors then examined the costs associated with these treatments. Their phraseology for treatment that varied from guidelines was those “that did not confirm to Evidence Based standards or could not be medically justified.” Apparently the practice on the part of qualified, skilled oncologists of making drug choices that vary from evidence-based medicine is synonymous with “not being medically justified.” Their conclusion “conservative estimate(s) of the average per patient overspend (first order) on inappropriate treatment validates the potential for quality care to lower cost and deliver huge value to patients, physicians and payors.”

What’s wrong with this picture?

First, clinical oncology as it is practiced today through the available guidelines (NCCN, etc.) has failed to improve 5-year survival for advanced cancer in 50 years. Thus, this “regression to the mean” thinking, if followed, would increasingly demand that medical oncologists scrupulously adhere to largely ineffective therapy guidelines.

The second problem is that this analysis provides no data on response, time to progression, survival or toxicity. For all we know, the 26 percent of patients who received non-evidence based treatment plans may have been the best responders with better survivals and lower toxicities.

Finally, in keeping with the Forbes article previously described, medical oncologists are rapidly abdicating control of their cancer patients’ treatments in favor of econometric analyses. Should this trend continue, patients may soon be forgoing the opinions of their MDs, in favor or the opinions of MBAs.

The cost per patient of deviations from evidence-based standards of oncology care.


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The use of statistical approaches as the basis for clinical trial design and FDA decisions regarding safety and efficacy has been an enormously damaging wrong turn in medical science.

The agency’s favorite trial design, the randomized controlled trial, is actually a very simplistic and quite weak comparison of the median outcome experienced by two populations, giving us very little useful information for treating individual patients in medical practice, and preventing the emergence of new, better, more ethical and productive ways to evaluate safety and efficacy of medical treatments.

It is said by some that the belief in statistics as the only way to learn anything about a medical treatment is indeed cult-like, and has no real basis in sound scientific practice or the general guidelines provided by the scientific method. The cult-like belief is actually the closed-minded irrational faith in randomized controlled clinical trials, the statistics they produce, and a metric called a p-value (the statistical significance measure) held by many clinical researchers and virtually all of the drug review offices at the FDA.

The name of this faith is “evidence-based medicine,” a term that sounds great but is actually code for medicine based solely on statistical significance garnered from randomized controlled trials. The agency will bend their statistical significance requirements when hypothesizing that a treatment has risks, but almost never does when considering the efficacy of a treatment.

Randomized controlled trials are not the solid scientific tool the cultists would like you to believe they are, and if your doctor is prattling on about how all decisions he makes regarding your care are driven by evidence-based medicine, you should consider getting another doctor, because yours is literally 000 with your health based on “odds” that you are just like the median patient in some population of patients tested in a clinical trial.

The chance that you are that median patient is actually quite small, but the statisticians at the FDA won’t tell you or your doctor about that statistic – and as a result, your doctor is highly likely to give you the wrong treatment, and your insurance company is highly likely to more or less require that your doctor do that. One-size-fits-all taken to an extreme.

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