By Norbert Farkas and Hansjörg Schützinger
While between 1998 and 2010 only nine approved companion diagnostics were listed by the FDA, 35 new companion diagnostics were approved between 2011 and 2020.1 Novel diagnostics, such as NGS (Next Generation Sequencing), have become more standardized and affordable allowing medicine to move away from the “one size fits all” approach to personalized medicine.
Technological advancements in diagnostics and personalized drug developments have opened new possibilities in healthcare. However, complex, and slowly adjusting healthcare systems have slowed down patient access. Drugs are in most cases still assessed and reimbursed separately from the companion diagnostic, often resulting in a reimbursement gap.
IVD companies have invested heavily into their market access capabilities to enable patient access. Now that many drugs require companion diagnostics, pharma companies are more and more eager to get familiar with the various diagnostics funding options and concepts to facilitate access to their innovative treatments.2
This article will address the challenges of diagnostics reimbursement and potential solutions to potentially accelerate access.
Why is the diagnostics reimbursement different and often challenging?
Whereas in pharmaceuticals the drugs are reimbursed by the respective payer, in diagnostics, the reported test result is covered. Until the test results can be delivered to the healthcare professional to make a treatment decision, laboratories need to invest in a variety of instruments, test kits, consumables, software solutions, as well as qualified and trained personnel. To ensure quality results, reimbursement tariffs should allow the laboratory to run the offered tests profitably. The reimbursement tariffs, therefore, account for the level of pre-analytics needed, automation, underlying test technology and complexity, required interpretation and setting of use, just to name a few.3,4 The following points illustrate the unique diagnostics reimbursement challenges:
1. Cost-based reimbursement:
The generated test reports are offered and seen as a service. The reimbursement tariffs usually consider what the laboratory must invest to provide the requested result. Today, payers still rarely set reimbursement rates based on the value provided by the test. The concept of evaluating improved patient outcomes together with health economic data is only on the verge of being implemented.
2. Nonbrand specific reimbursement:
If pharmaceuticals receive reimbursement, the negotiated reimbursement is tied to the specific drug. Diagnostics reimbursement however is nonbrand specific. The reimbursement code usually only contains a generic description of the biomarker or underlying technology. To illustrate that we can look at the immunohistochemical detection of the HER2 receptor. The German EBM (Einheitlicher Bewertungsmaßstab), a tariff list for billable outpatient services, only states that the “Histological examination for immunohistochemical detection of the HER2 receptor”5 is reimbursed. The laboratory is therefore free to choose the IHC-antibody-kit from their manufacturer of choice. The reimbursement rate always remains the same.
This means that the innovators in the field usually pave the way for other companies as well if they receive reimbursement.
PLA codes (Proprietary Laboratory Analyses Codes), which are additions to the U.S. CPT® code set are rather the exception. The system allows manufactures or laboratories to apply for specific codes that are tied to their brand name.6
3. Varying manufacturer involvement in the reimbursement discussions:
Diagnostics manufacturers are not always in the driver seat when it comes to reimbursement submissions. Often manufacturers are only able to support medical societies or laboratory interest groups indirectly in their discussions with payers.
4. Complex and diverse reimbursement pathways consisting of many stakeholders:
Healthcare systems are organized differently. Some use centralized (national) reimbursement schemes, while others allow regional or local decision-making. There may also be differences between private and public insurance coverage when it comes to testing.
Most healthcare systems also finance the outpatient sector differently than the inpatient sector. In general systems utilize a fee for service or global budget scheme in the outpatient sector, while the most prominent financing method of the inpatient sector is the DRG (Diagnosis Related Groups).
Other innovative coverage pathways exist. The French RHIN (repository of innovative acts outside the nomenclature of biology and anatomopathology) provides temporary reimbursement in exchange for evidence generation.7
To illustrate how access may vary depending on the setting, one can look at the German example. Outpatient services in Germany, as mentioned, are regulated via the EBM (Einheitlicher Bewertungsmaßstab). Companion diagnostics are listed under the subchapter 19.4 of the EBM, enabling reimbursement in the outpatient sector. On the other hand, the German inpatient sector is financed via DRGs (Diagnosis-Related Groups). Until 2020, no companion diagnostic has been included in the DRGs. While DRGs may be updated, this only happens if enough hospitals have documented additional costs.8
To provide the standard of care, hospitals may apply for additional funding throughout the year via an application for new examination and treatment methods (NUB – Neue Untersuchungs- und Behandlungsmethoden). Reimbursement of such a method is typically granted for one year for the applying hospital. The application is assessed by the institute for payment systems in hospitals (InEK – Institut für Entgeltsystem im Krankenhaus) but InEK is not required to justify their decisions and so far, has declined all applications for companion diagnostics reimbursement until 2020.8
Unfortunately, this lacking reimbursement synchronisation within the German healthcare system leads to unequal access to companion diagnostics and personalized medicine.
Hospitals are therefore often left with three options:
1 No companion diagnostic tests are performed
2. Hospitals cover the additional costs for companion diagnostics themselves
3. Patients are released from the hospital after a blood draw or biopsy, allowing them to be transferred to the hospital’s outpatient setting. This, of course, is only feasible if a hospital has an outpatient sector.
5. Inconsistent use of health technology assessments (HTA)
HTA bodies like EUNetHTA, IQWiG and NICE have evaluated certain complex diagnostics in the past. An increase of diagnostics HTAs can be observed. However, this is not yet the norm as it is for pharmaceuticals where higher prices are at stake and outcomes are measured easier due to the direct impact of the drug on outcomes.
NICE developed a specific diagnostics HTA process: the Diagnostics Assessment Program (DAP).9 The developed framework provides very solid methodological guidance for other stakeholders and decisionmakers. However, it is not linked to reimbursement decisions.
6. Long-term value of certain solutions not yet acknowledged:
Sometimes innovative and more expensive solutions like NGS- (Next Generation Sequencing), CGP- (Comprehensive Genomic Profiling) or WES- (Whole Exome Sequencing) results are not yet seen as clinically actionable enough for all indications and may also lack the supporting evidence. ESMO currently recommends NGS use for patients presenting with advanced non-squamous NSCLC, prostate, ovarian cancers and cholangiocarcinoma. However, larger panels should only be used if the resulting extra cost are acceptable10. In other indications, alternative testing like (sequential) PCR testing might be seen as sufficient and more appropriate by key opinion leaders.
7. Limited evidence requirements guidance:
Most of the times, in addition to the complex funding pathways and options, the evidence requirements are not always fully laid out and publicly accessible. This makes it challenging for manufacturers to construct their studies in a way that both the medical and payer relevant endpoints are included.
8. Drug and companion diagnostic are rarely assessed in parallel:
In many cases, the drug may already be reimbursed in a certain market, while the companion diagnostic is reimbursed with a significant delay, since diagnostic reimbursement evaluations often have no legally binding timelines.11
In Belgium, Xalkori®, for example, was reimbursed in 2013 while the positive reimbursement decision for the companion diagnostic (Identification of the ALK fusion gene) only happened in 2019.11
The case of Xalkori® shows that active dialogues with policy makers are required to keep up with the fast-developing medical advancements. Belgian authorities acknowledged the fact that drug and companion diagnostic reimbursement needed to be synchronized in the future. In May 2019, a royal decree was signed, implementing a bundled process for drug and companion diagnostic reimbursement needed to be synchronized in the future. In May 2019, a royal decree was signed, implementing a bundled process for drug and companion diagnostic reimbursement.11, 12
Australia follows a similar approach where the drug and the companion diagnostic are assessed in a co-dependent submission process. Individual and combined evidence is evaluated by MSAC (Medical Services Advisory Committee) and the PBAC (Pharmaceutical Benefits Advisory Committee). Both committees need to provide a positive recommendation for the test to be listed on the MBS (Medicare Benefits Schedule) and the drug on the PBS (Pharmaceutical Benefits Scheme).13
However, Belgium and Australia are rather the exception having transparent and aligned companion diagnostic pathways. Thus, the general landscape, especially in Europe, remains mostly opaque.
Potential solutions to accelerate companion diagnostics access
To ensure access to the companion diagnostic and ultimately the drug, it is essential to perform an early strategic access assessment for the targeted launch countries. For example, this should contain assessing the value of the diagnostic to the respective stakeholder, identifying the setting (inpatient, outpatient, novel), assessing funding pathways, evaluating comparators, verifying evidence requirements.
Furthermore, while various manufacturers have often competing interests, in certain cases, e.g. NGS access it is often valuable to join forces to jointly engage in policy dialogues. If the industry speaks with one voice via an industry consortium, policy makers are more likely to engage in discussions and make changes.
In most cases drug labels do not specify that a specific diagnostic kit from a certain manufacturer should be used. The most common phrasing regarding testing is that a validated test is required, opening the doors to multiple IVD manufacturers.
Example from Tarceva: “Assessment of EGFR mutation status (…). A validated, robust, reliable and sensitive test with a prespecified positivity threshold and demonstrated utility for the determination of EGFR mutation status, using either tumor DNA derived from a tissue sample or circulating free DNA (cfDNA) obtained from a blood (plasma) sample, should be performed according to local medical practice.14”
As more and more strategic partnerships between pharma companies and diagnostic companies emerge, it may be worth to explore more specific drug labels regarding the required companion diagnostic. This would potentially lead to pharmaceutical and diagnostic companies to collaborate closer on market access initiatives due to shared interests.
National reimbursement is of course the overall goal. However, many healthcare systems have the possibility to drive diagnostics access bottom-up. For example, in Germany it is possible to negotiate selective contracts within a region with certain payers. This allows companies to collect local data and to expand to other regions over time.15,16 Such options may bridge the reimbursement gap until national funding is established while also collecting valuable real-world evidence.
Finally, in some countries test sponsorship of companion diagnostics is common practice. Test sponsorship seems like an easy fix to ensure testing is available. However, companies should consider other innovative funding possibilities like managed entry deals. For example, coverage with evidence development or finance-based schemes to manage budget impact. A possibility for such a deal could be a risk sharing agreement, where the company agrees to cover any additional cost that occur, if contrary to expectations, the downstream savings do not materialise. A concrete example for such a deal may be found for NIPT (Noninvasive prenatal testing).17 Even though it is a non-companion diagnostic example, it demonstrates that companies should explore and consider various options.
Overall, the field of companion diagnostics is moving fast, and companies access strategies and efforts need not only to consider conventional access pathways but also innovative options within each launch country to provide patient access to the best possible tests and treatments.
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Norbert Farkas is the founder & managing partner at CENTIVIS AG a boutique (Digital) diagnostics marketaccess and policy consulting firm based out of Switzerland. Prior starting his own advisory firm, he supported multiple innovative pharmaceuticals, vaccines and in-vitro diagnostics product launches from the access and policy perspectives at Novartis and Roche Global headquarters. Norbert holds a master’s degree in economics from the Budapest University of Economics and Public Administration and an MBA from University of St. Gallen. He regularly coaches digital health start-ups, and lectures health policy students at University of Lucerne. He is the author of Diagnostics Reimbursement Compass: A 90-Minute Guide to Define, Demonstrate and Capture Diagnostics Value Confidently.
Hansjörg Schützinger is a senior consultant at Centivis AG. He previously worked as an oncology sales manager at Sysmex Switzerland and in various laboratory roles at the University of Nanjing (China), at Novartis and a start-up. He holds a master’s degree in health sciences from the University of Lucerne, focusing on Health Systems and Services & Health Economics, as well as a bachelor of science degree in Molecular Life Sciences from the University of Applied Sciences and Arts North-Western Switzerland, and completed an apprenticeship as biology lab assistant at F. Hoffmann-La Roche AG.