NEW YORK – Diaceutics and Alva10, two companies focused on facilitating evidence-based utilization of diagnostics in healthcare, are studying the economics of providing PD-L1 testing, and based on the data generated will develop a strategy to improve value-based reimbursement for labs providing such tests.
The project is one of the first to be launched on Diaceutics' DXRX, a platform that connects different players in the healthcare community that want to identify, study, and mitigate inefficiencies in the diagnostics ecosystem limiting patients' access to appropriate care. "The platform is about providing people with the right data and then enabling collaboration," said Peter Keeling, CEO of Diaceutics, a diagnostics data analytics company.
The PD-L1 testing project will bring together test developers, drugmakers, and payors to explore whether the present level of reimbursement labs receive for such analysis — ranging from between $80 and $120 depending on the CPT codes used — is sufficient based on the cost of running the tests and the value the biomarker provides in helping oncologists decide whether or not their patients should receive certain immunotherapies.
Since only a minority of cancer patients derive durable benefit from immunotherapy, there is significant interest among researchers and oncologists in using biomarkers to identify which patients are most likely to respond to these expensive treatments. Cancer patients with higher levels of PD-L1 expression on their tumors tend to derive greater benefit from checkpoint inhibitors, and the US Food and Drug Administration has now approved checkpoint inhibitors for non-small cell lung, head and neck, urothelial, gastric, esophageal, cervical, triple-negative breast and other cancers, where patients' tumors must have a certain level of PD-L1 expression in order to receive these drugs.
As such, PD-L1 testing, using immunohistochemistry (IHC), has emerged as a widely used biomarker for directing the use of immunotherapeutics, and many companies in Diaceutics' global network of 2,500 labs provide such testing. "PD-L1 is going to become an even more important biomarker," said Keeling, estimating that there may be 50 therapies in development at pharmaceutical companies around the world targeting PD-L1.
Even though the PD-L1 expression level on patients' tumors can be a key factor in deciding whether or not they receive pricey checkpoint inhibitors, such as pembrolizumab (Merck's Keytruda) or nivolumab (Bristol Myers Squibb's Opdivo), Diaceutics has found that most labs are performing such tests at cost or at a loss. Meanwhile, checkpoint inhibitors have blockbuster profits. For example, pembrolizumab raked in $11 billion dollars last year and is poised to become the top-selling drug in the world by 2025, with revenues projected to reach $23 billion.
With this demonstration project, Diaceutics hopes "to show that the economics [in the diagnostics industry] are broken and the value equation over this biomarker needs to be rethought," Keeling said.
Diaceutics will conduct the project with Alva10, a company that works with payors to understand the types of diagnostics that will reduce unnecessary care, lower wasteful healthcare spending, and improve patient outcomes, and then, helps diagnostic companies design products that meet these needs. Within the PD-L1 testing project, Alva10 will first gather data on the costs of conducting PD-L1 testing from labs in Diaceutics' network.
Using the data generated, Diaceutics and Alva10 hope to connect the dots for the Centers for Medicare & Medicaid Services and the various CPT coding bodies within the American Medical Association, and show that there is a relationship between the reimbursement labs are receiving for PD-L1 testing, the frequency of testing being performed, the drugs patients are receiving or not receiving, and the relative costs of those treatment decisions.
"Based on the strength of the evidence, the argument we essentially need to be able to make is that when you continuously drive down the reimbursement of these tests, you are not creating a financial ecosystem where labs can test for these biomarkers … and others can promote the use of the drugs," said Lena Chaihorsky, co-founder and VP of payor innovation at Alva10.
In a recent report, Diaceutics cited data suggesting that biomarker tests used to personalize non-small cell lung cancer treatment, for example, deliver between 30 percent and 60 percent of the economic value as reflected in therapy price, but these tests are paid for at a rate that is reflective of only 3 percent of the value. Chaihorsky provided another example in KRAS testing, which she estimated carries a Medicare price of $187. However, these tests are used to determine whether colorectal cancer patients have mutations that would keep them from responding to certain EGFR monoclonal antibodies that cost $120,000 per year.
"You're trying to give a $187 diagnostic to guard the gate for a $120,000 drug," said Chaihorsky. "Those economics are not sustainable for the diagnostic industry."
Making the case to increase payment for PD-L1 testing may be particularly challenging, since it relies on IHC analysis, a technology reimbursed not under the clinical lab fee schedule like most tests, but under the physician fee schedule. The physician fee schedule is budget neutral, which means that increasing Medicare reimbursement in one area will result in money taken away from another intervention.
"You can't just say we need to reimburse IHC more. You need to find a way to [make the case that] the situation is so economically dire, we must reimburse IHC more, and it is worth taking money out of another sector of the physician fee schedule," Chaihorsky explained. "That is a much more complicated argument than [asking for higher pricing for tests in] the clinical lab fee schedule, which is a cost-plus- based [process], but it doesn't need to be budget neutral."
Ultimately, to make a case for increased reimbursement, Diaceutics, Alva10, and its collaborators will have to bring the evidence they've gathered within this project before CMS. But first, Chaihorsky expects to have to present this evidence to groups in charge of CPT coding matters within the AMA and make a case for improving the IHC coding structure.
Although IHC is now used to gauge a variety of cancer biomarkers, from determining ALK rearrangements, HER2 expression, and PD-L1 expression, labs don't have unique codes to bill for these specific test indications. There is no unique CPT code for IHC testing to gauge PD-L1 expression, for example. Labs typically bill for these tests using general CPT codes describing IHC testing.
The set of coding solutions that Alva10 and Diaceutics will propose to AMA will depend on the data generated through the project. However, increasingly, there is a sense among some stakeholders that there needs to be a CPT code set specifically for IHC, so labs can bill for the specific tests they're performing and payors to easily track whether these tests are being performed for indications that they deem to be medically necessary.
Greater transparency in this regard will enable the types of clinical utility research Diaceutics and Alva10 are conducting within the PD-L1 testing project. "The economics of one IHC test is going to be very different from the economics of PD-L1 testing," said Chaihorsky. "We need a code set to separate all of those [different tests] so that the labs and manufacturers can make their own [payment] arguments in accordance with the biomarker that is of interest."
Alva10 also hopes to engage payors early during the project to get a better handle on how often they're reimbursing PD-L1 testing and how the use of immunotherapies tracks with that. Payors can provide insight into "how often are physicians treating without testing [and] how often physicians are getting test results after they've started patients on treatment," said Alva10 Founder and CEO Hannah Mamuszka. "All of those things we will want to pretty carefully analyze."
Pharmaceutical companies should also be interested in this topic, since diagnostic reimbursement is so closely tied to patients' ability to access biomarker tests that determine their eligibility for treatment. According to Diaceutics' market analysis, NSCLC biomarker testing for PD-L1, ALK, and EGFR have achieved 80 percent uptake, but this is in just one tumor type. On the whole, Diaceutics' data suggests that more than 50 percent of cancer patients who are eligible for personalized treatments are not receiving them due to suboptimal access to biomarker testing.
US regulations for diagnostics has made it challenging for pharma to address this problem. Diagnostic manufacturers typically work with pharma companies to develop an US Food and Drug Administration-approved distributed test that identifies the patients eligible for a drug. But once that drug hits the market, labs aren't incentivized to adopt that FDA-approved test kit, and they can bring their own in-house, lab-developed tests that gauge the same biomarker. For example, in the NSCLC space, Diaceutics estimates that lab-developed tests still constitute between 40 percent and 70 percent of biomarker testing.
"Within that you can have a lot of variation in terms of test quality and … you end up missing [identifying] somewhere between 10 percent to 20 percent of [treatment eligible] patients," Diaceutics' Keeling said. "Maybe the solution for PD-L1 testing is for all labs to implement the FDA-approved kits, but labs won't perform these kits if they're not adequately reimbursed."
Diaceutics over the years has advocated for drugmakers to not just invest in bringing an FDA-approved test to market for a therapeutic asset, but also work with the broader laboratory community on projects to standardize testing and get more involved in education efforts. In the same spirit, Keeling noted that drugmakers should also be interested in improving the financial incentives for diagnostics developers to advance accurate tests that their therapies will rely on to reach patients.
Ultimately, in Mamuszka's view, the economic challenges hindering access to critical biomarker tests like PD-L1 need to be fixed for the sake of patients. "If the test reimbursement barely covers the cost of running the tests, then physicians and labs are not particularly inclined to run it in the way that they could run it if they were able to get paid for it," said Mamuszka. "Labs are frequently revenue-generating centers of their hospitals. They can't run tests at cost or below cost and continue to do so."