By Monica Heger

One major hurdle in bringing next-generation sequencing into the clinic is how it will be received by payors and hospitals.

In a webinar hosted by Illumina this week, Trisha Brown, vice president of clinical affairs at Medco subsidiary DNA Direct, said that demonstrating the technology's cost effectiveness will be key to gaining reimbursement and encouraging hospital uptake.

Currently though, there is broad variability among payors and hospitals in both their general knowledge about genomics and their readiness to incorporate the technology into health care, Brown said.

Cost-Effectiveness Data

With regards to health plans, it is the "wild, wild West," Brown said, and there is a broad spectrum of plans from those that will not deal with genetic or genomic information at all, to plans that mention whole-genome or whole-exome sequencing — although none that state specifically that those tests will be covered. There are even some plans that say they don't cover genetic tests, said Brown, but actually do without realizing that the tests they are covering are genetic.

Brown said that a study conducted by DNA Direct found that of 200 publicly available health plans, about one-third have coverage policies on genetics or genomics tests, with policies naming up to 150 specific tests. Additionally, three plans specifically mention whole-genome sequencing, but "all state that it's experimental and not covered."

Nevertheless, she said, there have been cases where whole-genome sequencing has been covered. For instance, Howard Jacob, director of the Human and Molecular Genetics Center at the Medical College of Wisconsin, has said that two insurance companies have agreed to reimburse for whole-genome sequencing of pediatric patients with rare, undiagnosed diseases (CSN 8/24/2011).

As of June, Illumina had also received reimbursement for two cases that used genome sequencing to diagnose disease (CSN 6/15/2011).

"Sometimes it doesn't matter what the policies are" of the specific health plans, said Brown. "If you're able to make a good case for why whole-genome sequencing is going to benefit this member and potentially improve outcomes, there's a good chance they're going to cover it," she said.

The more that whole-genome sequencing proves to be cost-effective, the more likely that health insurance companies will reimburse for it, she said.

Health insurance plans are "ready to embrace genomics as soon as the return on investment is there," she said.

However, not everyone agrees. For instance, in November, a Medicare official indicated that the Centers for Medicare and Medicaid Services had no plans to consider reimbursement for whole-genome sequencing-based tests any time soon because it would be difficult to convince CMS that whole-genome sequencing has value in helping physicians make patient decisions (CSN 11/9/2011).

Employers may help accelerate the reimbursement of genomic tests, said Brown. Because employers' goals are to keep their employees healthy and productive, they have a different return on investment than health plans, said Brown. And individual employers can negotiate with providers to cover genetic tests for their employees that wouldn't otherwise be covered.

Driving Hospital Revenue

While the main driver for payors to reimburse for genomic tests will be cost-effectiveness demonstrations, for hospitals, genomic tests have the potential to increase revenues.

While spending for esoteric testing currently represents only about 2 percent of all health care spending, in 2012 molecular genetic testing is estimated to be about a $4 billion market, said Brown, with next-gen sequencing poised to potentially capture half that.

As reported by Clinical Sequencing News sister publication PCR Insider, consulting firm DeciBio has estimated that the global molecular diagnostics market, which is currently valued at $5.9 billion, is expected to hit nearly $11 billion by 2015, with next-generation sequencing-based testing experiencing the highest rate of growth over the next four years, at around 100 percent growth per annum.

While next-gen sequencing is currently a very small portion of the molecular diagnostic market, by 2015 it is expected to be between $700 million and $1.1 billion.

Hospitals, which are looking for new ways to drive revenue, stand to benefit, said Brown. The model for hospitals has changed such that they no longer make the bulk of their money from "heads on beds," said Brown. Rather, hospitals are making money from outpatient services such as colonoscopies and mammograms, and genomic tests are another outpatient service that hospitals could bring on board.

While many genomic tests currently in use at hospitals are based on PCR, arrays, or other technology, a number of hospitals are developing next-gen sequencing-based tests.

The Mayo Clinic, for instance, is working on sequencing-based hereditary colon cancer and mitochondrial disease tests, and is studying how to integrate whole-genome sequencing into patient care (CSN 2/15/2012).

Mount Sinai Hospital in New York is developing a sequencing-based pharmacogenomic test that it wants to make accessible via patients' electronic medical records (CSN 12/14/2011).

Pharmacogenomics will perhaps be how most hospitals make their first entrance into genomics testing, said Brown, because it is appealing to payors, employers, and physicians alike since it has already demonstrated that it is cost-effective, will reduce employee sick time, and the data can be readily used by physicians in patient care.

From her survey of 200 health plans, she said that 40 pharmacogenomic tests are already mentioned in health plans.

For clinical applications of next-gen sequencing, "pharmacogenomics is at the top of the list," said Brown. While whole-genome sequencing to diagnose rare disease and to help guide treatment of cancer has recently made headlines, using next-gen sequencing in pharmacogenomics is applicable to a larger number of people. "There's a lot of potential for pharmacogenomics," she said.

Going forward, the adoption of next-gen sequencing in the clinic still has a number of hurdles, she said. Analysis is still expensive and complicated, particularly for whole-genome sequencing, and acceptance by the US Food and Drug Administration is a "hurdle that has to be overcome."

Among other things, it will require that researchers and clinicians "demonstrate that the information you're getting out of next-generation sequencing or any kind of genomic analysis is going to provide a benefit greater than the cost that you put into it."

"We have a lot of work to do to make that happen," she said

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Demonstrating Cost Effectiveness of Clinical NGS is Key to Payor Reimbursement, Hospital Uptake