News at a Glance – July 2016

Gapfill Prices Cut Reimbursement for Molecular Testing. The Centers for Medicare & Medicaid Services (CMS) published interim gapfill prices for new CPT codes for molecular tests introduced earlier this year. Most of the tests wound up having their preliminary prices cut, compared to their prior regionalized prices—in some cases as much as 85 percent. The prices would be placed on the 2017 Clinical Laboratory Fee Schedule if CMS grants final approval later this year, although labs and other parties will have a period to submit comments. The Coalition for 21st Century Medicine, an organization that represents many molecular labs, suggested that the proposed prices were out of sync with the guidelines established by the Protecting Access to Medicare Act of 2014 (PAMA), whose rules were recently finalized by CMS. “The proposed gapfill rates are inconsistent with rates established by commercial payers and the PAMA statute,” the Coalition said in a statement. “Additionally, the PAMA statute sets a maximum of 10% reduction in payment for any test code in [2018] using the new market-based rate methodology.” In a recent report, William Blair & Co. analyst Amanda Murphy noted that PAMA would likely provide some needed clarity to the issue. “While PAMA has caused angst around potential cuts to CPT codes, the perhaps under-appreciated positive from the legislation is that it will transition pricing power away from CMS and the MACs and provide much needed visibility into pricing,” she observed.

Companion Diagnostic Developers Get FDA Guidance. The U.S. Food and Drug Administration (FDA) released draft guidance addressing companion diagnostics: “Principles for Codevelopment of an In Vitro Companion Diagnostic Device with a Therapeutic Product.” The FDA indicates the document is intended to guide in vitro diagnostic device (IVD) and therapeutic product sponsors in codeveloping their products and seeking “contemporaneous marketing authorization.” The new draft is a follow-up to a 2014 guidance document which defined in vitro diagnostic devices and encouraged earlier development of companion diagnostics. The FDA’s announcement of this latest guidance indicates it “provides general principles for addressing issues that may arise when codeveloping a therapeutic product and a corresponding IVD companion diagnostic. It also provides considerations for planning and executing clinical trials and successfully fulfilling FDA regulatory requirements.” An Aug. 18 webinar will provide more information about the guidance and answers to questions. Public comments on the guidance should be submitted by Oct. 13, 2016, to be considered before issuance of the final guidance. For more information about the webinar, click here.

Report Indicates Increased Health Care Venture Capital Investment. Health care corporate venture capital (CVC) is increasing across all sectors of the industry in terms of number of deals, dollars invested, and number of active CVC investors, according to a report released last month by Corporate Venture Action Group of the Health Evolution Summit. The report, “The Rising Tide of Strategic Investing: Corporate Adventures in Health Care Venture Capital” resulted from a meeting of the Corporate Venture Action Group, a group of nearly 30 CVCs, including some well-known names like Google Ventures, Merck Global Health Innovation Fund, and UnitedHealth Group Ventures. Simultaneously, Health Evolution Summit conducted a survey of health care CVCs. This report synthesizes findings from both the survey and the group meeting. The report defines CVCs as those that primarily invest in external companies run by unaffiliated entrepreneurs, not investments in internally generated ideas.