Reimbursement for Molecular Testing Faces Cuts in CMS’ Proposed Gapfill Prices

The Centers for Medicare & Medicaid Services (CMS) published interim gapfill prices last month for new CPT codes for molecular tests introduced earlier this year. Although the pricing was for a fairly narrow range of specialty molecular tests—just 16 CPT codes in all—they still caused some consternation among some of the esoteric molecular testing firms, several of which had codes designated specifically for their leading assays.

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. That’s even if the regional prices had been in place for a significant period of time.

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.

Not surprisingly, some laboratories and lobbying groups are up in arms. 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.”

For example, reimbursement for CareDx’s AlloMap assay was proposed to be reduced 74 percent, to $732 from $2,821. That test helps predict the risk of acute cellular rejection in potential heart transplant patients. Another proposed cut would impact Genomic Health’s Oncotype DX test for colon cancer. Such a test gives greater treatment options to patients who have been diagnosed with intermediate stage forms of the disease, along with evaluating their risk of recurrence. CMS proposed a price of $848.86. That’s 73 percent lower than the price Genomic Health is receiving from local coverage determinations made by individual MACs.

In a statement issued to G2 Intelligence’s Laboratory Industry Report, Genomic Health said that it believed the proposed rate “is based upon a flawed methodology that includes misinformed rates by local Medicare administrative contractors who do not process Genomic Health’s claims.”

“In addition, the methodology does not take into account the factors set forth in Medicare law to establish payment amounts, such as market rates and resources. These factors were considered when the local MAC originally established the payment rate for the Oncotype DX colon cancer test in 2011, which has been revalidated on multiple occasions by numerous MACs paying Oncotype DX claims over the past five years.”

CareDx noted that MACs Palmetto GBA and Noridian had supported its original higher price but that input from other MACs led to the cut.

Another big hit came to Veracyte for its Afirma gene expression classifier test for thyroid cancer. The test can help patients and physicians decide whether a cancerous node requires total thyroid removal. Although the Afirma test received the highest- price among the assays on the list at $2,240.16, that remains far below the price Medicare has been paying based on local determinations: $3,200. The proposed pricing represents a cut of roughly 30 percent.

One test that went all but untouched: Myriad Genetics’ Vectra DA assay to help predict the progression of rheumatoid arthritis and the threat of joint damage. Its pricing remained essentially the same at $587.

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.

Meanwhile, Genomic Health, CareDx and Veracyte said they would push to have CMS reconsider the proposed rates.

Takeaway: Many esoteric laboratories are unhappy with the current proposed 2017 gapfill pricing proposed by the Centers for Medicare & Medicaid Services, and plan to persuade the agency to change its position.