Next-generation diagnostics promise to offer an enhanced ability to diagnose disease and to provide moretargeted drug therapy to patients. However, for manufacturers of these new technologies, navigating the current pricing and reimbursement structure of major payers in the United States is a tremendous challenge.

In this report, Catherine Shaffer, M.Sc., lends her expertise in biotechnology to provide a comprehensive overview of current next-generation diagnostics. Neil Grubert, M.A., director of pricing and reimbursement research at Decision Resources, Inc., presents a thorough analysis of the current U.S. pricing and reimbursement environment for diagnostics with a special focus on Medicare policies. The discussion includes strategies that diagnostics companies may employ in the quest to bring products to market successfully and to achieve a favorable reimbursement status.

Get the Answers You Need to Shape Your Strategy

Next-generation diagnostic tests build upon existing molecular technologies, resulting in either a greatly enhanced version of older technology or in a completely new approach. Which novel diagnostics have received approval, and what improvements do they offer over existing technologies?
The greatest diffi culty in entering the market with a novel diagnostic test is navigating the existing pricing and reimbursement structure of the major payers. How do Medicare and private payers determine coverage for diagnostic tests? Which private payer has the most transparent coverage policies for diagnostics?
Manufacturers of diagnostic tests must meet rigorous requirements for patient outcomes data and showcase a test' s clinical value before payers, particularly Medicare, will approve reimbursement. How has Genomic Health successfully secured coverage for its product Oncotype DX, a test that quantifi es the likelihood of recurrence of breast cancer?
Similar to the controversy surrounding personalized medicine, which calls into question the notion of market restriction with the use of targeted therapies, there is limited fi nancial incentive to invest in developing a diagnostic test. What strategies can companies employ to increase the uptake of a diagnostic test during commercialization?

Scope

Birth of next-generation diagnostics: overview and description of diagnostic tests that improve upon existing immunoassay and nucleic acid testing (NAT) technologies.
Next-generation diagnostics approved since 2001: coverage of select diagnostics for indications such as drug metabolism, chemotherapy side effects, oncology, cystic fi brosis, and HIV.
Current pricing and reimbursement environment for diagnostics: path to market, challenges of collecting health outcomes data, and commercialization strategies.
Medicare' s role in the reimbursement of diagnostics: description of the agency' s policies in determining coding, coverage, and payment levels.
Private payers' role in the reimbursement of diagnostics: overview of private payers' policies.
Outlook: a look at the future pricing and reimbursement environment for next-generation diagnostics.

Executive Summary
- Strategic Considerations
- Stakeholder Implications
Introduction
What Are Next-Generation Diagnostics?
Next-Generation Diagnostic Tests Approved Since 2001
- Roche/Affymetrix' s AmpliChip CYP450
- Third Wave Technologies' UGT1A1 Molecular Assay
- Other Approved Next-Generation Diagnostic Tests in Select Indications
  - Oncology
  - Cystic Fibrosis
  - HIV
Current Pricing and Reimbursement Environment for Diagnostics
- Challenges of Health Outcomes Data
- Introducing a New IVD Test to the Market
- Strategies for Commercialization
Medicare' s Role in Reimbursing Diagnostics
- Coding
- Coverage
- Payment
Reimbursing Diagnostics Through Private Payers
Outlook

Tables

1. Select Approved Next-Generation Diagnostic Tests, 2001-2007
2. Requirements for the Award of Each Category of CPT Codes

Figures

1. Process for Developing Local Medicare Coverage Determinations
2. Process for Developing National Medicare Coverage Determinations
3. Percentage of HMOs That Restrict Use of Select Targeted Cancer Therapies to Patients with Relevant Gene Mutations
4. HMO Pharmacy Directors' Views on the Importance of Positive Biomarker Test Results As a Condition for the Use of Select Targeted Cancer Therapies
5. HMO Pharmacy Directors' Views on the Importance of Accompanying, Validated Biomarker Tests As a Condition for Formulary Inclusion of Future Targeted Therapies for Select Cancers