Myriad Genetics' ($MYGN) stock dropped 9% on Sept. 30, driven down by investors reacting to what appeared to be a proposed 48% Medicare reimbursement cut for one of the company's signature cancer diagnostic tests. The reduction turned out to be a bogus number generated by a clerical error. But the one-day mini-panic over Myriad's situation underscored the industry's vulnerabilities once insurance coverage becomes uncertain.
Here's how it started: The Centers for Medicare & Medicaid Services (CMS) issued a report suggesting that it would reduce reimbursement by 48% for the remainder of 2013 for Myriad's BRACAnalysis Test, which screens for BRCA1 and BRCA2 mutations that boost a patient's risk of getting breast or ovarian cancer. As Reuters and The Motley Fool pointed out, that was enough to send the Utah company's stock into a dive.
Myriad addressed the matter in a regulatory filing, stating that Utah Medicare contractor Noridian Healthcare Solutions and Palmetto GBA erred in their pricing. Myriad said it confirmed the error with both contractors in a telephone call. What's more, Noridian told Myriad that it would correct the pricing immediately to $2,795.09, though it may take a week or two to be reflected in CMS data. The reimbursement pricing for 2014 will be the same number, according to the filing.
News of the correction was enough for Ladenburg Thalmann to upgrade Myriad's stock to "buy" from "neutral," Reuters notes, and the analyst firm also noted that the payment rate fit what investors had expected. The Motley Fool added that Myriad's statement and the analyst firm's upgrade helped push the stock up as high as 13% in response early on Oct. 1. Myriad closed Tuesday at $25.31, up 7.7%.
Myriad has focused on diversifying since the Supreme Court banned gene patents but has been able to hold onto its individual complementary DNA work, including its BRCA1 and BRCA2 genes relating to breast and ovarian cancer. At the same time, the company is suing competitors Ambry Genetics and Gene By Gene to protect its patent on BRCA tests. Earlier this month, it debut the myRisk Hereditary Cancer multi-gene diagnostic test, which can analyze 25 different genes connected to 8 major cancers.