June 2015, Vol 4, No 3

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Understanding Implications of the Proposed FDA Regulation of Laboratory Developed Tests

Interview with the Innovators

Shortly after the Food and Drug Administration (FDA) released its proposed draft guidance for regulating laboratory developed tests, including molecular diagnostic testing, the Association for Molecular Pathology (AMP) published a white paper addressing the potential consequences of regulatory and reimbursement dynamics that threaten patient care. The paper, titled “A Molecular Diagnostic Perfect Storm: The Convergence of Regulatory & Reimbursement Forces that Threaten Patient Access to Innovations in Genomic Medicine,” addresses the consequences of this gathering perfect storm of regulatory and reimbursement forces impacting molecular diagnostic testing. The white paper offers numerous recommendations designed to preserve patient access to appropriate testing and mitigate burgeoning negative impact on healthcare. This paper is available online at http://amp.org/publications_resources/position_statements_letters/PerfectStorm.cfm.

AMP holds that medical professionals in universities, cancer centers, clinical laboratories, and pharmaceutical/manufacturing companies across the country have honored the public trust in the Human Genome Project by developing hundreds of innovative diagnostic tests and therapies that are advancing modern medicine in ways that would have otherwise been impossible without this breakthrough in genetic research. They view the proposed regulation by the FDA and the reimbursement policies of the Centers for Medicare & Medicaid Services (CMS) as barriers that could prevent continued progress in this arena.

Essentially, they say the new policies inappropriately classify laboratory developed procedures (LDPs) as medical devices and apply existing medical device regulations, which were enacted for regulation of medical device manufacturers, to the activities of clinical laboratories that perform services using LDPs. If implemented, the FDA’s proposed framework would unjustifiably impose new, burdensome, and in some cases duplicative requirements on clinical laboratories and the medical professionals who perform essential services within them. Meanwhile, the CMS, the nation’s largest insurer, may deny coverage or reduce payment for several medically necessary molecular pathology tests. Medicare coverage policies are frequently adopted by the private sector. Unfortunately, healthcare providers—those developing and delivering innovative diagnostic tests—along with patients, who are the ultimate intended beneficiaries, are caught in the middle.

PMO recently had the pleasure of speaking with 2 members of AMP—Dr Roger D. Klein, and lead author of the “Perfect Storm” paper, Dr Victoria M. Pratt.


PMO Can you please provide a synopsis of the issue covered in your paper, “A Molecular Diagnostic Perfect Storm: The Convergence of Regulatory & Reimbursement Forces that Threaten Patient Access to Innovation in Genomic Medicine”?

Dr Pratt We at AMP feel that laboratory developed tests are more accurately described as laboratory developed procedures (LDPs) and, with some improvement under CLIA [Clinical Laboratory Improvement Amendments], state, and other governing agencies, there is more than adequate oversight of these procedures already in place. Currently, there are multiple forces within the FDA endorsing FDA oversight of laboratory procedures as well as the CMS looking at reducing reimbursement. There are high costs associated with FDA oversight, costs in addition to the cost that we already incur for maintaining our other regulatory agencies that inspect and oversee the laboratory industry. Considering this, along with lack of reimbursement, we’re looking at the potential that laboratory testing, especially by molecular pathologists, may no longer be offered.

Dr Klein The focus of the white paper is the headwinds that the folks who are doing clinical laboratory testing are facing right now. Those headwinds include the proposed FDA regulations as well as reimbursement issues. We’ve had substantial downward pressure on reimbursement as well as significantly increased stringency with respect to coverage decisions.

Then there’s also regulation that’s imposed through the clinical laboratory provisions of the Protecting Access to Medicare Act, which places extremely arduous reporting burdens on nonbundled laboratory testing. The statute requires labs to report extremely granular payment data to the CMS. These data include all prices and volumes for each test for every payer. All these forces are coalescing to produce this enormous headwind.

Most clinical laboratories lack the resources and don’t have the expertise to file FDA submissions for their tests. So if the FDA begins implementing regulations and requires premarket submissions, the result will be that affected tests are not going to be offered by most of the AMP members.

Dr Pratt Some of the concern is simply the associated costs. The lab incurs cost for proficiency tests, for CAP [College of American Pathologists] accreditation, for maintenance contracts, and now potentially the FDA’s fees, because all of these submissions have user fees as mandated under law that the laboratories would be required to pay on top of everything else. With the lack of reimbursement, there’s no return on investment here. We’re working in the negative values.

PMO The FDA and other federal agencies propose that the complexity of LPDs, particularly genomic sequencing, warrant a regulatory framework for the FDA to ensure that LDPs are properly validated. This appears to be a hypothetical concern by the FDA rather than a response to real-world examples of trouble that’s happened lacking these regulations. Do you see this as an accurate read on the problem?

Dr Pratt AMP and others have asked the FDA to provide examples of where there’s a problem, and they’ve quoted from The New York Times 2, maybe 3 cases where perhaps not all the data are well documented. One example is a technology issue at Dartmouth and the CDC [Centers for Disease Control and Prevention], where Dartmouth used an assay that had a lower limit of detection than the CDC assay, so there was a concern that there were false-positives and false-negatives associated with the various tests.

There’s not good documentation that a problem exists out there that the FDA is trying to fix. It’s important to note that AMP doesn’t come to the table suggesting that there’s absolutely nothing wrong with the current programs that are in place. It’s been acknowledged that there’s room for some improvement in the current structure. We believe we should not implement something that is overly burdensome for a program that is already working well.

Dr Klein
I completely agree. Our position as an organization is that we support modernization of the CLIA regulations, which were originally written in the early ’90s. We believe that most laboratory testing performed by reputable laboratories under most circumstances is of high quality. Examination of proficiency testing data from CAP and a dearth of lawsuits against clinical laboratory providers support that contention.

If you look at our litigious society, you rarely see a laboratory getting sued because of faulty laboratory tests. Our system is currently very heavily dependent on having high-quality professionals directing the laboratories, and in most cases it works well. One of the criticisms the FDA has is that the CLIA regulations themselves do not mandate, or do not explicitly require, that tests that are offered have clinical validity. Some of the agencies, like the CAP- and CLIA-exempt states like New York, actually do require a demonstration of clinical validity for molecular pathology tests.

This is a very important topic, especially in oncology. In cancer diagnostics there may in fact be tests offered for which the clinical usefulness is uncertain, or in unusual cases for which the clinical meaning of the biomarker itself is unclear. As an organization, we’re willing to admit that there may be offerings out there for biomarkers that are of dubious value. However, the appropriate regulatory mechanism for addressing this issue is CLIA, rather than the imposition of medical device regulations on clinical laboratories. In fact, that is what the FDA is talking about doing. The agency has proposed taking preexisting medical device regulations and superimposing them on activities of clinical laboratories.

PMO Would you say that the core of the conflict arises from the definition of an LPD as a medical service versus a test?

Dr Klein The CLIA regulations are geared toward laboratory services and oversight of the provision of laboratory services. These are medical services; they are patient services. CMS approaches these activities within that paradigm. The FDA regulations are geared toward manufacturers of medical devices that are designed, developed, manufactured, boxed, labeled, and distributed in interstate commerce to laboratories across the country.

Further, I think the interpretation component should not be overlooked. The role of the molecular pathologist is not just running a device or running a test. There is brain power, there is training, many years of extensive training, and successful completion of various examinations to ensure that the professional is qualified to not only run but interpret these tests.

Dr Pratt
I agree. The lab is not a box that spits out an answer. There’s a lot of professional work that’s done behind the scenes to give that interpretation.

Dr Klein I think this is a critical point, because one of the things the FDA is doing here is to make an artificial distinction between the “test,” which is what they’re calling a device, and the work of the professionals who actually developed those tests, continually monitor them, improve them, use them in patient care, and interpret and report their results in this context. While the dichotomy between test manufacturer and operation exists in the manufacturing world, it really doesn’t exist in a clinical laboratory. The laboratory director who’s looking at these tests is responsible for all aspects of them from start to finish, including test design, development, and validation, and we have very highly skilled and highly trained people who are doing this work.

PMO How does the FDA state the need for the proposed regulations?

Dr Pratt In my opinion, there are unseen pressures, some of which stem from the direct-to-consumer testing market, which is essentially gone with the exception of 23andMe. I think there is pressure from manufacturers concerned about laboratories using their test, because often their tests are for a very narrow indication. For example, there’s a BRAF test for colon cancer, but there’s also a BRAF test for melanoma. These are different BRAF tests, and you can’t mix and match those so that an LDP actually will validate both on 1 instrument.

I think there is pressure from manufacturers that want better return on investment for going through the FDA process. They believe there’s an uneven playing field. But I would point out that manufacturers aren’t inspected routinely by CAP, CLIA, and other state agencies. I know in my previous lab, we were inspected up to 3 or 4 times a year by various internal groups and external agencies.

Dr Klein As an organization, we understand that, particularly in the molecular world, technology is advancing very rapidly. There are many new tests and offerings out there that potentially could be criticized as not yet having sufficient data to demonstrate that they’re clinically valuable for patients. But I think it’s important to understand that as an organization, we are patient advocates and, therefore, want what’s best for the patient. Again, we’re not saying that there are zero problems. What we’re saying is that the current system works well for most testing, and that to improve the system for the current era, it requires more of a surgical scalpel than a mallet. If the FDA imposes a heavy-handed system that’s designed for manufacturers on clinical laboratories, that would risk patient access to essential, innovative services.

PMO Are you satisfied with the process of dialogue between yourselves and the FDA, or is there room for improvement there?

Dr Klein I chair AMP’s Professional Relations Committee, and I want you to understand that we have had a very good working relationship with the FDA for a number of years. The FDA recognizes the expertise that resides in our organization. Our members serve on FDA advisory committees. In fact, FDA personnel are members of our organization. So although we disagree on this particular issue, it is not that we don’t maintain good relationships with the FDA or that we don’t respect the people there. Quite the contrary, we respect them very much. What we are trying to do is to work together with the FDA and the CMS for the benefit of the patient. We simply don’t agree on this particular issue, probably because of our in-depth understanding of what it takes to operate a laboratory, our understanding of the field, the important benefits molecular testing brings to patients, and the overall quality with which the services appear to be provided. Basically, you’re hearing the laboratory professional’s perspective relative to that of the FDA, but you can rest assured that there is an ongoing dialogue that is actually quite friendly and civil.

PMO Where is the meeting point? Can you summarize how you propose moving ahead?

Dr Pratt Some of our recommendations focus on updating the existing regulatory agency CLIA. We believe that CLIA can be improved to address the concerns that the FDA is trying to address.

There’s adverse reporting, which could be done through CLIA. CLIA could add guidance documentation around clinical validity. There is already language in federal law for CLIA around this concept, but it could be more explicit.

The FDA is concerned that they do not have knowledge of all the available tests that are already being performed in the labs across the United States. Quite the contrary, that information resides in CLIA; however, CMS cannot easily pull those data from their information system. This is another improvement to be made.

PMO Do you have any insights as to how this impacts the field of oncology specifically?

Dr Klein One of the areas that we’re concerned with now is the implementation of next-generation sequencing, a revolutionary technology, in cancer management, and the issues with reimbursement of those technologies.

Cancer is a different kind of field than some others. You have patients who reach a stage, for example, when they’re terminal and they have exhausted therapeutic options. Many oncologists are willing to look at a tumor and try to find a mutation that’s a driver mutation for which there’s a targeted therapy that may have been demonstrated to work in another tumor type, but has not yet been proved to work in the type of cancer the patient has. In the appropriate setting, they may be willing to offer it to a patient who has no other options. They also may be able to offer the patient the opportunity to enroll in a clinical trial. But right now, I think the oncology community and payers need to come together to try to work out a paradigm that allows reimbursement for a test that provides useful information to a treating oncologist, that is, the tests that are requested by oncologists but haven’t yet reached the state of literature evidence that insurers are now requiring for reimbursement of most molecular tests.

In the oncology area, that will be critical going forward. The standard of care at major cancer institutes for some tumor types is to offer patients enrollment in clinical trials. Well, how do you find out if a patient is eligible for a trial that involves a targeted therapy? You’ve got to do the mutation analysis. I don’t think the insurance industry is necessarily there yet in terms of understanding the need for, and appropriateness of, reimbursing testing for this purpose.

Dr Pratt Right, because if the payer says it determines whether they’re going on the clinical trial, the clinical trial needs to pay for the test, not the insurance. Many of those clinical trials are not covering the cost of the testing. Some are, some aren’t. It just depends.

Dr Klein Typically you would be testing the patients up front to see whether they are eligible, so it wouldn’t be in conjunction with any specific trial. Therefore, there is really nobody to pay for the test other than the patients themselves, because insurance often will not cover it. We’re also facing headwinds in pricing. We’ve had pretty significant reductions in reimbursement rates for molecular path testing over the past couple of years, basically because of some coding changes. I think the general headwinds with reimbursement we’re seeing across medicine are being felt in all specialties.

PMO What’s next for AMP in this process?

Dr Pratt AMP will continue to work with the FDA, CLIA, and other regulatory and reimbursement agencies on this issue. We are also having discussions with ASCO [American Society of Clinical Oncology], the AMA [American Medical Association], CAP, Palmetto, and other payers. AMP will continually work with these organizations, and we’re not going to stop, because patients are at the center of everything we do.

PMO Thank you very much for your time today. This was very informative. We wish you success in providing the best resources for patients and the physicians who treat them.


Dr Klein is Chair of the AMP Professional Relations Committee and Medical Director of Molecular Oncology at the Robert J. Tomsich Pathology & Laboratory Medicine Institute, The Cleveland Clinic Foundation.

Dr Pratt is a member of the AMP Professional Relations Committee, the Chair Elect of the AMP Program Committee, and Director, Pharmacogenomics Laboratory in the Department of Medical and Molecular Genetics at Indiana University School of Medicine.

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