Recently, the Centers for Medicare & Medicaid Services (CMS) decided to provide nationwide reimbursement for certain in vitro, companion diagnostic tests that employ Next Generation Sequencing (NGS) for patients with advanced cancer. This CMS decision, in the form of a finalized National Coverage Determination (NCD), is noteworthy for at least three reasons:

1. On the positive side, at least some diagnostic tests that were not previously covered will now be reimbursed across the nation.
2. The NCD provides a roadmap for test developers looking to have certain tests reimbursed by Medicare.
3. The reimbursement is restrictive and will exclude tests that are not cleared or approved by the Food and Drug Administration (FDA), which will contribute to a longer path to market and increased patient costs.^1,2

Absent a positive NCD, reimbursement is discretionary based on Local Coverage Determinations. When a positive NCD is present, the NCD is binding on all Medicare Administrative Contractors throughout the country.³

This new NCD recites coverage criteria that must be met for both the test and the patient. On the test side, some of the NCD requirements are standard for human in vitro diagnostic tests, including that the test be performed in a CLIA-certified laboratory⁴and that the test must be ordered by the patient's treating physician.

But further requirements, such as the test being cleared or approved by the FDA as a companion diagnostic that employs NGS, would exclude reimbursement under the NCD for valuable and worthwhile tests, such as Laboratory Developed Tests (LDTs). LDTs are not cleared by the FDA under the 510(k) process nor approved under the PMA process, and they may not employ NGS.⁵

Additionally, the NCD requires that results be presented to the treating physician—for management of the patient—using a report template that specifies treatment options.

The NCD patient side requirements are also particularly restrictive. For example, the patient must have recurrent, relapsed, refractory, metastatic, or stage III or IV cancer. This "advanced cancer" requirement excludes a wide variety of patients, including patients with earlier stage cancers. Many of these patients could derive significant benefit from earlier access to these cutting-edge tests.

Also, the government: (i) will pay for retesting or repeated testing in only certain circumstances; (ii) will require that the patient seek further cancer treatment;⁶and (iii) requires that the test be "indicated for use in [diagnosing] that patient's cancer."⁷

Conclusion

CMS coverage is important for commercial viability. CMS's new NCD will make some tests eligible for reimbursement nationwide, but reimbursement is restrictive and excludes many important diagnostics, including LDTs, and limits test-eligible patients. Developers of NGS employing in vitro, companion diagnostic, advanced cancer tests may consider using the NCD as a roadmap for obtaining coverage. Other intended test providers should carefully consider the need for FDA clearance and approval of the test, which will directly impact government reimbursement for the test.

For questions regarding the NCD, or any patent, FDA, or CMS-related matter, please contact Vern Norviel, David Hoffmeister, or any member of the FDA regulatory, life sciences, or patents and innovations practices at Wilson Sonsini.

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