Companion Diagnostics Spur Precision Medicine but Face Reimbursement Challenges

As precision medicine continues to evolve, companion diagnostics (CDxs) are increasingly being used to guide sometimes life-or-death treatment decisions. Their aim is to improve clinical outcomes by using predictive biomarkers to target patients, especially those with cancer, who could respond well to particular therapeutics. But industry experts cite a disconnect at times between FDA approval and payer reimbursement, slowing the potential impact of a burgeoning array of CDxs and prompting pharma companies to take proactive steps to market them.

“We’ve seen steady advancements in the reimbursement landscape for diagnostics in the U.S. over the last few years, but coverage determinations can still take between one and two years post-FDA approval,” says Alasdair Milton, a managing director in KPMG's Healthcare & Life Sciences Strategy practice. “Private payers typically look to decisions made by CMS and also to leading oncology guidelines from the likes of ASCO [i.e., American Society of Clinical Oncology] and NCCN [i.e., National Comprehensive Cancer Network].”

The issue of CDx reimbursement “obviously drives adoption,” adds Edward Abrahams, Ph.D., president of the Personalized Medicine Coalition, a Washington, D.C.-based education and advocacy organization. Its 14 stakeholder groups include drug companies, diagnostics companies, patient groups, venture capital firms and payers.

“Without reimbursement it’s very difficult to penetrate the market, and there are more than 300 drugs with biomarker strategies today compared to five such drugs in 2008,” Abrahams says. “One-quarter to one-third of all drugs approved in the last five years have biomarker strategies on their labels, which doesn’t necessarily mean it’s a CDx but tells the doctor to check for certain things” in weighing therapeutic benefits and risks.

By some estimates, the CDx market will steadily increase to top $6.5 billion globally by 2025 due to a heavy pipeline of products and expansion beyond oncology therapies. Less conservative estimates forecast the global market for CDxs will reach $10.7 billion by 2026, basically doubling this year’s market size.

A CDx is described by the FDA as an “in vitro diagnostic device or an imaging tool that provides information that is essential for the safe and effective use of a corresponding therapeutic product” — and its use is stipulated in the product’s labeling. In other words, the therapeutic product is considered safe and effective only if used with the CDx.

So, typically a CDx is linked to a specific therapeutic product, considered a prerequisite to its use, and often follows a co-development pathway. By contrast, a complementary diagnostic’s use is considered optional and may be associated with a class of drugs.

The earliest example of companion pairing occurred in 1998 with the FDA’s simultaneous approval of Herceptin (trastuzumab) from Genentech USA, Inc., now a member of the Roche Group, with Dako’s HercepTest, an assay used to determine human epidermal growth factor receptor 2 (HER2) overexpression in breast cancer tissue.

The number has risen steadily since then: As of Oct. 25, the FDA listed 48 cleared or approved CDxs including in vitro and imaging tools deemed essential for the safe and effective use of 52 therapeutic products for 136 indications.

“These statistics indicate that companion diagnostics will be critical for the continued advancement of personalized medicine,” says Lauren-Jei McCarthy, an FDA spokesperson. “The FDA’s role in reviewing tests to assure they are accurate and reliable is critical to protecting the public health, especially tests that could guide patients to the wrong therapies.”

While the vast majority of the approved CDxs are paired with cancer therapeutics, McCarthy notes one imaging companion diagnostic for non-transfusion-dependent thalassemia, an inherited blood disorder: Resonance Health's FerriScan. This MRI-based diagnostic test, which measures liver iron concentration, is used in conjunction with Novartis Pharmaceutical Corp.’s Exjade (deferasirox).

CDx Costs Run Low to High

Costs for diagnostic tests vary widely, putting some of the more expensive CDxs under careful scrutiny. For example, Foundation Medicine, Inc.’s FoundationOne CDx, a broad genomic profiling test that searches 300-plus genes for cancer-relevant mutations in solid tumors via tissue biopsy, has a list price of $5,800.

Another version of the test called FoundationOne Liquid CDx, a liquid biopsy that analyzes 300-plus genes from a blood draw, is FDA approved as a companion diagnostic test for nine drugs targeting four types of cancer. This version of the test also lists for $5,800, and it, too, uses next-generation sequencing-based technology.

A September 2020 report commissioned by the American Cancer Society Cancer Action Network and LUNGevity Foundation found that while most commercial payers covered and paid for select individual biomarkers, fewer payers covered emerging biomarkers. The report also cited “inconsistent coverage” for FoundationOne CDx due to “continued payer skepticism that large [multigene] panels meet the clinical utility threshold.”

“Depending on the tumor type, the number of recognized biomarkers with clinical utility may number fewer than five,” the report says. “It is difficult, therefore, to justify coverage of a panel with 50 or more genes. Consequently, payers may consider the entire test to be E&I [i.e., experimental and investigational] if all genes on the panel do not have established utility. Others will cover the test but negotiate payment only for those medically necessary biomarkers.”

Stacey Brown, senior director of payer marketing for Foundation Medicine, tells AIS Health, a division of MMIT, that payer coverage for comprehensive genomic profiling (CGP) “remains uneven.” But she adds that “support and coverage adoption has grown significantly in recent years, primarily for FDA-approved CDxs like FoundationOne CDx and FoundationOne Liquid CDx.”

According to Brown, FoundationOne CDx is the first FDA-approved tissue-based broad CDx “that is clinically and analytically validated for all solid tumors.” Currently, FoundationOne CDx has gotten the agency’s green light as a companion diagnostic across 28 indications associated with 26 therapies in seven cancer types. “Several of our companion diagnostic approvals…are associated with therapies indicated across multiple cancer types,” she notes.

“Health plans often require that an FDA-approved companion diagnostic indicate appropriateness for a therapeutic in order for that therapeutic to be covered,” she says. “However, in many cases these same insurers do not cover the associated FDA-approved companion diagnostic(s). This creates an interesting challenge — in some cases, physicians may be hesitant to order the companion diagnostic testing indicated for a patient, which could result in that patient not having access to the resulting therapies from which they may have benefited.”

As of Nov. 1, Medicare covers all Foundation Medicine tests for qualifying patients, Brown says, while TRICARE, the U.S. military’s health care program, covers FoundationOne CDx and FoundationOne Liquid CDx “in accordance with their FDA-approved indications.” In addition, 60-plus commercial health plans cover one or more of Foundation Medicine’s CPG tests (the two CDxs and FoundationOne Heme, a lab-developed test for blood cancers).

“While the use of a CGP test to inform treatment decisions is supported by a considerable body of evidence, some private payers feel further evidence — including randomized, controlled trials — is needed to demonstrate the clinical utility of the broader CGP approach to single gene or ‘hotspot’ tests,” she says.

Against this backdrop, Foundation Medicine continues “to educate payers and other critical stakeholders as to the existing utility of comprehensive genomic profiling in oncology clinical practice, particularly in its ability to help match patients to appropriate therapies, while simultaneously avoiding (expensive) treatments that are less likely to be effective,” she adds.

Brown notes that in addition to the company’s efforts to secure coverage for Foundation Medicine services, it continues to “seek contracted provider status with health plans so patients can access covered testing at their in-network benefit levels.”

“We do work closely with payers. We have a team that does so,” a Foundation Medicine spokesperson tells AIS Health. She, too, notes that the company’s CDxs are covered by Medicare.

A CMS spokesperson explains that CMS “took action to advance innovative personalized medicine for Medicare patients with cancer” in March 2018 by finalizing a national coverage determination that covers diagnostic laboratory tests using next-generation sequencing for patients with advanced cancer. FoundationOne CDxs fall into this category.

But the CMS spokesperson stresses that FDA approval does not ensure Medicare payment of a drug, device or diagnostic. “An item or service that [the FDA deems] is safe and effective does not necessarily demonstrate a health benefit in the Medicare population. Medicare patients have different clinical profiles and considerations due to the complexity of their medical conditions and related treatments compared to other age groups.”

Under fee-for-service (FFS) traditional Medicare, if the CDx meets other statutory requirements and there is not a national Medicare policy, a coverage decision remains at the discretion of the local Medicare administrative contractor, notes the CMS spokesperson.

Abrahams, of the Personalized Medicine Coalition, says Medicare’s general approach of reviewing one diagnostic at a time “remains challenging, and the one thing PMC wants to do is understand better payer thinking about using diagnostics to inform treatment…to make payers and providers more receptive to personalized medicine.”

Policies Pack Criteria for CDx Use

As for private commercial insurers, Elan Rubinstein, Pharm.D., principal of EB Rubinstein Associates, a managed care and pharmaceuticals consulting firm based in Oak Park, Calif., says that “from what I've seen, looking at this on an ad hoc basis, insurer coverage of companion diagnostics appears to vary. Insurers write coverage policies that establish the circumstances under which companion diagnostics are covered.”

Independence Blue Cross, for example, says in its clinical guidelines effective Jan. 1, 2021, for the lab management program, “not all indications for medications with an FDA-approved companion diagnostic test require the results of that test prior to prescribing.”

Moreover, the Philadelphia-based insurer cites certain diagnostic tests that “would not be considered medically necessary when prescribed for indications that do not require a companion diagnostic,” including myChoice CDx. This next-generation sequencing-based assay developed by Myriad Genetic Laboratories, Inc., identifies individuals with ovarian cancer who may be eligible for treatment with GlaxoSmithKline plc's Zejula (niraparib) or AstraZeneca and Merck & Co., Inc.'s Lynparza (olaparib).

Independence says myChoice testing may be considered when all of the following criteria are met: The plan member has an ovarian cancer diagnosis; treatment with a medication for which myChoice is an FDA-approved diagnostic is under consideration; the FDA label for the drug and indication being considered says CDx testing for homologous recombination repair (HRD) status is necessary for patient selection; the member does not have a previously identified germline or somatic mutation in either BRCA1 or BRCA2; the member does not have a known BRCA mutation in the family; and the “rendering laboratory” is a qualified provider of service per the health plan’s policy.

Independence points out in its guidelines that although specific CDxs “may be identified in the FDA label for a new drug approval, similar laboratory-developed tests performed by a CLIA [i.e., Clinical Laboratory Improvement Amendments]-certified laboratory are generally accepted as alternatives that can typically provide the required information.”

But a report released Oct. 22 by The Pew Charitable Trusts offers a cautionary note, citing concerns about lagging federal oversight of the increasingly complicated market for in vitro diagnostic tests, which use human samples such as blood or saliva to detect the risk or presence of certain health conditions.

Aside from FDA-approved or cleared tests, according to the Pew report, an unknown number of lab-developed tests (LDTs), which is a type of in vitro diagnostic, enter the market without agency review. “In some cases, after FDA approves one companion diagnostic, labs create follow-on versions of those tests that they claim can identify the same mutation.” But the report points out that individual labs “often have different approaches to analyzing samples,” and some LDT developers “claim to test for additional mutations that have not been adequately reviewed to predict drug response.”

The upshot is “the same patient may get different results depending on the LDT used, receive ineffective therapies for a condition, or miss out on more beneficial one,” Pew says, noting that many cancer therapies have serious side effects, compounding the harm for patients getting inappropriate treatment.

Big Pharma Partners on CDxs

Big pharma is heavily involved in the manufacture of CDxs. Roche, the Swiss biotech/pharma giant, for example, says it has worked with nearly 200 pharma and biotech companies to develop and commercialize predictive assays for cancer drugs.

In its third-quarter 2021 earnings report, released Oct. 20, Roche said that its year-to-date sales growth was driven by its diagnostics division. That unit reported $13.3 billion in sales this year as of Sept. 30, up from $9.7 billion for the year-ago period, while its pharmaceuticals unit posted $33.4 billion over the same period, down slightly from $34.3 billion. While much of the diagnostics growth was attributed to COVID-19 and routine testing, Roche cited strong growth across the division, including CDxs.

And the market is only growing. KPMG’s Milton points out a significant change contained in the FDA’s April 2020 guidance to industry on developing and labeling in vitro companion diagnostic devices for certain oncology therapies.

“FDA final guidance says if the CDx can tick certain boxes, it can be used across the entire class of drugs, not just one drug,” Milton says. This means that diagnostics manufacturers “may see greater use of their test as more therapeutics launch into that particular class,” he says. “For therapeutics developers, this guidance won’t change the amount of data needed to prove clinical validity, and so adoption of this approach is likely to be limited, at least in the near term.”

Specifically, the agency’s guidance says in part, “when it is scientifically appropriate, FDA supports developers of companion diagnostics to develop their products (or pursue broader labeling for approved companion diagnostics) in a way that results in broader labeling for their products (i.e., for a specific group of oncology therapeutic products).”

Liz Mansfield, Foundation Medicine’s vice president of regulatory affairs, responding to the FDA’s guidance, says that “the class or group claim concept for a companion diagnostic that is approved across multiple drugs may present opportunity for greater efficiency in the regulatory process and ensure patients and their providers have comprehensive information on which therapies might work for them.”

PBM CEO Says He Expects CDx Market’s Growth

Mesfin Tegenu, CEO and chairman of RxParadigm, a Delaware-based PBM, says the CDx market “is naturally expected to grow as a result of development of new biomarkers for different diseases, as well as higher demand for customized therapy and unmet medical needs.”

As Tegenu explains it, within a plan’s prior authorization criteria, there is generally a reference to the CDx based on FDA-approved labeling. Coverage for the CDx would be dependent on a payer’s benefit structure and whether the plan chooses to cover the linked therapy, for which providers would follow its labeling.

Tegenu, explaining the importance of covering such diagnostics, says that “despite the pharmaceutical industry aiming to develop therapies to treat and potentially cure diseases, patients continue to fail to respond to standard therapies, have side effects or develop resistance to the current regimen. Putting focus towards companion diagnostics where available will target a specific group of patients for testing and treatment, allowing for greater safety and efficacy for a particular therapeutic product and progression towards personalized medicine.”

As drug and diagnostics companies aim toward getting coverage for CDxs, he maintains, they must focus on “working with the payers and understanding their benefit structure and coverage policies based on line of business.”

How Does Managed Care Fit In?

When it comes to payer outreach, Merck, for example, “did a lot to deal with this issue. Others argued it was just a way to assure Keytruda [(pembrolizumab), a Merck cancer immunotherapy] would be used,” says Randy Vogenberg, Ph.D., principal at the Institute for Integrated Healthcare (IIH), a health care solutions advisory firm. He asserts that CDx reimbursement often boils down to “lots of medical and marketing politics involved that really should not be.”

When asked whether he views a trend toward this type of paired drug/diagnostic approval by the FDA, Vogenberg replies, “yes and no.…Diagnostic certainty has always been part of drug development and FDA submissions, but having companion diagnostic labeling or [the] requirement to use it remains controversial.”

The bottom line, according to Vogenberg, is that appropriate diagnostics based on physician assessment and clinical workup typically seem to be covered. He adds that the total cost of care should be calculated by including diagnostic testing, as well as the drug and its administration.

Despite the movement toward vertical integration of PBMs and health plans and efforts to integrate medical benefits to pay for the CDx and pharmacy benefits to pay for the drug, “their infrastructure is still antiquated,” Vogenberg says. “If you’re not working together, it becomes very awkward and cumbersome, and in the meantime, technology advances and CDxs are developing.”

“It’s going to be more and more of a problem for managed care because the genie is out of the bottle on this,” he says. New CDx testing “is coming fast, and it’s harder to stop it.”

The bottom line, says Vogenberg, is that the “FDA will approve these products. The question is, are they going to be paid for by insurance, or are people going to pay for it out of their pockets? The clash is managed care doesn’t want to change,…and the FDA is bringing more to market and putting pressure on payment.”

Regulators are approving CDxs “at a rapid rate, and it’s hitting a brick wall on the financial side.”

Contact Abrahams via Christopher Wells at cwells@personalizedmedicinecoalition.org, Brown and Mansfield via Erin Smith at ersmith@foundationmedicine.com, Milton via Bill Borden at williambordenjr@yahoo.com, Rubinstein at elan.b.rubinstein@gmail.com, Tegenu at mesfin.tegenu@rxparadigm.com and Vogenberg at randy@iih-online.com.

By Judy Packer-Tursman