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Foundation Medicine Expects Boost for Reimbursement From FDA Approval, CMS Coverage Decision


NEW YORK (GenomeWeb) – Following yesterday's simultaneous approval of Foundation Medicine's FoundationOne CDx test as a companion diagnostic for solid tumors by the US Food and Drug Administration and a preliminary national coverage determination (NCD) by the Centers for Medicare and Medicaid Services, company executives today provided additional comment on the implications of the decisions for the firm's business.

Under the so-called parallel review process, The FDA approved FoundationOne CDx, which detects genomic alterations in 324 cancer genes using next-generation sequencing, as a genomic profiling test to guide therapy and clinical trial selection, and as a companion diagnostic for more than a dozen FDA-approved drugs for advanced cancer patients with five tumor types: non-small cell lung cancer, melanoma, colorectal cancer, ovarian cancer, or breast cancer. For those, it looks for specific mutations in the EGFR, ALK, BRAF, ERBB2 (HER2), KRAS, and BRCA1/2 genes. Concurrently, CMS issued a draft NCD that would provide coverage for FDA-approved companion diagnostic claims in advanced tumors. The decisions had been long awaited and expected to come in before the end of the year.

In a conference call this morning to discuss the news with investors and analysts, Foundation Medicine CEO Troy Cox said that FoundationOne CDx is the first and so far only FDA-approved comprehensive genomic profiling test for all solid tumors that is also a covered under a preliminary NCD from CMS.

He said the NCD is now subject to a 30-day comment period, followed by an administrative window of about 60 days, before the final version will be posted. Based on that timeline, the company expects the final NCD during the first quarter of 2018. At that time, Foundation Medicine will be able to secure a unique code for the test and work with Medicare to get the billing process set up, he said.

"Once final, the NCD will represent a significant expansion of coverage for Medicare beneficiaries nationwide by initially covering five tumor types," Cox said. Those five cancer types currently account for about 50 percent of FoundationOne tests the company conducts, he added. Furthermore, Medicare and Medicare Advantage patients (who will also be covered by the NCD) account for about 40 percent of the company's testing volume.

According to CFO Jason Ryan, Medicare pricing for the test will be determined under the Protecting Access to Medicare Act (PAMA), which will go into effect in January. PAMA determines Medicare payment for a laboratory test based on the weighted median of private payor rates, and Ryan said that the company will submit such data over time.

In the meantime, while the test is not yet commercially available and the firm hasn't billed for it yet, there is another mechanism by which it can be paid through PAMA, Ryan said. "We think of that in the context of how we've been paid under the [local coverage determination] through Palmetto," he said, the firm's local Medicare administrative contractor.

Earlier this year, Foundation Medicine said it had received its first payments for Medicare patients from Palmetto, at an allowable rate of $3,416, for its FoundationOne test, the non-FDA-approved version of FoundationOne CDx.

However, overall, payments for FoundationOne appear to have been significantly lower: during an earnings call last month, Ryan said that the average revenue for each comprehensive genomic profiling test in the third quarter was $2,600. Most of the tests the company reported during that quarter were clinical FoundationOne tests.

Coverage by CMS should also make it easier for Foundation Medicine to obtain reimbursement from private payors going forward. "What resonates with all payors of all types is FDA approval," Cox said, as well as reimbursement by others, particularly the government.

Cox pointed out that the proposed NCD also allows for the expansion of coverage for FoundationOne CDx as claims for new solid tumor types are added over time, so-called coverage with evidence development (CED).

He acknowledged that the NCD is not specific for Foundation Medicine's tests and would also apply to other NGS-based tests that are FDA-approved companion diagnostics. However, he stressed that it would not cover NGS tests that merely have 510(k) approval.

Besides its use in clinical testing, Cox said, Foundation Medicine also sees FoundationOne CDx as a "highly differentiated and valuable product for our biopharma partners, representing a streamlined, cost-effective, and significantly de-risked regulatory process to companion diagnostic development and approval."

He said the test can already serve as a companion diagnostic for on-label drugs from companies that include Amgen, AstraZeneca, Boehringer Ingelheim, Clovis Oncology, Eli Lilly, Novartis, Pfizer, and Roche's Genentech. Adding new companion diagnostic markers would involve validation studies or concordance studies for approval "and then a straightforward process of updating the label for FoundationOne CDx," he said. "This unique opportunity positions us as the companion diagnostic partner of choice."

The company plans to expand the platform regularly and to "remain current with all companion diagnostics" for additional indications and FDA-approved therapies, he said.

Biopharma partners also "have a key stake to make sure our test is successful," Cox said, pointing to Clovis Oncology, which helped to promote Foundation Medicine's first companion diagnostic, FoundationFocus CDxBRCA. That test was approved by the FDA a year ago for use with Clovis' ovarian cancer therapy Rubraca (rucaparib).

Foundation Medicine's share price on the Nasdaq increased about 20 percent in mid-afternoon trading today.