Speaker 1: Hello, and welcome to the Votes and Verdicks Podcasts, hosted
Speaker 1: by the policy and Litigation team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP. This podcast series examines
Speaker 1: the intersection of business policy and law. I'm Duane Wright,
Speaker 1: an analyst with Bloomberg Intelligence covering government healthcare policy. On
Speaker 1: today's episode, we'll be talking to Susan van Meter, president
Speaker 1: of the American Clinical Laboratory Association, which represents the nation's
Speaker 1: clinical laboratories. Susan has a deep healthcare policy and advocacy background,
Speaker 1: which includes over seventeen years leading the federal relations wing
Speaker 1: of the Healthcare Association of New York State, which represents
Speaker 1: New York's hospital and health system, and most recently was
Speaker 1: the executive director of adam DX, where she directed policy
Speaker 1: and advocacy for manufacturers of in vitro diagnostic clinical tests.
Speaker 1: I'm looking forward to our conversation today because there's a
Speaker 1: lot going on in the clinical lab space, whether it's
Speaker 1: FDA regulatory policy or CMS payment policy. We'll dive into
Speaker 1: those topics today, So Susan, Welcome to the Votes in
Speaker 1: Verdicts podcast.
Speaker 2: Hey, Dwayne, thanks for having me join you today. I've
Speaker 2: been looking forward to this conversation.
Speaker 1: So, Susan, you became president of ACLA April twenty twenty two.
Speaker 1: What is ACLA, who do you represent and how many
Speaker 1: members are in your association?
Speaker 2: Well, the ACLA we represent the lation nation's leading national
Speaker 2: clinical laboratories, so we have about forty laboratories and the
Speaker 2: membership as a whole, they include both the nation's largest
Speaker 2: clinical commercial laboratories, so lab Corp, Quest, Mayo, Clinic Bioreference, Sonic,
Speaker 2: among others. And then we have a number of laboratories
Speaker 2: that have more focused menus that are really driving precision medicine,
Speaker 2: focusing on advanced diagnostics. They include companies such as Tempests,
Speaker 2: Exact Sciences, Neogenomics, Myriad, and many others, and all together
Speaker 2: again about forty members. We also have a category of
Speaker 2: associate membership that principally includes IVD manufacturers, so companies such
Speaker 2: as Abbott, BDH, Logic, Roche, Siemen's, ThermoFisher and others. Really
Speaker 2: gives us a nice expansive view of the whole diagnostics ecosystem.
Speaker 2: But principally we're focused on advocating for policy to really
Speaker 2: expand patient access to innovative diagnostics for clinical laboratories.
Speaker 1: So, as I mentioned earlier, you became president April twenty
Speaker 1: twenty two. It's now January twenty twenty four. Time lies,
Speaker 1: what were the key priorities when we took over the
Speaker 1: job and how has the landscape changed since then.
Speaker 2: Yeah, Well, when I first started, we were really in
Speaker 2: the heat of discussions on two key issue areas. One
Speaker 2: is PAMA reform, and I know we'll talk more about
Speaker 2: that later, but also oversight of diagnostics. And at that
Speaker 2: time Senator Burr and Senator Murray were really driving a
Speaker 2: very active discussion on the Hill on the Valid Act,
Speaker 2: which was a piece of legislation that it would have
Speaker 2: established a diagnostic specific regulatory apparatus separate and apart from
Speaker 2: medical device and that this would have been one kind
Speaker 2: of cohesive regulatory framework. So we were heavily involved in
Speaker 2: that when I started. As we know, the Valid Act
Speaker 2: did not cross the finish line, but this issue persists. Sure,
Speaker 2: we'll talk a little bit more about what's happened post
Speaker 2: Valid Act. But the way to think about ACLA priorities
Speaker 2: is that we have four key pillars of our work.
Speaker 2: The first pillar is reimbursement, so we focus on ensuring
Speaker 2: that we are representing the industry well when it comes
Speaker 2: to securing new codes and appropriate crosswalks or gap fills
Speaker 2: for payments for new tests and technologies, and of course
Speaker 2: we'll talk about PAMMA and PAMA reform. Under reimbursement, we
Speaker 2: also spend quite a lot of time engaging with MAX
Speaker 2: on local coverage determinations and then of course private payers
Speaker 2: on coverage and payment policy. Second main pillar of our
Speaker 2: work is regulatory, so that's both with regard to KLEA
Speaker 2: and as we know, the KLIAK has put forward several
Speaker 2: dozen recommendations over the last year that CMS and HHS
Speaker 2: more broadly might consider, so we've been heavily involved there.
Speaker 2: Also under the regulatory umbrella we have our engagement with
Speaker 2: the f A third category or pillar of our work
Speaker 2: is preparedness and infrastructure. So when I came on board,
Speaker 2: COVID was winding down, but then we had another public
Speaker 2: health emergency that was EMPOCS, and our laboratory stepped up
Speaker 2: to partner and support the public health labs in the
Speaker 2: country to dramatically augment capacity for IMPOS testing. We're very
Speaker 2: proud of that work. So our work on preparedness and
Speaker 2: infrastructure continues. We do have a set of recommendations that
Speaker 2: we actually develop with the Johns Hopkins Center for Health Security.
Speaker 2: We're very proud of. It's a proposal for a national
Speaker 2: Diagnostics Action Plan, So we're continuing to work on that.
Speaker 2: And the last pillar of our work is in public affairs,
Speaker 2: and I'll just draw attention to a campaign that we
Speaker 2: started last year called the Power of Knowing, and that's
Speaker 2: all about ensuring that policymakers understand the foundational role that
Speaker 2: diagnostics play in inform clinical decision making. You know, we
Speaker 2: really like to underscore for US disease awareness months or
Speaker 2: days how important that clinical laboratory testing really is to
Speaker 2: making sure that parent patients are diagnosed appropriately and set
Speaker 2: on the right course for treatment and monitoring of treatment
Speaker 2: to ensure the best outcomes.
Speaker 1: Susan, thanks for that background. It seems like you all
Speaker 1: have a lot on your plate, and I think it's
Speaker 1: fair to say that the FDA added some more work
Speaker 1: for you all, And I want to touch on this
Speaker 1: issue of FDA oversight of laboratory developed tests, and I
Speaker 1: think it's worth trying to highlight how LDTs fit into
Speaker 1: the healthcare system. Now, So can you just give us
Speaker 1: an overview of what we're talking about when we say
Speaker 1: LDTs and how acla's advocacy on the issue of FDA
Speaker 1: oversights has changed over time.
Speaker 2: Yeah. Well, LDTs, or laboratory developed tests, are an integral
Speaker 2: and tremendously important aspect of the healthcare delivery system. These
Speaker 2: are tests that are developed to meet clinical needs. We
Speaker 2: have members of ours that have for example, developed tests
Speaker 2: to address conditions that were either previously unknown or not
Speaker 2: well understood. So there's a category of tests that really
Speaker 2: address rare diseases and that's tremendously important. So it could
Speaker 2: be perhaps a small patient population, but these tests are
Speaker 2: essential in ensuring that we're identifying disease and again helping
Speaker 2: to drive clinical decision making. LDTs are also part of
Speaker 2: you know, routine tests, so when you take a regular
Speaker 2: annual physical, you'll have a number of core tests that
Speaker 2: will help your clinician just really ascertain how your overall
Speaker 2: health is. And then of course LDTs are and I think, uh,
Speaker 2: you know critically here for this discussion we're going to
Speaker 2: have about the role of the f d A LDTs
Speaker 2: are really a way where we see innovation being driven
Speaker 2: in diagnostics broadly, LDTs have the capacity to respond quickly,
Speaker 2: whether it's to a public health emergency or to ensure
Speaker 2: that the latest scientific understanding of a disease, of characteristics
Speaker 2: of a disease. I'm sure we'll talk a little bit
Speaker 2: about biomarkers, but how do we translate the latest scientific
Speaker 2: discoveries into diagnostics to really help drive patient care. So
Speaker 2: when I think about how foundational laboratory developed tests are
Speaker 2: to driving precision medicine, you know that's going to be
Speaker 2: a significant area of focus for all of us moving forward. Right.
Speaker 2: LDTs are really rather replaceable again when it comes to
Speaker 2: really reflecting the latest science in a diagnostic.
Speaker 1: And So in terms of how ACLA has approached this issue,
Speaker 1: what's changed Because in the past, ACLA had had been
Speaker 1: historically opposed to oversight by the FDA, and that seems
Speaker 1: to have shifted a bit. Can you walk us through
Speaker 1: that shift and what are your goals when you think
Speaker 1: about this process?
Speaker 2: Sure, of course, and that's a great question. And acla's
Speaker 2: position has changed, and some of that change does indeed
Speaker 2: pre date me. So there are a number of ACLA
Speaker 2: member companies that do bring some tests through the agency.
Speaker 2: So there's some experience within the ACLA membership of working
Speaker 2: with the FDA, and that's you know, beyond securing euas
Speaker 2: for public health emergencies, right, it's for core tests as
Speaker 2: part of some of our member companies menus. So there
Speaker 2: is that experience. But more broadly, the issue has been
Speaker 2: that for many, many years, the FDA has indicated that
Speaker 2: it has authority to regulate LDTs and is simply exercising
Speaker 2: its enforcement discretion, that is not actively providing oversight. What
Speaker 2: that does is creates gray area and uncertainty in the
Speaker 2: market for diagnostic test developers, for laboratories developing tests. So
Speaker 2: you know, when you have that gray area, you might
Speaker 2: see a reluctance from companies to jump into a space
Speaker 2: to develop some testing when it's essential for patients. So
Speaker 2: we started having a conversation with the agency a few
Speaker 2: years ago about how to address that gray area. Right,
Speaker 2: It's not to say there isn't robust oversight now. Right,
Speaker 2: Every ACLA member is a KLi lab, all of our
Speaker 2: members are accredited by the College of American Pathologists. There's
Speaker 2: a lot of other oversight that's in place to de
Speaker 2: facto many of our labs, if not most of our
Speaker 2: labs are caring for patients that are in New York,
Speaker 2: so they're subject to New York States requirements in addition
Speaker 2: to requirements that need to be made for coverage, for example,
Speaker 2: by the moldex program. So there is a significant amount
Speaker 2: of oversight that should reassure folks about the performance of tests.
Speaker 2: But because of that gray area, we thought it was
Speaker 2: really important to significantly engage on any efforts for diagnostics reform,
Speaker 2: and look, the FDA has been focused for a lot
Speaker 2: of years and thinking about how to move from an
Speaker 2: enforcement discretion position to having more active oversight. We wanted
Speaker 2: to be part of those conversations on legislation and think
Speaker 2: that's important because we do see a role for the
Speaker 2: FDA potentially, but only if it's done via legislation to
Speaker 2: craft a diagnostic specific overall framework. That's critically important.
Speaker 1: And that's good to know because I think we should
Speaker 1: talk a bit about the history here. You mentioned the
Speaker 1: FDA's thinking about enforcement discretion, and there is a history
Speaker 1: here where prior to twenty sixteen, the FDA did release
Speaker 1: guidance to implement some kind of oversight of laboratory developed
Speaker 1: tests that was when President Obama was president. There was
Speaker 1: a change in administration, that guidance ended up getting pulled back,
Speaker 1: and there was this effort, as you mentioned, to figure
Speaker 1: out another way forward. And now it's fast forward to
Speaker 1: twenty twenty three. September of twenty twenty three, the FDA
Speaker 1: released a proposed role to provide a framework or at
Speaker 1: least maybe there's a short wave putting it bring LDTs
Speaker 1: into the Medical Device Framework. And so that common period
Speaker 1: opened and closed October through December, and now we're waiting
Speaker 1: on some I guess my final role at some point,
Speaker 1: which many think is probably the first half of this year.
Speaker 1: So ACLA provided some comments, as did others, and there
Speaker 1: are plenty of comments from hospitals, labs, diagnostic manufacturers, patient groups,
Speaker 1: and we can get into that a little bit later,
Speaker 1: but focusing on what ACLA wrote in terms of the comments, Oh,
Speaker 1: what is it about the role of LDTs in guiding
Speaker 1: patient care that makes the Device framework, which is what
Speaker 1: FDA wants to bring LDTs under. What about that framework
Speaker 1: makes makes it a poor fit? And why this is
Speaker 1: the wrong direction for the FDA.
Speaker 2: Yeah, it's a great question, and I think it's exactly
Speaker 2: the right question. Right, Because the ACLA, as I had
Speaker 2: mentioned previously, we can see a role for the FDA, right. So,
Speaker 2: but it has to be a framework that is established
Speaker 2: by a legislation that is specific to diagnostics, because we
Speaker 2: do think if you take the medical device authorities and
Speaker 2: apply it to laboratory developed test you are going to
Speaker 2: lose a significant number of tests on test menus. You
Speaker 2: are going to lose the ability to swiftly take the
Speaker 2: latest advances in science and apply it to diagnostics to
Speaker 2: really drive personalized care. And the med device authorities are
Speaker 2: rather inflexible. So let's consider an example of precision oncology testing. Right,
Speaker 2: I'll genericize it somewhat, but we have several members that
Speaker 2: have taken tests through the agency, so they have cleared
Speaker 2: or approved assays in the cancer space. They also maintain
Speaker 2: an LDT. And the reason they maintain the LDT is
Speaker 2: because they're able to swiftly iterate upon that latest discovery. Right,
Speaker 2: they've discerned there's an impact that a new that understanding
Speaker 2: of a biomarker has on you know, improved diagnosis, improved
Speaker 2: decision making around treatment. You want to update that test
Speaker 2: so that you're delivering that latest scient ticket advancement to
Speaker 2: patients and providers. That's what patients deserve. Unfortunately, the medical
Speaker 2: device authorities don't allow for that kind of iteration on
Speaker 2: tests and that's really important. So you're going to be
Speaker 2: you're going to have this lack of innovation meeting patients
Speaker 2: and that's really essential. So that's a very very important issue,
Speaker 2: a policy issue, and this is about putting patients first
Speaker 2: and ensuring we're supporting innovation. Let me give you another
Speaker 2: example too, right. I had mentioned that LDTs are really
Speaker 2: important for uh, you know, ensuring that we are ascertained
Speaker 2: what disease condition might be afflicting a patient. And there
Speaker 2: are scores of rare diseases small patient populations and ldt's
Speaker 2: sort of a really important role here. If we contemplate
Speaker 2: sort of what's the economic decision making that goes into
Speaker 2: developing a test and taking it through the agency. You
Speaker 2: need to consider what's the cost of developing the tests,
Speaker 2: the clinical study is necessary to prepare a submission, and
Speaker 2: the cost of the submission itself if it's a five
Speaker 2: to ten K. But if we're talking about rare disease,
Speaker 2: you know, more likely that's going to be a PMA
Speaker 2: or DENOVO and the fee is somewhere over four hundred
Speaker 2: thousand dollars. That's not insignificant when you're talking about the
Speaker 2: potential to have revenue being rather modest, given these tests
Speaker 2: are going to be applied to a really small segment
Speaker 2: of the patient population. So we have a member company
Speaker 2: that has several hundred LDTs and they tell that for
Speaker 2: half of their ldt's, the annual revenue for each one
Speaker 2: of those tests is less than the cost of a
Speaker 2: five to ten k fee. So you can see if
Speaker 2: you apply the medical device authorities broadly, you're going to
Speaker 2: have labs face some really difficult questions about which tests
Speaker 2: they can afford to keep. On those menus, we want
Speaker 2: to be able to do the right thing and make
Speaker 2: sure that ldt's are able to meet the needs of
Speaker 2: small patient populations. They're critically important patients. We want to
Speaker 2: make sure that they've got the treatments available to them
Speaker 2: that they deserve, and you need to have a diagnostic
Speaker 2: to drive that. So those are a couple of key
Speaker 2: examples why the inflexibility of the medical device authorities are
Speaker 2: really dramatically unsuited or ill suited for diagnostics generally.
Speaker 1: That's great background and understanding that viewpoint, there's another aspect,
Speaker 1: which is, well, does FDA even have the authority to
Speaker 1: do this? As I mentioned earlier, they tried to do
Speaker 1: this through guidance in twenty sixteen. Now they're trying to
Speaker 1: do it through a proposed rule. Do they have authority
Speaker 1: to do this? And if the FD eight does end
Speaker 1: up finalizing this rule, are we likely to see litigation?
Speaker 1: You know, we've seen over the last year and a
Speaker 1: half with passage of the Inflation Reduction Act and the
Speaker 1: negotiation pieces, there's a lot of litigation from the companies
Speaker 1: that are impacted through the negotiation process. So are you
Speaker 1: likely to see that play out if the FDA finalizes
Speaker 1: the rule?
Speaker 2: Yeah, so easily. For many years has maintained a position
Speaker 2: that the agency lacks the authority under current law to
Speaker 2: apply the medical device authorities to LDTs. We've been very
Speaker 2: clear about that for many years. So how do we
Speaker 2: think about this? Well, LDTs are unique assays right designed,
Speaker 2: developed and performed by clinical laboratories certified under clear to
Speaker 2: perform high complexity testing to yield important clinical information about
Speaker 2: a patient that can be used again to inform or
Speaker 2: guide patient care. So laboratories that develop and perform LDTs
Speaker 2: are providing a professional health service. That's really key. They're
Speaker 2: not acting as manufacturers. They are not distributing devices. So
Speaker 2: LDTs are professional services, they're not devices. Right. If you
Speaker 2: think about how a lab is sort of integrated into
Speaker 2: patient care, it can often be the case that our
Speaker 2: member laboratories and the professionals they are in are providing
Speaker 2: advice and guidance to clinicians as they think about, you know,
Speaker 2: what tests should I order?
Speaker 1: Right?
Speaker 2: Which tests in the menu best suits the characteristics of
Speaker 2: the patient, So we can provide that support and guidance. Upfront,
Speaker 2: we receive the sample, there's pre analytics steps that take
Speaker 2: place or evolving sample preparation, perhaps amplification of samples, et cetera.
Speaker 2: And then there's the analysis of the test itself. And
Speaker 2: then when we take those analytics steps, there are things
Speaker 2: to consider. Nest we just don't deliver the results right
Speaker 2: or the data. There's post analytics steps that are important
Speaker 2: as well. Right, we want to make sure that we're
Speaker 2: confirming at that the test is accurately interpretive, quantified entered
Speaker 2: into the LIS. There's often conversations between our member company,
Speaker 2: laboratorians that are delivering that service with the clinician who
Speaker 2: had ordered to test, to ensure that they understand the
Speaker 2: results and are best able to leverage those results to
Speaker 2: drive the right patient care decision. So, in short, we
Speaker 2: do not believe the LDA has the authority. That's largely
Speaker 2: rooted in the fact that ldt are not medical devices,
Speaker 2: but they are in fact professional services.
Speaker 1: And so with that in mind, what strikes me about
Speaker 1: this is that this proposal impacts a lot of different stakeholders,
Speaker 1: so clinical laboratories, diagnostic manufacturers, academic medical centers, hospitals, patient groups,
Speaker 1: and where there's this disagreement, usually you see Congress try
Speaker 1: to come in and legislative solution, and you mentioned that earlier,
Speaker 1: specifically about the Ballot Act, and I'd like to dig
Speaker 1: into that for a second here. How has Congress tried
Speaker 1: to respond to these different views? And while we haven't
Speaker 1: seen Congress make progress in the past, you think that
Speaker 1: this proposal will be a catalyst for action this year.
Speaker 1: Granted it's an election year, so that's kind of tough,
Speaker 1: but can you walk us through what it is you're
Speaker 1: trying to accomplish within the legislative process.
Speaker 2: Sure, and I'm glad you raised a valid Act again
Speaker 2: because I think it bears hovering on for a moment.
Speaker 2: And while we did not endorse the Valid Act, we
Speaker 2: think there were that we were continuing to work on it.
Speaker 2: I mean that we made significant improvements to the Valid Act,
Speaker 2: and I want to just reflect on a few of those.
Speaker 1: Right.
Speaker 2: The Valid Act would have again established a diagnostic specific
Speaker 2: apparatus or regulatory framework for all diagnostics, so it would
Speaker 2: have better appreciated the characteristics of laboratories of laboratory developed
Speaker 2: tests of diagnostics in general. It would have had a
Speaker 2: meaningful grandfathering policy, which is critically important when we think
Speaker 2: about maintaining access patient access to tests that are available now.
Speaker 2: It would have had a transition period that allowed for
Speaker 2: multiple areas of notice and comment rulemaking over an extended
Speaker 2: period of time to allow for appropriate prepar preparation of implementation.
Speaker 2: And it would also have included a number of new
Speaker 2: attributes that are unavailable today under current law to the Agency,
Speaker 2: including something called technology certification, which broadly speaking, would have
Speaker 2: been a pathway for test developers to secure the approval
Speaker 2: of a suite of tests after the Agency had considered
Speaker 2: a single assay within that suite of tests, and it
Speaker 2: would have allowed for agreed upon change control protocols to
Speaker 2: be made after the test was on the market with
Speaker 2: notification back to the agency. So that concept of being
Speaker 2: able to pull in the latest scientific advancements and knowledge
Speaker 2: and have that be reflected in tests is something that
Speaker 2: would have been embraced through this technology certification pathway. We
Speaker 2: had a lot of favorable and productive discussions with the
Speaker 2: Agency throughout negotiations on the Hill on the valid Act. Again,
Speaker 2: we felt we made really strong progress. So we think
Speaker 2: that was a very positive step forward, and I will
Speaker 2: say we would certainly prefer that type of framework to
Speaker 2: what the FDA is doing now. When the Valid Act
Speaker 2: did not cross the finish line at the end of
Speaker 2: twenty twenty two, you know, we reconvened with the agency
Speaker 2: with other stakeholders, talked to bipartisan by cameral committees on
Speaker 2: these issues, and really encouraged everyone to reconvene again go
Speaker 2: back to the Hill right that legislation is the right direction.
Speaker 2: We were also very close there and we know kind
Speaker 2: of what those key attributes really need to be in
Speaker 2: the legislation, and so we're continuing to encourage that right
Speaker 2: we as we work with the agent and see we
Speaker 2: did provide robust comments to this proposed rule, but we
Speaker 2: are encouraging them to withdraw the rule, and for the
Speaker 2: reasons that we've mentioned that having to do with policy issues,
Speaker 2: ensuring patient access, having the latest technology but reflected in
Speaker 2: tests available to patients, and addressing this legal issue that
Speaker 2: we mentioned that legislation is the right pathway forward. So
Speaker 2: we're going to continue to encourage that be the direction forward.
Speaker 2: And I think that you mentioned a lot of stakeholders
Speaker 2: that have weighed in. You know, we've been reading a
Speaker 2: lot of the comment letters that have been posted, and
Speaker 2: there are a number of other organizations like US that
Speaker 2: are reflecting on the importance for Congress to be involved
Speaker 2: here right to have the right pathway forward, the ideal
Speaker 2: pathway forward be through legislation.
Speaker 1: And so for folks keeping track or trying to keep track,
Speaker 1: when we say the VALID Act, it's short for Verifying, Accurate,
Speaker 1: Leading Edge IVC Development Act, introduced by Congressman Bushan of
Speaker 1: Indiana and Congresswoman Diana to Get of Colorado. So it's
Speaker 1: a bipartisan bill and it remains to be seen what
Speaker 1: Congress is able to do this year again an election year.
Speaker 1: They're still trying to figure out appropriations funding for the
Speaker 1: current discal year five months late or later, so time
Speaker 1: will tell. But I do want to circle back to
Speaker 1: a comment you made earlier about the cost is associated
Speaker 1: with compliance. You get touched on it a bit. Can
Speaker 1: you just walk us through some of the economic and clients'
Speaker 1: costs under the device framework, because we did see the
Speaker 1: FDA put forward a number in terms of what the
Speaker 1: cost might be, and I wonder if that's how they
Speaker 1: get to that number that's even close? You know, is
Speaker 1: this going to impact certain labs disproportionately than others.
Speaker 2: Yeah, it's a great question, and you know, maybe I'll
Speaker 2: answer relatively high level and suggestive. Folks are interested in
Speaker 2: more detail in the ACLA comment letter to the agency.
Speaker 2: It's available on our website. We do have a robust
Speaker 2: section that addresses what we think the faulty assumptions are
Speaker 2: in the FDA's cost benefit analysis, and we make suggestions
Speaker 2: for a number of alternatives. In short, we think they
Speaker 2: dramatically underestimate the cost associated with implementation and overestimate the
Speaker 2: benefits as they conceive of them. Right, you know, if
Speaker 2: you look at one there's one key assumption that's that's
Speaker 2: driving their understanding of the performance of LDTs. It's a
Speaker 2: single study that has since been refuted by some of
Speaker 2: the original authors. That does not make for a strong analysis.
Speaker 2: So again in our comment letter, we've got a really
Speaker 2: detailed assessment and make some recommendations here. But when we
Speaker 2: think about the cost, which I think is really your question,
Speaker 2: how do we think about the cost here? So for laboratories,
Speaker 2: if you look at the timeline under the proposed rule,
Speaker 2: there are some requirements that take place within the first year.
Speaker 2: For example, it's adverse events reporting. There would be obviously
Speaker 2: some compliance costs associated with that, but the big cost
Speaker 2: would come in meeting the requirement that is three and
Speaker 2: a half years out, which is submission of all high
Speaker 2: risk tests that are Ldt's right. So a laboratory needs
Speaker 2: to be taking a look at their menu now and
Speaker 2: determining which tests they believe would be considered high risk tests.
Speaker 2: There's a question and on the table about would the FDA,
Speaker 2: by the way, make available to laboratories pre submission meetings
Speaker 2: to help answer the question about thinking about risk of tests.
Speaker 2: But so if the lab makes a decision about which
Speaker 2: of its test menus are high risk tests. Then you
Speaker 2: need to make a further decision about for which of
Speaker 2: those will you prepare us submission for the agency. There
Speaker 2: is cost obviously associated with that. There are a dearth
Speaker 2: of regulatory experts that are available to industry and to
Speaker 2: the agency as well, that are available to really help
Speaker 2: pull those submissions together. I had reflected some moments ago
Speaker 2: about thinking about what about those LDTs for which the
Speaker 2: annual revenue is less than a five ten K submission,
Speaker 2: And I think for many of these high risk tests,
Speaker 2: you know, we would be again talking about pm AS
Speaker 2: or Denovo's. So it's the cost associated with the preparation
Speaker 2: of the submission that includes, you know, hiring the regulatory experts,
Speaker 2: and then there's the cost associated with the fee. But
Speaker 2: you know, this isn't all dollars and cents. When we
Speaker 2: think about the potential for labs to have to curtail menus,
Speaker 2: that's the cost to patients, right and public health, and
Speaker 2: that has us worried here. So you know, in short,
Speaker 2: we think again there's an underestimation of cost and overestimation
Speaker 2: of benefit based on the timeline and characteristics of that
Speaker 2: proposed rule, So it'll it'll affect labs differently depending upon
Speaker 2: the menus that they have in place, the proportion of
Speaker 2: tests that are LDTs, the proportion of those that are
Speaker 2: high risk tests. But in general, that's how we think
Speaker 2: about the costs and broadly, what are our concerns associated
Speaker 2: with the.
Speaker 1: Costs, and so your comments focus on the impact to
Speaker 1: the labs. I do wonder, since we're talking about an
Speaker 1: expansion of FDA regulatory oversight to new class products, whether
Speaker 1: the agency itself has the resources to do this and
Speaker 1: to do all this in a timely manner. Typically when
Speaker 1: we talk about FDA funding, it's usually a conversation about
Speaker 1: the user fee agreements, and there's user fee agreements for drugs,
Speaker 1: animal drugs, biologics, and medical devices. And so we are
Speaker 1: going to be approaching another round of the UFA reauthorizations.
Speaker 1: Do you think the FDA has the resources to do this? Number? One,
Speaker 1: is it possible that the way this is laid out
Speaker 1: and the rule that the funding could be addressed through,
Speaker 1: that you'd signal that these labs now have to comply
Speaker 1: with some of these new rules, and you need the
Speaker 1: expertise to get there. FD is going to be competing
Speaker 1: for the same talent and the same resources. So I
Speaker 1: do wonder what the resource impact is going to be
Speaker 1: for the agency that's supposed to provide the oversight of
Speaker 1: all of this.
Speaker 2: Yeah, I think that's also really a great question, and
Speaker 2: we have concerns about that, And I know the concerns
Speaker 2: are not just concerns on the part of clinical labs,
Speaker 2: but a lot of stakeholders express concerns about the capacity
Speaker 2: of the agency to implement the rule they put forward
Speaker 2: right as proposed. You know, one of the things we'll
Speaker 2: be really looking for when this final rule comes out
Speaker 2: if there is any change with regard to timeline, the
Speaker 2: potential for grandfathering right just as a reminder for folks
Speaker 2: that or maybe just to be instructive if listeners don't
Speaker 2: know this, But under the proposed rule, the FDA is
Speaker 2: not suggest grandfathering any tests that are on the market
Speaker 2: right now. So perhaps it looks to grandfathering or again
Speaker 2: lengthening that timeline to try to address the resource issue.
Speaker 2: But we do express in our comments, and again other
Speaker 2: stakeholders have expressed concerns about the capacity of the agency
Speaker 2: to implement this role as proposed. We do have significant
Speaker 2: concerns there, and you mentioned the medical device user fees
Speaker 2: and negotiations. You know, we're living under MADUFA five right now.
Speaker 2: You know, by the time you would get to the
Speaker 2: point where you're approaching submissions for those high risk tests
Speaker 2: I mentioned, you know, three and a half years out
Speaker 2: at least under the proposed role timeline, you're already in
Speaker 2: the process as industry like ACLA would be, other industry
Speaker 2: groups would be of starting those negotiations for MADUFA six.
Speaker 2: Right So, I certainly think these issues are going to
Speaker 2: blend together, and you're you know, you're right about the
Speaker 2: synergies therein does that give Congress a further impetus to
Speaker 2: move on legislation, You know, it could be the case.
Speaker 2: We'd certainly like to see legislation, as you know, sooner
Speaker 2: rather than later. We think we know what those key
Speaker 2: components really should be and need to be right to
Speaker 2: address the needs of patience and innovation.
Speaker 1: That's helpful. And this issue, as I mentioned earlier and
Speaker 1: as Susan mentioned, has been going on in terms of
Speaker 1: FDA's role and overseight year, has been going on for
Speaker 1: quite some time. It's playing out again because of what
Speaker 1: FDA proposed last year, and I suspect that we see
Speaker 1: a final rule in the first half of this year,
Speaker 1: will be having more conversations about where this is going
Speaker 1: to go and what the appropriate role is for FDA
Speaker 1: and and whether they have the resources, and what the
Speaker 1: impact might be for labs in this space. So it's
Speaker 1: definitely going to be on our radar screen moving forward.
Speaker 1: I do want to spend a couple of minutes so
Speaker 1: talking about the other side of this, which is how
Speaker 1: labs get paid for tests and whether the reimbursement system
Speaker 1: that we have now is appropriate, and go back in time,
Speaker 1: there was a bit of a shift in terms of
Speaker 1: diagnostic payment and an attempt to maybe harmonize or move
Speaker 1: the payment system in line with what we were seeing
Speaker 1: in the private sector. So that was around twenty fourteen.
Speaker 1: So the issue seems to be right now is that
Speaker 1: the attempt by Congress to change the payment system might
Speaker 1: not have worked, and that that law, the Protecting Access
Speaker 1: to Medicare Act, was part of a broader healthcare bill
Speaker 1: that wasn't just about diagnostic payment. It was about a
Speaker 1: whole host of issues, including position payment, among other things.
Speaker 1: So can you just walk us through the history here.
Speaker 1: What is it about PAMA that Congress tried to do?
Speaker 1: And when we look at some of the challenges, now,
Speaker 1: are they a result of drafting or is it a
Speaker 1: result of the administration and current administration implementing it in
Speaker 1: a way that Congress didn't intend.
Speaker 2: Yeah, great question. So at the heart of the policy
Speaker 2: in PAMA is that Medicare should base its rates off
Speaker 2: of rates paid by insurers in the commercial market, right,
Speaker 2: so a very kind of different construct for our Medicare
Speaker 2: payment system. So in order for CMS to be able
Speaker 2: to ascertain what those commercial rates were, they did a
Speaker 2: survey of laboratories across the country. Unfortunately, when they did
Speaker 2: that first survey, they garnered data from less than one
Speaker 2: percent of labs across the country. And when we think
Speaker 2: about labs, right, we think about three key segments. It's
Speaker 2: commercial laboratories, hospital laboratories, and physician office laboratories. And just
Speaker 2: to put a real fine point on this, the total
Speaker 2: number of hospitals that provided survey data were fewer than
Speaker 2: twenty five not twenty five percent, but twenty five hospitals.
Speaker 2: We had five thousand hospitals in the country. So, in short,
Speaker 2: there was a real dearth of data, and the data
Speaker 2: were skewed towards large commercial laboratories, and the net effect
Speaker 2: was that when CMS determined what the Medicare rates would be,
Speaker 2: it led to very significant draw ups and reimbursement. And
Speaker 2: you couple that with the requirements under PAMA for scheduled
Speaker 2: reductions of up to a certain percentage. That led to
Speaker 2: three years of reductions of up to ten percent. It's
Speaker 2: rather significant for an industry when you think about how
Speaker 2: big the clinical lab fee schedule is. You know, it's
Speaker 2: roughly about ten billion dollars a year, or somewhere less
Speaker 2: than three percent of total Part B spending, right, So
Speaker 2: it's a modest system compared to the whole of Part
Speaker 2: B spending. So when you're talking about reductions that are
Speaker 2: so large, they can be tremendously harmful. So ACLA encouraged
Speaker 2: CMS to administratively make changes to the policies to pull
Speaker 2: in more data, particularly from hospital labs. There were some
Speaker 2: modest modifications there, but nothing significant enough. ACLA actually filed
Speaker 2: suit against the agency, indicating that CMS acted in an
Speaker 2: arbitrary and capricious fashion and determining how the rates would
Speaker 2: be set. The US District Court of Appeals for the
Speaker 2: DC Circuit in the summer of twenty twenty two actually
Speaker 2: agreed with ACLA on the merits that harm was done.
Speaker 2: There was arbitrary and capricious decision making on some of
Speaker 2: the policy used to determine rates, but there is judicial
Speaker 2: preclusion on suing on the rates themselves. Therefore, the court
Speaker 2: did not require a remedy. So that's why legislation is
Speaker 2: really important for us. So we have worked hand in
Speaker 2: glove with a group of bipartisan bio cameral leaders and
Speaker 2: all the health committees, so three health committees Senate, Finance, House,
Speaker 2: Energy and Commerce, Houseways and Means to develop legislation that
Speaker 2: we think is a really moderate and responsible pathway forward
Speaker 2: to ensuring that CMS has what it needs through a
Speaker 2: statistical sampling model recommended by MEDPACK to pull in information
Speaker 2: about what commercial rates really are and to then apply
Speaker 2: those to set Medicare rates, and it would not eliminate
Speaker 2: reductions called for in the law, but would mitigate them.
Speaker 2: So put a cap on increases, a cap on decreases,
Speaker 2: right protects the Medicare program, gives greater stability and predictability
Speaker 2: to clinical labs. We think that's the right thing when
Speaker 2: it comes to thinking about access and infrastructure and innovation.
Speaker 2: So this bill is the Saving Access to Laboratory Services
Speaker 2: Act or SALSA. I have to back up for a
Speaker 2: moment and really appreciate the work that's been done by
Speaker 2: Congress to show that it understands that PAMA is the
Speaker 2: wrong direction. Right. So last year was the most recent
Speaker 2: time in November, when Congress acted to delay what would
Speaker 2: have been the next round of PAMMA cuts and data reporting,
Speaker 2: so they would have been up to fifteen percent cuts
Speaker 2: on about eight hundred tests. So that marked the fourth
Speaker 2: time that Congress has acted and the fifth time that
Speaker 2: cuts have been delayed. So really, in short, you know,
Speaker 2: you're seeing that there's a bipartisan understanding that there are
Speaker 2: flaws in PAMA that need to be corrected.
Speaker 1: Right.
Speaker 2: So again, six four times Congress has acted, five times
Speaker 2: the reductions have been delayed. We're tremendously grateful for that, right,
Speaker 2: But we think twenty twenty four is really the year
Speaker 2: to sort of settle this finally, to put the clinical
Speaker 2: lab fee schedule on a sustainable, long term pathway, and
Speaker 2: again we think SALSA is the way to do that.
Speaker 2: In this Congress Susan.
Speaker 1: That's helpful. You are providing an overview of the payment
Speaker 1: landscape for clinical labs. Can you give us a sense
Speaker 1: of what some of the other issues are that ACLA
Speaker 1: is working on.
Speaker 2: Yeah, of course, So I'll just mention two issues among
Speaker 2: the many that that we're working on. One of them,
Speaker 2: in the reimbursement realm is prior authorization.
Speaker 1: Right.
Speaker 2: Our view really mirrors that of you know, many in
Speaker 2: Congress and other stakeholders that have pointed out I think
Speaker 2: quite effectively that prior ofth has become increasingly opaque and
Speaker 2: aggressive and a tool that is denying services for patients
Speaker 2: and payment for providers. So we think guardrails around prior
Speaker 2: authorization is essential. So the administration recently took an important
Speaker 2: step in the right direction of putting guardrails around insurers,
Speaker 2: around most insurers, not all insurers, in terms of their
Speaker 2: prior auth practices, making requirements for transparency on policies, making
Speaker 2: processes electronic, which should be helpful, including the sharing of
Speaker 2: information around patient documentation. But much more is really needed
Speaker 2: to ensure that we have a more streamlined system that
Speaker 2: allows patients to get the care that they deserve. One
Speaker 2: thing we're looking at. In particular, is how the OIG
Speaker 2: has rightfully pointed out recently that we're seeing that Medicare
Speaker 2: advantage plans covered lives have diminished access to covered services
Speaker 2: compared to those similarly situated patients in the fee for
Speaker 2: service program. That bears greater attention and focus. So we
Speaker 2: want to continue to work with the administration to tighten
Speaker 2: some of the guardrails and work with Congress because there
Speaker 2: are members in both chambers, on both sides of the
Speaker 2: aisle that are really interested in making sure that prior
Speaker 2: off is not a barrier to patients getting the care
Speaker 2: that they need. We need to think about the role
Speaker 2: of clinical laboratories and healthcare delivery system we pay. We
Speaker 2: play an essential role, but one where we often do
Speaker 2: not engage directly with patients. So that adds a layer
Speaker 2: of difficulty for clinical labs when it comes to securing
Speaker 2: some of the information that's necessary to meet prior off demands.
Speaker 2: So that's something that we're going to be ensuring policymakers
Speaker 2: really understand. So, you know, a step in the right
Speaker 2: direction from the administration. We're looking forward to continuing to
Speaker 2: work with them and engage robustly with Congress to put
Speaker 2: you know, further guardrails around prior off and I'll just
Speaker 2: mention kind of one final issue, which is preparedness. Right.
Speaker 2: I mentioned at the top of our discussion that preparedness
Speaker 2: and infrastructure is an important workstream for ACLA. Congress has
Speaker 2: yet to reauthorize the Pandemic All Hazards Preparedness Act. We're
Speaker 2: encouraging them to do so. There are some provisions where
Speaker 2: able to get into those packages, and the House and
Speaker 2: Senate to recognize the importance of diagnostics in preparedness. But
Speaker 2: discussions continue off of the hill as well. You know,
Speaker 2: we have the opportunity to engage with the Administration, HHS,
Speaker 2: various agencies there in the new Office of Preparedness in
Speaker 2: the White House to make sure we have a continuity
Speaker 2: of conversation about what is needed to prepare and respond
Speaker 2: to challenges. One thing that we are encouraging, we think
Speaker 2: we're making some progress, is that we have pre event
Speaker 2: agreements or arrangements put in place with commercial labs and
Speaker 2: government to facilitate rapid response in the event there is
Speaker 2: an emergency. So we're going to continue to focus there.
Speaker 2: So that's just a couple of other priorities among many.
Speaker 1: Susan, it sounds like you and your team will be
Speaker 1: busy this year working on a lot of these policies.
Speaker 1: So best of luck as it's all unfolds.
Speaker 2: And thank you.
Speaker 1: Yeah, and with that, Susan, I want to thank you
Speaker 1: for joining us today. This was a great discussion, and
Speaker 1: I want to thank the listener as well for joining us.
Speaker 1: As a reminder, you can read all of our bi
Speaker 1: research on the Bloomberg terminal at b I go. Thanks
Speaker 1: again for listening and have a great day.