One year after launching its first product, Seattle’s Integrated Diagnostics has secured insurance coverage from several healthcare groups, including UnitedHealthCare (NYSE: [[ticker:UNH]]).
The biotech firm, which goes by the shortened name “Indi,” said today that United and six preferred provider organizations (PPOs) covering more than 200 million people, will reimburse for the Xpresys Lung test, which determines whether lung nodules of a certain size are benign growths. It’s rare for a diagnostic product to win deep coverage so fast; Xpresys Lung launched in October 2013. “It usually takes companies three years to get this kind of traction,” says Indi chief business officer Jim Garner. “We don’t think anyone’s done it as quickly.”
Founded in 2009 by genomics pioneer Lee Hood, Indi has raised north of $60 million in venture capital from the likes of Baird Capital, InterWest Partners, and the Wellcome Trust.
United officials were unavailable for comment. But it’s fairly clear what United and the PPOs see: a chance to prevent a battery of invasive and expensive tests that are often called for when a scan detects lung growths between 8 and 30 millimeters across. That indeterminate size is difficult to assess for malignancy. Taking lung biopsies—there are a few methods—are expensive procedures not without serious risk. Xpresys Lung aims to give a more definitive answer and steer a big percentage of people with indeterminate nodules into the “benign” category. It measures for levels of 11 proteins in a blood sample; their identity is Indi’s trade secret.
The test is a negative predictor; that is, Xpresys Lung will determine if those nodules are benign, but it will not confirm a cancer diagnosis. “I think we’re seeing more of this type of test that helps avoid medical interventions that are expensive and risky for the patient,” said Scott Allocco, a consultant who specializes in personalized medicine, reimbursement, and diagnostics. (He does not have ties to Indi.)
Until the Affordable Care Act, aka Obamacare, there was less incentive for the U.S. healthcare system to pay for tests that kept patients away from drugs and medical interventions. Much of the talk around diagnostics has been in the context of personalized medicine, and getting drug company support for companion diagnostics that identify patients who will respond well to a drug. One example is vemurafenib (Zelboraf), a melanoma treatment for people with a genetic mutation called BRAF V600E; it was approved in 2011 along with a test that identifies BRAF V600E-positive patients.
With the approval of vemurafenib and other targeted cancer drugs that year, an Xconomy headline declared, “The cancer drug dark ages are coming to an end.”
No less significant would be the avoidance of thousands of unnecessary and costly medical procedures in the first place. Of the 3 million patients who present with lung nodules in the U.S. each year, 20 to 27 percent have nodules in the indeterminate range. About half of those patients go down the biopsy route, but when they do the median cost of all those interventions is $35,000, Indi’s Garner said, although he cautions that the numbers are approximate and represent early data.
The way Indi arrived at those data, however early, is an interesting part of the insurance coverage story. One reason United made its decision so quickly is because Indi kept United in the loop and even solicited feedback.
To convince United that the benefits of coverage outweighed the costs, Indi used some of its venture war chest to conduct a chart review study of 3,000 patients with lung nodules. (It was retrospective, meaning they amalgamated data from the patients’ charts, hence the name “chart review study.”)
United didn’t conduct its own study to verify the data, which at first seemed odd to me, until Joseph Ferrara, a consultant in Boston who worked with Indi on its strategy, pointed out that insurers who cover drugs don’t reconstruct pharmaceutical clinical trials.
“We found the management of these module patients wasn’t well understood in the [scientific] literature, nor could a payer look at claims data and discern how patients with nodules were managed,” said Ferrara. “[Indi’s] study was perceived as robust.”
Indi has been charging $4,250 for the test, but none of the parties involved would discuss whether that would change with insurance coverage, or how much it would be reimbursed. Typically, a diagnostics company’s list price is the starting point of a negotiation with payers. Foundation Medicine (NASDAQ: [[ticker:FMI]]), for instance, has been getting about $3,600 for its FoundationOne tests, even though they are listed at $5,800 (FoundationOne, however, isn’t covered by United yet).
The standards for coverage also tend to vary from payer to payer. Garner said that United’s Lee Newcomer, the insurer’s senior vice president responsible for oncology, genetics, and women’s health, declared early in the discussions with Indi that he needed to see either 10 percent cost savings or 10 percent improvement in health outcomes. “We showed 10 percent on both sides,” said Garner.
Next up is Medicare, a tougher nut to crack. A diagnostic expert at one regional Medicare contractor has already told Indi not to go for Medicare coverage with retrospective data. So Indi will submit clinical trial data by the end of this year, with a Medicare decision possible as soon as next year. The six PPOs that have contracted with Indi are MultiPlan, FedMed, Fortified Provider Network, InterWest Health, Stratose, and Three Rivers Provider Network.
