Guest Post By: Perry Dimas, Senior Vice President and General Manager for Premier Source, part of AmerisourceBergen

The 2015 Business of Personalized Medicine Summit was an inspiring day with talented professionals. One key takeaway was that while diagnostics hold the promise of getting the right medicine to the right patient at the right time, much work remains to develop a standardized system of approving and covering diagnostic tests to ensure patient access.

As an industry, diagnostics are settling into a commercialization pathway similar to medicines, but lack some of the foundational measures that make it possible. Shepherding a diagnostic test from pre-launch to commercialization can often and accurately be described as “building the plane while we fly it.” Main challenges for diagnostic manufacturers are regulatory, coding, and coverage/reimbursement issues that are clearly defined for medicines but not these informative tests. Why are these factors uniquely challenging to diagnostic manufacturers, and what will change to open up more opportunity?

Regulatory Approval:

Most diagnostic innovators establish a Laboratory Developed Test (LDT) business model and administer tests out of their own laboratories. In the diagnostics industry, validation of the test is currently regulated by CMS’s Clinical Laboratory Improvement Amendments (CLIA).

Importantly, the FDA has proposed framework for diagnostic oversight, but the structure and timing of these regulations have not yet been finalized. It’s imperative to understand the FDA’s process when it is announced and the impact it will have on commercialization of existing and new diagnostic tests. While it will end a period of confusion for many stakeholders, there will be a period of transition before a potential streamlining occurs and tests are better enabled to reach the highest potential of offering diagnoses and guidance to providers and patients.

Coding:

For most products and services offered in healthcare, such as procedures, medications, and diagnoses, a system for coding exists and is consistently used across providers and payers. For example, medications and dosages are assigned a J-code, so the payer quickly understands what it is reimbursing. Unfortunately, the same process does not exist for diagnostic testing; there is not currently a coding structure to identify what each test does. Lacking an appropriate code, many diagnostic companies use a miscellaneous CPT code. This raises red flags and makes the process for being reimbursed for a valuable healthcare tool a challenging process for the manufacturer.

An industry standard for coding would reduce questions among payers, streamline the billing process for providers and allow for overall industry tracking of use. The AMA has been working to apply more transparency and structure to diagnostic coding, but it is still a work in progress. 

Coverage and Reimbursement:

While the industry continues to work to address the challenges presented by the lack of standardized coding, diagnostic manufacturers can take steps to see greater reimbursement success within this developing environment. Acquiring the right data to demonstrate clinical utility is especially crucial. The vast majority of the time, this data is accumulated post-launch, a key difference in the commercialization of diagnostic tests versus medications. Specifically, payers look for observational trial data, such as how a test, once ordered by a physician, impacts patient management and effects health outcomes. And, how exactly did it help?

Currently in its infancy, the diagnostic space has many question marks. While admittedly no one has all of the answers, many partners in the field are working to determine the best practices and options for diagnostic manufacturers to most effectively navigate the commercialization process. The conference may have ended, but the conversation needs to continue to drive the adoption of diagnostic tests as an informative and valuable component of personalized medicine.