How can a company charge $3,500 per patient for some new gee-whiz diagnostic test, and then go around claiming it will save the healthcare system money?
Lots of companies hem and haw when asked to prove their medical innovations save the system money, but South San Francisco-based Veracyte is putting cost-effectiveness front and center in its business plan. Its future essentially depends on it.
The company, backed by a prominent crew of investors like Kleiner Perkins Caufield & Byers, TPG Biotech, Versant Ventures, and Domain Associates, has started to make headway with this idea. Since January, Veracyte has been commercializing a gene expression test that’s supposed to help doctors determine when a lump in the thyroid gland is benign, or potentially malignant.
Thyroid cancer rarely kills people—each year, 48,000 get diagnosed and only about 1,700 die from it, according to the American Cancer Society. But diagnosis is tricky, as almost 500,000 suspicious thyroid lumps get biopsied in pathology labs every year, and about 20 to 30 percent of those tests offer “inconclusive” results. About 125,000 patients, fearing the worst, go on to have surgery to remove their thyroid glands at a cost of about $12,000 to $16,000 apiece, plus a lifetime of thyroid hormone medications, not to mention the inevitable complications from surgery. Veracyte’s big idea is that by charging $3,500 for its Afirma gene expression test, it can help doctors rule out malignancy early in the game, and help cut down on unnecessary surgeries.
So far this year, Veracyte said it has performed its gene expression test on about 1,000 of these iffy thyroid tissue samples.
“Anytime you can take a sample in doctor’s office, and provide information to make more informed treatment decisions that can take cost out of the system, we think that’s a good place to be,” says Veracyte co-founder and CEO Bonnie Anderson.
Most medical technology companies start out with an invention and look to find ways to best apply it, but Veracyte started in 2008 the other way around. It began, Anderson says, by looking for highly inefficient areas of healthcare that were ripe for disruption with a new medical technology. The company decided to start with thyroid cancer, as it has been growing in the U.S., and physicians have struggled with its diagnosis.
Getting the test to work right was a technical puzzle. Veracyte explored various technologies—whole genome sequencing, DNA copy number variation screening, and microRNA testing—before settling on gene expression as the basic technology platform likely to give a cost-effective answer.
There were lots of issues to consider. The critical sample to study is what’s known as a fine-needle aspirate, in which a doctor sticks a needle into the thyroid bump in three or four different places to extract cells for analysis under a microscope. Doctors use ultrasound imaging to make sure they are getting cells from inside the thyroid nodule, and not some other tissue. Sometimes different doctors in different places get different types of samples, and sometimes you get a little blood in there that confuses the issue on the microscope slide, Anderson says.
Veracyte sought to control
