Medicare reimbursement for BRCA predictive cancer tests will drop by almost 50% as of January 1, 2014, a move that could cause market leader Myriad Genetics ($MYGN) some major pain in the months ahead.
The Centers for Medicare and Medicaid Services (CMS) recently finalized its decision initially addressed at the end of November, and Myriad confirmed the coverage reduction in a new regulatory filing.
According to the Utah company, CMS said it would slash reimbursement levels from $2,795 to $1,438 for a full sequencing of BRCA1 and BRCA2, or for the sequencing of just BRCA1. (There's no payment rate yet for a full sequencing of just the BRCA2 gene.) The payment levels are set to become effective for tests performed on or after Jan. 1. Myriad's BRACAnalysis test screens for mutations in both genes, whose presence can indicate a much higher risk of breast or ovarian cancer.
Blame the U.S. Supreme Court for the price cut; the court issued a decision over the summer that invalidated some Myriad BRCA patents but upheld others, opening the door to competition. CMS attributed its reimbursement reduction to the court's decision, noting that pricing from rival labs now offering BRCA testing ranges from $900 to $2,900, GenomeWeb reported. This led to a reimbursement adjustment to reflect the new competitive market, the story explained.
LabCorp ($LH), Invitae, Quest Diagnostics ($DGX), BioReference Laboratories ($BRLI), Gene By Gene and Ambry Genetics have since launched their own BRCA tests following the U.S. Supreme Court decision, and Myriad is suing all of them, alleging patent infringement.
As GenomeWeb noted, Medicare reimbursement is only a small part of Myriad's revenue. But Myriad's BRACAnalysis test itself is a major revenue driver, and the fear is that private insurers will also reduce their reimbursement rates now that Medicare has done so. Myriad's stock has plunged from a high of $30.65 on Nov. 27 to $20.59 as of the start of trading on Dec. 31, reflecting investor anxiety and panic as the CMS reimbursement rumors ultimately became a reality. Their actions come even as Myriad has worked to diversify its test offerings.
Myriad explained in its regulatory filing that it won't leave the CMS change unaddressed. CMS said it is providing an additional public comment period through Jan. 27, 2014, on the BRCA test reimbursement changes. Myriad said it will chime in "during the new public comment period to address a number of both substantive and process concerns."