New Thinking on Clinical Utility: Hard Lessons for Molecular Diagnostics

The once-lucrative diagnostics testing market is at a crossroads, facing greater pressure to show value in an atmosphere of evolving regulatory priorities. Cost and patient value are in the forefront of every payer’s mind as we move deeper into the era of healthcare reform and cost consciousness. Converging efforts—such as the recent McKesson Health Corporation and American Medical Association (AMA) partnership to create a registry of molecular diagnostic tests, and the new gap-filling procedures used by CMS to set reimbursement rates—have increased both the granularity and clarity demands of diagnostic coding, emphasizing the increasing need for precision in quantifying test value and justifying price. With these pressures come insight and a clear aspiration for companies and payers alike: Better, less risky, more principled strategies are necessary for companies to generate evidence of impact and determine clinical utility. Clinical utility—defined as the usefulness of a test for clinical practice (distinct from clinical validity, which is how well the test can determine the presence, absence, or risk of a specific disease)—is arguably the most significant hurdle facing new technologies and their investors. 1 Palmetto GBA, the CMS carrier for California, Nevada, Hawaii, and Pacific Islands (the region referred to as Jurisdiction E, previously called J1), was the first to require that companies complete a technology assessment summarizing all evidence of clinical validity and clinical utility when seeking CMS coverage and reimbursement. Under its MolDx program, created in 2011, not only did it bring to the forefront the importance of clinical utility evidence, but it also recognized the need for uniquely identifying these tests with a nomenclature known as Z-Codes. Issued by McKesson (contracted technology provider for MolDx), Z-Codes offer a transparent way to identify and track unique diagnostic tests. The relevant information about these tests is captured and shareable within McKesson’s Diagnostics Exchange (DEX), an online test registry and work flow solution for test manufacturers to submit in