The Centers for Medicare and Medicaid Services (CMS) in late December confirmed that its new price for CPT code 81211, full sequence analysis testing for the BRCA1 and BRCA2 genes, was not a mistake. In a posting Dec. 27, CMS indicated that the national limitation amount of $1,438.14 contained in the final Clinical Laboratory Fee Schedule for 2014 was based on a median of prices submitted by local Medicare administrative contractors and will be effective for tests performed on or after Jan. 1, 2014. CMS will accept comments on pricing for CPT codes 81211 and 81214 (BRCA1 full sequence) through Jan. 27, 2014. The announcement is a serious blow to Myriad Genetics (Salt Lake City), which until recently was the only company that performed BRCA testing. A decision by the Supreme Court in June 2013 opened the doors for other companies to begin offering BRCA testing, and since then a number of labs have launched their own BRCA tests at a lower price point than Myriad’s test. The new price represents a 48.5 percent cut from what Myriad had been paid in 2013 ($2,795). Prior to gap-fill pricing for molecular diagnostic testing, Myriad in some cases was paid more than […]
The Centers for Medicare and Medicaid Services (CMS) in late December confirmed that its new price for CPT code 81211, full sequence analysis testing for the BRCA1 and BRCA2 genes, was not a mistake.
In a posting Dec. 27, CMS indicated that the national limitation amount of $1,438.14 contained in the final Clinical Laboratory Fee Schedule for 2014 was based on a median of prices submitted by local Medicare administrative contractors and will be effective for tests performed on or after Jan. 1, 2014. CMS will accept comments on pricing for CPT codes 81211 and 81214 (BRCA1 full sequence) through Jan. 27, 2014.
The announcement is a serious blow to Myriad Genetics (Salt Lake City), which until recently was the only company that performed BRCA testing. A decision by the Supreme Court in June 2013 opened the doors for other companies to begin offering BRCA testing, and since then a number of labs have launched their own BRCA tests at a lower price point than Myriad’s test.
The new price represents a 48.5 percent cut from what Myriad had been paid in 2013 ($2,795). Prior to gap-fill pricing for molecular diagnostic testing, Myriad in some cases was paid more than $3,000 for the test. Myriad’s list price for the test is $4,040.
Shares of Myriad Genetics plunged 17 percent to $20.02 on Dec. 30 after CMS issued its confirmation. The stock price over the past year has ranged from $20.02 to $38.27. As of Jan. 7, 2014, the stock was trading at $21.05.
Wall Street analysts say the new pricing is a significant negative for the company. J.P. Morgan’s Tycho Peterson says the primary question is how quickly this will impact private payers.
“With increased competition coming to the market at significantly lower prices than MYGN [Myriad Genetics], we expect payers will begin to influence physicians to use competitive tests, while leaving open the option for patients to use MYGN’s test if they want to pay the additional cost (+$1,500) out of pocket,” he says. “In our prior physician survey, all 25 physicians surveyed were willing to convert away from MYGN for a competitive product and 76 percent viewed price as a ‘very important’ factor in the testing decision.”
Amanda Murphy, an analyst with William Blair & Co., says CMS’s decision is troubling because it suggests that pricing of new codes via the gap-fill process should be determined solely based on competing labs’ pricing, including those tests that have been on the market for only months if not weeks intended to garner publicity and market share.
“In our view, this does not bode well for the lab space in general, particularly to the extent the gap-fill process is used to price any new sequencing-based diagnostics code and given that CMS has now declared its intention to adjust pricing on the Medicare Clinical Laboratory Fee Schedule based on technological changes.”
Murphy also notes that while tests based on Sanger sequencing and next-generation sequencing may be relatively straightforward from a technical standpoint, “every discussion we have had with genetics laboratories suggests that classification of variants from the ‘normal’ into something clinically actionable is not and is far from commoditized.”
While BRCA is one of the most well-characterized genes in literature, “we also believe that based on our analysis of the quality of publicly available variant databases and given the lack of ‘hotspot’ dangerous BRCA mutations, variant classification using actual clinical data based on meaningful sample size (millions) versus in silico statistical models and small sample sizes (thousands) is more robust.”
Takeaway: The deep cut to payment for BRCA testing is a blow for Myriad Genetics, but the company can offset some of the reductions through other test offerings and assays currently in its pipeline.
