of $10 million a quarter in revenue—enough to entice Myriad to buy. Even after Medicare has signed off, Crescendo still has its work cut out explaining the value of its test to payers.
—Genomic Health has sought to commercialize a new test for prostate cancer over the past year, and presented some solid clinical data about it last year at the American Urological Association annual meeting. But the service hasn’t truly caught on, partly because the company and the investigators who conducted the key prostate cancer study haven’t yet gotten the results published in a top peer-reviewed journal. Without results published in a peer-reviewed journal, the company can’t really talk turkey with payers. The peer-review process can take months, or maybe more than a year, and even then, peer-reviewers can’t provide the same level of scrutiny that full-time professional FDA staff can provide.
—Madison, WI-based Exact Sciences (NASDAQ:[[ticker:EXAS]]), has had an impressive run in the stock market over the past year, in no small part because of its unusual embrace-the-FDA-fully strategy. The company has developed a molecular test that screens for early signs of colorectal cancer in a stool sample—a less invasive approach than traditional colonoscopy. Although Exact could have taken a cheaper, easier route to the market by simply running a small clinical trial to show the test’s value, and then set up a CLIA lab, it chose to go the extra mile to satisfy the data hounds at the FDA. Exact Sciences is now preparing for a FDA advisory panel meeting on March 27, in which expert advisors to the FDA will debate the merits of Exact’s colon cancer screening test in public. Exact is actually in parallel talks with the FDA and Medicare, to both evaluate the quality of its data, and determine what it’s worth, in one fell swoop. “We felt (FDA approval) would be helpful in commercialization of the test, because more doctors would have confidence in it, and insurers would have confidence, as would the Medicare system,” CEO Kevin Conroy told me in November.
Naturally, there is a downside to submitting to regulation. It raises the barriers to entry for new market entrants, increasing the time and expense to develop new tests. Some tests probably won’t get developed that might be useful for patients. It would stifle some innovation. If the regulators are incompetent, excessively risk-averse, too slow, or deaf to the needs of patients, it could be a disaster. Somebody, i.e. the taxpayers and the companies themselves, is going to have to foot the bill for extra staff and resources to help the FDA carry out this expanded mission.
These all seem like reasonable trade-offs to me. In the pharmaceutical industry, we’re willing to accept a little less innovation so that we can be confident of a safe, effective, well-regulated U.S. drug supply. The FDA is far from perfect, but it’s pretty good at what it does. When the FDA messes up a drug review, it’s front-page news, which means that it’s still unusual and unexpected. It would be unthinkable for any politician to put the FDA out of the drug regulation business.
I happen to believe that some types of markets, especially those that are highly technical and high-stakes like the world of diagnostics, tend to function better with tough, trusted regulatory bodies. An unregulated Wild West free market is great if you’re selling books online or consumer smartphone apps. It’s not such a great thing when you’re talking about credit-default swaps or cancer drugs.
Professional medical societies already do set some standards, and sign off when they think a diagnostic test is well validated enough for standard practice. Peer-reviewed journals have a role here too, in separating good data from bad. Payers are increasingly building up some of their own expertise to make science-based judgments.
All of that effort can and should continue, but I would argue those things together aren’t enough to inspire confidence in molecular diagnostics. “There is a hodgepodge system vouching for quality of diagnostic tests,” says Brad Gray, CEO of Seattle-based NanoString Technologies, the developer of a molecular diagnostic test for breast cancer. “There’s no good housekeeping seal of approval on these products. We have to make a decision, as an industry, not just diagnostics, but the whole healthcare system, about what to do.”
These molecular diagnostics represent the long-awaited payoff from society’s investment the past couple decades in basic biology and genomics. And it’s precisely because of the long investment in basic science that we should make a corresponding investment in science-based regulation. I’m not saying every single test in the tens of thousands of labs around the U.S. needs to go through an FDA approval test—it’s just not practical and necessary for everything, especially for simple one-off blood tests in hospitals. But if we stick with the system we have now, society will get very few widely-used molecular diagnostic tests. A bit of well-crafted regulation, led by smart people at the FDA with the resources to do their jobs, could go a long way toward delivering on the promise of precision medicine.
