South San Francisco-based Veracyte was built to provide clear diagnostic answers for patients with curious thyroid lumps that might be cancerous. It’s taken a lot of research to build a convincing body of evidence, and now it’s getting an important endorsement from UnitedHealthcare, the nation’s largest private health insurer.
Veracyte is announcing today that Minnetonka, MN-based United Healthcare (NYSE: [[ticker:UNH]]) has issued a new medical coverage policy that includes Veracyte’s Afirma genetic test as an option for patients who got inconclusive results on standard pathology reviews.
The Veracyte test won coverage from Medicare in late 2011, but since only about one-fourth of thyroid patients are 65 or older, Veracyte’s business depends on persuading private insurers that its sophisticated gene expression test is worth the $4,200 retail price tag. UnitedHealth’s decision essentially makes it easier for Veracyte to make its case to thyroid patients within a pool of 27 million people, in addition to about 40 million patients covered by Medicare.
Veracyte’s big idea is that its Afirma gene expression test can help doctors rule out malignancy early in the game, and cut down on unnecessary surgeries. Many suspicious thyroid lumps can be analyzed today with simple pathology tests, but not all. Almost 500,000 thyroid lumps get biopsied in pathology labs every year, and about 20 to 30 percent of those tests provide inconclusive results. Fearing the worst, about 125,000 patients go on to have surgery to remove their thyroid glands at a cost of about $12,000 to $16,000 apiece, and then take a lifetime of thyroid hormone medications. Veracyte’s pitch is that its test is a relative bargain, when it helps patients avoid the invasiveness, the complications, and expense of all those unnecessary surgeries.
“We have five peer-reviewed publications now that demonstrate the clinical validity, analytic validity, and improvement in quality of life from our test,” says Veracyte CEO Bonnie Anderson. “The move by UnitedHealth to make a positive coverage decision underscores the robustness of the work we’ve done to bring the product to market and to ensure that patients are going to be able to feel comfortable going to watchful waiting in lieu of surgery.”
Still, plenty of work remains. While it has cleared an important hurdle with the medical reviewers at UnitedHealth, Veracyte still has to negotiate reimbursement levels for its test with others at the insurance company, Anderson says. So far, Veracyte has been successful at getting “most private payers” to reimburse the company at varying rates since it started marketing the Afirma test two years ago, Anderson says.
Veracyte, which I profiled here in late 2011, has grown up to employ about 100 workers, Anderson says. The company has processed about 32,000 kits with fine-needle aspirate samples from thyroids, Anderson says. Most thyroid samples can be classified as benign or malignant based on traditional pathology review, but about one-fourth of them—roughly 7,000—are classified as inconclusive. Veracyte runs these samples through its proprietary test, which looks at gene expression patterns to see whether it’s safe to say a lump is benign.
UnitedHealthcare didn’t exactly go out on a limb. Its decision comes a couple months after an influential physician group incorporated the test into its standard practice guidelines. That vote of confidence came from the National Comprehensive Cancer Network Clinical Practice Guidelines in Oncology, otherwise known as the NCCN Guidelines.
Getting support from payers and physicians at an early stage is critical for Veracyte, because it decided to provide the test to patients who want it, and spend its own company resources bargaining with insurers to get reimbursed. While patients or physicians might not have the time or ability to navigate the insurance system, Veracyte now considers its ability to secure reimbursement “a core competency” of the company, Anderson says.
It’s still quite early to say how big a business this might be. Veracyte believes the potential market for Afirma is worth about $450 million in the U.S., and as much as $800 million worldwide, Anderson says. The company isn’t yet profitable, and has chosen to keep investing in broadening its thyroid offering, and developing new diagnostic uses for its technology. Sanofi’s Genzyme unit, which sells Thyrotropin alfa (Thyrogen) to treat residual thyroid cancer cells left behind after surgery, has been co-marketing the Afirma test with Veracyte since January 2012.
