Medicare's rejection of Alzheimer's test leaves Lilly in the lurch

Three years ago Eli Lilly ($LLY) stepped up with a check for $300 million and a promise of up to $500 million more when it snapped up Amyvid, an imaging agent that could light up the presence of toxic beta-amyloid in the brain. The presence of amyloid has long reigned as one of the most likely biomarkers for Alzheimer's as well as a target for drug developers.

But even after winning a limited FDA approval for using Amyvid to diagnose the disease, the regulators in charge of Medicare recently dealt Lilly a setback when they adamantly refused to reimburse for the imaging drug in all but a handful of cases. And the decision has big implications for Navidea ($NAVB), which has been developing its own imaging agent--NAV4694, going into Phase III--to spot the Alzheimer's biomarker, while highlighting the need for a better understanding of the disease and the biomarkers that can be used to diagnose it at different stages of development.

Lilly, no stranger to development setbacks, lashed out at the federal agency, accusing Medicare of overstepping its authority on diagnostics, taking a position contrary to expert opinion and flying in the face of a national effort aimed at finding and using new and better ways to diagnose and treat the dread disease.

Lilly, which has invested huge sums in a series of so-far-failed Alzheimer's drugs, is left with a diagnostic test that earned only $1.2 million in the second quarter. And it's been pushing its work in the field, doggedly acquiring imaging agents for tau--another potential biomarker for the disease--just a few months ago. As Alzheimer's is typically a disease that begins to manifest itself when a person reaches their mid-60s, though, Medicare controls the market on imaging agents.

There are some good reasons why Medicare would be reluctant to cover the test. It can't be used to make a definitive judgment about the disease, only as a tool assisting in a doctor's assessment, especially if the absence of beta-amyloid can be used to rule out the disease and look for other sources of symptoms of dementia. But even if doctors conclude that a patient does have Alzheimer's, there is little they can do to treat the illness. Eli Lilly's own attempt to come up with a companion therapy in solanezumab failed Phase III, forcing the company to go back to the drawing board and start over with a group of earlier-stage patients.

Lilly, though, is left with a product and no market. And now it appears likely that the company is considering a move to fight back with its lawyers.

"Coverage with evidence development as proposed by CMS does not provide patients appropriate access to these amyloid imaging brain scans. Instead, it creates additional complexity for the broader community in determining the best path forward for patients," said Eric Dozier, senior director of Lilly's Alzheimer's business division. "As we continue to review the final decision memo, we will be evaluating all available options to ensure patients and physicians can gain access to this innovative diagnostic tool as soon as possible."

- here's the release from Lilly