The Role of Companion Diagnostic Testing in Payer Decision Making

Jerry Conway
Published: Monday, Mar 18, 2013

Author

Jerry Conway
Jerry Conway
As the saying goes, “When one door closes, another door opens.” And for the pharmaceutical industry, that translates to a transformation toward targeted therapies over the one-size-fitsall, blockbuster model of drug development and commercialization.

Despite the best efforts of the pharmaceutical industry to develop potentially curative approaches to diseases, such as cancer, many patients fail to respond to standard therapies, experience adverse events, or develop resistance to prescribed treatments. Payers have developed many strategies to effectively manage this reality, including the development of formularies, pathways, differential copayments, and support for generics; however, the process has been a continuous challenge.

Although the pharmaceutical industry adjusts to the current patent cliff and an increasingly payer-driven environment, personalized medicine is emerging as a critical game changer. A more complete understanding of cancer biology and the new tools complementing the field of companion diagnostics (CDx) offer the pharmaceutical industry the ability to target subsets of patients for testing and treatments— unleashing the potential for greater safety and efficacy, accelerated regulatory approval, and the possibility for value-based reimbursement. Payers are intrigued, yet remain cautiously optimistic.

A strategic decision to build a CDx program is a complex one. For top-performing pharmaceutical and diagnostic companies incorporating CDx into strategy, preparing for success involves developing consistent criteria and protocols to ensure success within budget.

A focus on biomarkers may help drive clinical trial enrollment, overall treatment efficiency, and a better understanding of previously failed therapies, all of which will likely help to accelerate approvals of life-enhancing and cost-effective therapies. For example, Novartis’ failed drug, lumiracoxib (Prexige), may be resubmitted to the FDA with a CDx. If approved, this would be the first time a “failed” drug has been rescued by using a CDx.1-4

There is an increased awareness in the pharmaceutical industry that drugs must be more “personalized” to optimize their effect and cost savings. Payers are starting to support this movement. According to Ira M. Klein, MD, MBA, chief of staff, Office of the Chief Medical Officer at Aetna, “Let’s not look at the mean survival for a new drug…let’s look at who got 12 months additional survival, and who got almost none. Then, let’s ask if we can define another companion diagnostic to treat the right people.”

There are only approximately 40 drugs in the United States associated with CDx. In the past 5 years, most of the major pharmaceutical companies, including Abbott, Pfizer, Novartis, Bristol-Myers Squibb, Boehringer Ingelheim, and AstraZeneca, have incorporated CDx into product strategy, as exemplified by the cancer drug development pipeline where there are more than 500 compounds targeting over 140 genomic alterations in trials. Many, once successfully commercialized, could result in a rapid proliferation of CDx into the cancer clinic.

Business Model Issues

A trend toward codevelopment of drugs and CDx stands in stark contrast to siloed development. Linking a molecular test to drug response requires a clinical trial. Ideally, codevelopment programs are initiated early in trials, but tests are often an afterthought. This paradigm is changing as more codevelopment successes have become public, and the pressure continues to mount on pharmaceutical companies to replace brand name medications coming off patent protection.

Divergent business models make commercialization of CDx difficult. Ironically, many diagnostic tests have been rewarded with more favorable reimbursement as a laboratory-developed test (LDT) than those that have been successfully cleared by the FDA. Additionally, it is unclear to most diagnostic companies how they will be compensated for the costly effort required to complement the pharmaceutical industry’s efforts, leaving many companies leery about entering into such arrangements.

Submitting a diagnostic with a drug might increase the therapeutic’s chances of being approved, and perhaps drive accelerated timelines. There have been several legislative proposals, such as the MODDERN Cures Act, which create additional incentives for such partnerships. As pressure mounts on traditional diagnostic testing reimbursement, some diagnostic companies are starting to leverage their expertise via codevelopment arrangements with the pharmaceutical industry, thus securing some value-based revenue that offsets revenue declines from the traditional clinical testing line of business.

Regulatory Challenges

The lack of standards, or a road map, for evidence- based development, commercialization, payer coverage, and value-based reimbursement presents a unique challenge to diagnostic development efforts. When considering a CDx partnership, trial and error often prevails in working through the process with the FDA. In July 2011, the FDA issued a draft guidance document for discussion about this hurdle; however, to date it has not been finalized.

That’s not to say that the FDA hasn’t made progress. It is increasingly more common for the FDA to change a drug label to include pharmacogenetic information. Of the 40 or so drugs currently associated with diagnostic tests, the FDA requires a non-branded CDx to be used for only approximately five. Some drugs have updated labels that include recommendations to use a test (eg, warfarin), whereas the majority only have updated information about the possible genetic link to side effects and optimal dose.

For example, the FDA changed the labeling of colon cancer drugs cetuximab (Erbitux) and panitumumab (Vectibix) to be prescribed only to people with nonmutated forms of the KRAS gene. It’s unclear how useful updating labels with recommended or informational items will be. Although irinotecan labeling now includes FDA recommended genotyping for mutations in the UGT1a1 gene that cause increased susceptibility to severe diarrhea in patients with cancer, the label doesn’t require it.

Many industry insiders have said that stronger prescriptive labeling is needed to make sure tests, such as those to genotype for mutations in the UGT1a1 gene, are actually used to optimize drug therapy. Additional regulatory guidance on CDx development is urgently needed for the promise of companion diagnostic/pharmaceutical development to be realized.

Access and Adoption

Of course, what eventually matters is whether doctors can access and utilize CDx tests in the clinic. And, even though some CDx tests have been approved by the FDA, proving real-world efficacy and cost-effectiveness has been elusive. In addition, if only FDA-cleared tests were allowed to be run as a condition of drug coverage, patient access would likely be compromised because many laboratories would choose not to run the approved in vitro diagnostic test kit, instead opting to develop and perform an internally validated Clinical Laboratory Improvement Amendments (CLIA)–regulated LDT version.

Another important issue is the lack of education and understanding about personalized medicine among most physicians and other stakeholders. Uptake for required CDx has been fair; however, most doctors still don’t know enough about the testing to consistently utilize this emerging approach in routine clinical practice.

In a recent Medco nationwide survey of more than 400,000 physicians, 98% agreed that genetics is an important consideration for drug therapy, yet only 10% said they felt comfortable with their knowledge about such testing.This issue is critical in cancer, in which a significant shift in mind-set from cytotoxic agents toward targeted therapies is in forward motion. It is becoming extremely confusing for even the most up-to-date physicians to stay on top of the latest knowledge, and rapid advances in technology will allow us to assess cancer at a much deeper level

Emerging Companion Technology in Cancer

Cancer has long been categorized and treated by its anatomic site of origin (eg, lung, breast, colon, and skin). More recently, molecular testing has been added to detect specific, or “hot spot,” mutations to identify patients for new treatments that target such mutations (eg, EML4/ALK and crizotinib).

To date, CDx tests in cancer have largely been single-gene, hot spot mutation tests and not comprehensive multi-gene tests. However, as the field of personalized medicine expands, many oncologists and pathologists recognize the need to further categorize and treat cancers by the underlying alterations in the DNA that drive tumor growth. This change to a pathway approach represents significant challenges to the prevailing view on how CDx tests should be developed, approved, and commercialized.

Next-Generation Sequencing: A New Approach to Companion Diagnostics

Given the increase in molecularly driven medicine, demand is increasing for revolutionary technologies that deliver fast, inexpensive, and accurate genomic information. Since 2004, the National Human Genome Research Institute has awarded more than $100 million for the development of next-generation sequencing (NGS) technologies, which resulted in the rapid growth of NGS platforms designed to sequence large amounts of DNA much more efficiently than with previously existing technologies. The important applications of the technology have triggered a rapid migration into the clinic. In cancer applications, NGS provides substantial advantages over single-gene hot spot tests and, using very small amounts of precious tissue, can result in detection of a broad array, and perhaps more sensitive and accurate assessment, of genomic alterations, which can have a significant impact on therapeutic and care management decisions.

Many companies and academic medical centers have started utilizing this technology in their CLIA laboratories to further characterize multiple disease states for patient management, including commercial companies such as Life Technologies, as well as prominent cancer centers such as MD Anderson, Memorial Sloan-Kettering Cancer Center, St. Jude’s Children’s Hospital, University of Michigan, and Dana-Farber.

Over time, NGS-based approaches are likely to replace many existing molecular tests (eg, KRAS and BRAF) that are currently run as PCR-based tests. Some are already starting to be replaced by NGS-based methods, which can identify and quantify the hot spots plus a broader range of alterations (eg, base pair substitutions, insertions/deletions, copy number alterations, and gene rearrangements). NGS also provides an attractive solution to the practicing physician who cannot possibly stay up-to-date as the number of CDx tests increases and will look for a one-stop solution to test all cancer genes.

However, NGS-based tests are not all created equal. There will always be substantial variation in development, resources required to perform the test, decision-support resources, and clinical usefulness among NGS-based tests for different clinical applications. This is particularly important when considering somatic versus germ line testing, as there will be differences in the sensitivity and specificity of sequencing, and there will be varying levels of bioinformatics required to successfully translate enormous amounts of data into actionable information.

The clinical use of NGS-based CDx testing is expected to grow at a much faster rate than the overall molecular testing market. Powerful clinical applications are being shown regularly in top-tier journals (eg, The New England Journal of Medicine and Nature) and national medical conferences (eg, American Society of Clinical Oncology, American Association for Cancer Research, and San Antonio Breast Cancer), and expanding evidence will drive broader use of NGS-based tests as the standard of care and ultimately replace many of the molecular tests in use today. Operational and data production costs will continue to decrease, making the technology more accessible, and value-based coding, coverage, and payment required to realize the full potential of this innovation will occur through effective collaboration across stakeholders.

Payer Decision Making: A Growing Dilemma

Because CDx tests may help improve efficacy and outcomes while reducing adverse events associated with certain treatments, they can possibly save payers the costs associated with ineffective or harmful drug therapies. This is the basis for discussions about value-based payment of CDx that clearly yield substantial downstream improvements in outcomes and cost-effectiveness.

Because targeted drugs are often considered to be very expensive, a growing number of payers now require CDx to be performed prior to approving distribution and payment for certain drugs. Some payers even require the performing laboratory to download CDx test results as an additional set of data to drive informed decision making and authorization.

Many payers are eager to support CDx tests that enable clear decision making with proven clinical utility. However, unlike medical devices and drugs, there is no clear or standardized method of preparing evidence of clinical utility, establishing coverage, or setting a reimbursement rate for a CDx test. Instead, coverage and reimbursement is set on a case-by-case basis whereby payers determine what is best for their beneficiaries in terms of improving their quality of life and treatment outcomes with opportunities to reduce medical costs.

In the face of rapidly evolving technology and absence of a clear road map for decision making, there is a payer dilemma: how to quickly evaluate, cover, and pay adequately for CDx tests that provide a clear benefit to patients and the insurer, while ruling out those tests that are of no benefit.

Payer Role in the Future of Companion Diagnostics

Companion diagnostics can enable significant improvements in safety, efficacy, outcomes, and cost-effectiveness associated with many existing and new therapies. Payers interested in providing access to CDx tests by covering and paying for them can be of great help by supporting the following:
  • Standardization necessary to create a clear road map for evidence-based development, commercialization, payer coverage, and value-based reimbursement of CDx tests
  • Willingness to support innovations, such as next-generation sequencing and other emerging CDx technologies
  • Transformation of the CPT coding process to enable rapid assignment for new CDx tests

Reprinted from AJMC
Funding Source: None.

Author Affiliation: From Foundation Medicine, Inc, Cambridge, MA.

Address correspondence to: Jerry Conway, Vice President of Reimbursement & Payer Strategy, Foundation Medicine, Inc, One Kendall Square, B3501, Cambridge, MA 02139. E-mail: jconway@foundationmedicine.com.

References

  1. Myshko D. Creating a personalized medicine strategy. PharmaVOICE. 2011;18-21. http://www.prtm.com/uploadedFiles/Thought_ Leadership/Articles/External_Articles/PharmaVoice_Creating_Personalized_Med_Strategy.pdf. Accessed December 3, 2012.
  2. QIAGEN expands partnership with genome diagnostics for development of new tests for applications in prevention and personalized healthcare. FierceBiotech website. www.fiercebiotech.com/press-releases/qiagen-expands-partnership-genome-diagnostics-development-new-tests-applications-prev. Accessed December 3, 2012.
  3. Diller W. Can a biomarker salvage Novartis’ Joicela (aka Prexige?). The In Vivo Blog website. http://invivoblog.blogspot.com/2010/03/can-biomarker-salvagenovartis-joicela.html. Accessed December 3, 2012.
  4. Silverman E. Novartis hopes to revive a zombie. Pharmalot website. www.pharmalot.com/2011/04/novartis-hopes-to-revivea-zombie/. Accessed December 3, 2012.



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