Medicare draft decisions may boost Natera, Myriad tests

Dive Brief:

Medicare contractors published a batch of local coverage determinations Thursday relating to devices and diagnostics sold by companies including Myriad Genetics and Natera.
Analysts at Cowen called the draft LCD for Natera's colorectal cancer test as a win for the company, noting that the "coverage was materially broader and quicker than expected."
The situation is less clear for Myriad, with the two documents on pharmacogenomic testing indicating the population being offered the test may grow, but the type of providers offering the test may remain limited.

Dive Insight:

Local Coverage Determinations are made by Medicare Administrative Contractors, or MACs, when a national coverage determination has not yet been made or when a national policy needs to be clarified to address local differences in the practice of medicine.

The Natera draft LCD covers the use of its Signatera in minimal residual disease testing of patients with colorectal cancer. Under the LCD, the payer will reimburse the use of the test to guide whether to administer chemotherapy to patients after surgical resection, and to check for disease recurrence in previously treated patients.

Natera currently sells Signatera as a CLIA test, primarily to help drug developers identify people eligible to take part in clinical trials, and previously identified the receipt of a draft LCD as the trigger for it to prepare to promote the diagnostic. That trigger has come sooner than Natera expected.

Talking to investors two weeks ago, Natera CEO Steve Chapman said the company expected a draft local coverage decision toward the end of 2019 or early next year, at which point Natera planned to bolster its U.S. sales force to -sell the colorectal assays prior to Medicare coverage being finalized.

The ahead-of-schedule decision led Cowen analysts to talk up the prospect of Signatera sales growing faster than previously forecast. The analysts had penciled in $15 million of Signatera sales for 2020 but think the finalization of the LCD "could drive potential upside to our estimates."

The analysts identified another LCD as a potential positive for Signatera, which Natera plans to prove the value of in a couple of indications before seeking broader coverage that reflects the scope to use it in multiple cancers. Chapman pointed to similar routes taken by other assays to show the viability of the plan.

One such product, CareDx's AlloSure test for certain organ transplant rejection, gained draft coverage in the heart and kidney transplant populations in the latest batch of proposed LCDs. The Cowen analysts pointed to the CareDx draft LCD as a "positive leading indicator that [Natera] may be able to expand coverage of its test into those areas over time as well."

The analysts were more equivocal about the impact of the latest draft LCDs for Myriad and its GeneSight depression test. Across draft LCDs for pharmacogenomic tests and combinatorial pharmacogenomics, the analysts picked up hints that coverage could expand beyond refractory major depressive disorder patients and into the far larger population of people with psychiatric illness. However, the LCDs also contain suggestions that use of GeneSight may remain limited to specialist healthcare professionals.

"If coverage is indeed limited to only psychiatrists, we believe this would be an incremental negative relative to commentary from management," the analysts wrote.

The comment period on the draft LCDs ends Nov. 21. Analysts at Cowen expect the final LCDs to be posted "shortly" after that date. CMS reimbursement will kick in 45 days after the finalization of the LCDs, suggesting the new policies could start affecting uptake of the devices and diagnostics early next year.