What Kind Of Company Is 23andMe?

by Jondavid Klipp | Apr 15, 2019 | 23andMe

What Kind Of Company Is 23andMe?

A study led by researchers at the genetic testing lab company Invitae (San
Francisco, CA) found that 23andMe’s direct-to-consumer BRCA test for
hereditary breast cancer misses almost 90% of BRCA mutation carriers. 23andMe has been criticized for offering the test because it only analyzes three BRCA gene mutations out of a total of 1,000 other known mutations. The study results were presented at the American College of Medical Genetics and Genomics annual meeting in Seattle on April 4.

However, providing clinically relevant information to patients does not seem to be the primary goal of 23andMe. In fact, the company does not even operate a CLIA-certified lab—it subcontracts lab testing services to LabCorp. Rather, Laboratory Economics thinks 23andMe is simply a marketing company whose goal is to obtain patient DNA and demographic information which can be sold to pharmaceutical companies to help with drug research.

23andMe markets two testing services directly to consumers. Its ancestry testing service costs $99 and analyzes saliva samples obtained from at-home collection tubes. The samples are shipped to a LabCorp facility in North Carolina for genotyping. 23andMe takes the data provided by LabCorp to prepare ancestry reports that are made available to customers through online accounts in about 3-5 weeks. The report provides an estimate of your ancestry composition (e.g., 47.4% European, 41.8% East Asian & Native American, 5.2% Sub-Saharan African, et al.).

The company’s second product includes an ancestry report plus tests that assess your genetic risk for a variety of diseases (Parkinson’s, Alzheimer’s, Celiac Disease, breast cancer, et al.) and your carrier status for numerous inheritable diseases (Cystic Fibrosis, Bloom Syndrome, Canavan Disease, et al.). The report also gives generic lifestyle advice such as “avoid eating fast food,” and “sleep a healthy amount.” The cost for this combined service is $199.

FDA Clearance?
The FDA has granted 23andMe four separate clearances related to sending its genetic testing reports directly to consumers. The clearances did not involve instrument systems or reagents, just the issuance of result reports. FDA clearance was given after 23andMe showed that more than 97% of users understood that they should not use the company’s reports to make any changes to their treatment without first consulting their doctor.

Loss-Leader Testing
23andMe is clearly using its ancestry and genetic testing services as loss leaders. Its advertised list prices of $99 and $199 are often discounted by as much as 30% with free shipping. The company has also offered free testing to certain ethnic groups that are underrepresented in its DNA database, which now includes samples from more than five million people around the world. In fact, Laboratory Economics thinks that 23andMe is likely to be paying LabCorp close to, if not more than, $199 per specimen tested. LabCorp has stated that it makes above-average margins on testing services provided to 23andMe.

DNA Database For Sale
23andMe says that roughly 80% of the five million people who have purchased its service have given their consent to having their anonymized DNA and demographic data shared with third parties. And this is where 23andMe makes its money. The company has had research partnerships with numerous pharmaceutical companies including Alynlam, Biogen, Pfizer, Roche’s Genentech, Johnson & Johnson’s Janssen, Denmark-based Lundbeck and Germany-based Grünenthal Group.

And last year it announced its biggest deal to date, a four-year agreement to develop new drugs with GlaxoSmithKline (GSK). The companies agreed to split costs and profits equally, and Glaxo made a $300 million investment in 23andMe.

In addition, GSK contributed its LRRK2 inhibitor, a promising therapeutic target for some forms of Parkinson’s disease, into the partnership. GSK thinks 23andMe’s database of people who know their LRRK2 variant status will help the Parkinson’s program enroll patients on the way to clinical proof of concept.

Who owns 23andMe?
The company was co-founded by its CEO Anne Wojcicki, ex-wife of Google co-founder Sergey Brin, in 2006. Google was an early investor in 23andMe. In addition, 23andMe has raised more than $750 million from a combination of private equity investors (e.g., New Enterprise Associates, Mohr Davidow Ventures, Sequoia Capital) and pharmaceutical companies (e.g., Genentech, GlaxoSmithKline and Johnson & Johnson).

Largest Nursing Home Lab Company Seeks Bankruptcy Reorganization

by Jondavid Klipp | Mar 15, 2019 | Nursing Home

Largest Nursing Home Lab Company Seeks Bankruptcy Reorganization

Trident Holding Company (Sparks, MD), the nation’s largest nursing home lab operator, filed for Chapter 11 bankruptcy reorganization in the Southern District of New York on February 11. Trident, which employs 4,500 full-time workers and 660 people part time, provides mobile x-ray, ultrasound, and clinical lab testing services to some 12,000 nursing homes, assisted living and correctional facilities in more than 35 states. Its subsidiary lab companies include Diagnostic Laboratories and Radiology (Burbank, CA), Schryver Medical (Denver, CO) and U.S. Lab and Radiology (Brockton, MA).

Trident’s bankruptcy filing showed the company and its subsidiaries had a total of $785 million of secured debt outstanding and missed a $9.2 million interest payment that had been due January 31. Trident’s heavy debt burden became unsustainable due to declining occupancy rates at nursing homes, Medicare CLFS rate cuts, and a botched billing system transition.

Soon after the bankruptcy filing, Trident obtained a $50 million debtor-in-possession (DIP) financing loan from hedge fund Silver Point Capital (Greenwich, CT), which now has equity control. The loan will allow Trident and its subsidiaries to continue to operate, while it restructures both its debt and business operations. Full details in March 2019 issue of Laboratory Economics.

Many Hospital Labs Still Don’t Know They Must Report PAMA Data

by Jondavid Klipp | Feb 18, 2019 | CLFS, PAMA Data

Many Hospital Labs Still Don’t Know They Must Report PAMA Data

On January 22, the Centers for Medicare & Medicaid Services (CMS) hosted a teleconference that focused on a new rule that requires nearly all hospital outreach labs to collect their private-payer payment data from January 1 to June 30, 2019, and report it to CMS in early 2020. This data, along with private-payer data from independent labs and physician office labs, will be used to set new rates for the Medicare CLFS in 2021.

Although the new rule was published in early November 2018 and the data collection period is already underway, the teleconference Q&A showed that many hospital outreach labs are unaware that they are required to report. Broad participation from hospital outreach labs in the current data collection cycle is critical to stabilizing Medicare CLFS rates in 2021.

The Final Medicare Physician Fee Schedule for 2019 states that hospital outreach labs that bill for their non-patient lab services using the hospital’s national provider identifier (NPI) must now use Medicare revenues from the Form CMS-1450 14x Type of Bill to determine whether they meet the majority of Medicare revenues threshold and low expenditure threshold.

During the teleconference, CMS confirmed that this will require most hospital outreach labs to collect and report their private-payer data.

Laboratory Economics notes that in simplest terms, the rule requires any hospital outreach lab that collects $12,500 or more in Medicare CLFS revenue during the first six months of 2019 to report their private-payer payment data to CMS. Of course, all independent labs and physician-office labs meeting the $12,500 threshold must also report.

Based on an analysis of Hospital Cost Report data from 2018, Laboratory Economics has identified more than 1,000 hospital outreach labs that will meet the $12,500 threshold and are therefore required to report.

The PAMA law authorizes CMS to impose civil monetary penalties of up to $10,000 per day on labs that are required to report, but fail to do so. However, CMS did not enforce this law during the first reporting cycle (2016-2017) and it has not threatened to do so in the current cycle.

The cost and complexity involved with collecting private-payer payment data combined with CMS’s unwillingness to impose penalties on non-reporting labs lead Laboratory Economics to the unfortunate conclusion that most hospital outreach labs, as well as smaller independent labs and POLs, will dodge their reporting responsibility.

This likely scenario will have devastating long-term consequences for all laboratories. It means that lab test codes paid through the Medicare CLFS—already scheduled for three straight years (2018-2020) of 10% rate reductions—may suffer reductions of as much as 15% in 2021.

Note: This is an excerpt from an article in the February 2019 issue of Laboratory Economics.

Special New Year’s Report: Lab Execs Share Outlook for 2019

by Jondavid Klipp | Jan 14, 2019 | Laboratory Economics, Laboratory Market Research, Laboratory Outlook

Special New Year’s Report: Lab Execs Share Outlook for 2019

For an inside look at what may be in store for the clinical lab and pathology business this year, Laboratory Economics interviewed the top executives at a diverse group of 10 lab companies.

Not surprisingly, our interviews revealed that commercial insurers are using Medicare’s repricing of the CLFS as a pretext to cut their own rates. What is surprising (and alarming) is that some commercial insurers have demanded the full three-year phased-in ~30% CLFS reduction applied to their rates upfront immediately.

Labs are hoping to offset the pricing pressure by gaining economies of scale through geographic and test menu expansion. On the brighter side, the extreme pricing pressure that terrorized technical services for anatomic pathology seems to be over. Furthermore, molecular diagnostics and prescription drug monitoring continue to be high-growth markets.

Pricing pressure from both Medicare and commercial insurers
High volume growth in molecular diagnostics and prescription drug monitoring
Anatomic pathology reimbursement rates have stabilized
Hospital outreach labs benefiting from health system acquisitions of physician practices
Nursing home labs are restructuring and consolidating

Companies profiled in the January 2019 issue of Laboratory Economics include Sonic Healthcare USA, NeoGenomics, Health Network Laboratories, CellNetix, TriCore Reference Labs, Enzo Clinical Labs, Clinical Laboratory Services, CellMax Life, Psychemedics and Wisconsin Diagnostic Labs.

Does New Far-Reaching Anti-Kickback Law Apply To All Labs?

by Jondavid Klipp | Dec 15, 2018 | Laboratory Regulations

Does New Far-Reaching Anti-Kickback Law Apply To All Labs?

Hastily passed opioid legislation, signed into law by President Trump on October 24, outlaws the use of volume-based compensation for laboratory sales reps, regardless of the type of testing involved. The new law, Section 8122 of the “Eliminating Kickbacks in Recovery Act of 2018” (EKRA), authorizes criminal penalties for some conduct that is currently permissible under antikickback statute safe harbors.

The new law prohibits commission payments based on the number of patients referred to a laboratory, the number of tests performed, or the amount billed to or received from a “health care benefit program” (which includes commercial insurers as well as Medicare and Medicaid). As written, Section 8122 of EKRA applies to all laboratories, not merely labs that perform testing for recovery homes and clinical treatment facilities, and to all services covered by all payers, rather than only services covered by Federal healthcare programs.

Karen Lovitch, attorney at Mintz Levin, notes that Senators Marco Rubio (R-FL) and Amy Klobuchar (D-MN) introduced this provision in an effort to target patient brokers who recruit patients for addiction treatment centers and allegedly receive financial kickbacks in return. Brokers have reportedly paid for patients’ travel, rent, or other expenses to make it easier for them to seek treatment, and even helped uninsured patients obtain private insurance coverage by paying their premiums while in treatment.

Lovitch says the EKRA fails to carve out lab testing that has nothing to do with opioid or drug abuse. Furthermore, it applies to all labs when doing business with all payers. The legislative history fails to clarify whether Congress intended to construct this anti-kickback provision so broadly
with respect to laboratories and, if so, whether Congress had any rationale for doing so, according to Lovitch.

Lovitch believes that it’s unlikely that Congress will remove laboratories from the new law entirely, but expects that there will be significant pressure on Congress to limit its applicability to services related to opioid use and treatment.