Tuesday, January 20, 2015

Three Panels at JP Morgan January 2015: Diagnostics, Next Gen Sequencing, DHealth




  • TOP: DIAGNOSTIC AND PAMA
  • MIDDLE: NEXT GEN SEQUENCING
  • BOTTOM:  DIGITAL HEALTH TRENDS






Diagnostic & Laboratory Testing Washington Outlook - 
Is Value-Based Reimbursement Here At Last?

• Ed Pezalla, MD, MPH, VP, National Medical Director for Pharmacy Policy & Strategy, Aetna
• Chandra Branham, VP, Payment & Health Care Delivery Policy, The Advanced Medical Technology Association (AdvaMed)
• Scott McGoohan, J.D, Vice President, Reimbursement and Scientific Affairs, American Clinical Laboratory Association
• Dan Todd, Principal, Todd Strategies

Moderators: Tycho Peterson, Senior Equity Research Analyst, J.P. Morgan • Ipsita Smolinski, Senior Analyst, Capitol Street



NOTE: These are personal notes taken in real time during the webcast.  They are *not verbatim* but attempt to capture most of the main points of each speaker. 

Smolinski: Thanks for joining us.  For the first time in 30 years, Congress reformed the CLFS.  Now, in 2017, CMS will peg reimbursement to private pay rates.  How will it be implemented?   We’ll also talk about FDA regulation of laboratory developed tests, and the agency’s guidance and the Beltway response.

Dan Todd was on the Hill at SFC, helping write PAMA.  He’s now at Todd Strategies. 

TODD

How we got here?  Last April, SGR legislation needed several billion dollars.  We were aware of faults of the CLFS.  “Soviet style price fixing.”   Great companies couldn’t get code, couldn’t get paid.  Coverage, coding, and payment were problems.  Why was Medicare the high payer for CLFS?   We don’t need “most favored nation” for Medicare, but we pegged to market prices.  $2.5B saver by CBO, and get the market moving for the correct values on the advanced diagnostic side.   We expect a regulation to implement this “any day.”  Rule must be out by June.   General Counsel will deem it a major rule, so it’s notice and comment rulemaking. 

BRANHAM

Advamed was very interested in this, and we were very involved with ACLA, Coalition for 21st Century Medicine, we all had reasons for it to be successful, but with our own provisions.  Advamed pushed hard for the Expert Advisory Panel to bring experts into CMS.   We wanted provisions on Coding also.  Make codes more granular so payers could understand what they were paying for, and timely.  

We pushed for ways to bring value concepts into the statute.  We pushed hard for CMS to do a pilot…too difficult to finalize.   We see 2015 and beyond as opportunities to bring in value concepts.  That’s our strategic effort.

Today, the reg is coming. Scott will cover that.   We’ve broached important issues with CMS, or vague areas.   We’ll see what CMS does.  The Expert panel, CMS has issued the charter, meet 4X per year, nominations solicited.   We don’t know who the panelists will be.  July 2015 will be the first meeting.

With respect to unique codes, this gets into the weeds!!  CMS must issue unique codes for tests without unique codes, by 1/2016.   That’s around the corner.  CMS may issue G codes, or use AMA, or McKesson.  We’ve talked to AMA and McKesson.  CMS is in the loop.  Results unknown.

Last issue, a new emerging issue after the statute.  This is a question – how this will play out – how this new payment system will impact Point of Care Tests (POCT) in the MD’s office.  Why?  Scott will talk about this also.  When we think about who are the reporting labs, they’re labs that get most CMS revenue from Part B.   That should incorporate physician office labs, yet that might be a reporting burden, but we’d like to see…we might like to see full reporting, and not have those POCT … keep the price adequate and not jeopardize access.  There isn’t data whether physician office labs are paid more or less, and whether they’ll report is open.

McGOOHAN

As said, the first fee schedule overhaul, and a massive change.  ACLA supported this.  We support this because 1, we previously faced annual ~2% cuts, in the PFS rule for CY2014, CMS proposed and finalized a broad “technological change adjustment” for all 1200 codes.   That was sweeping and could reduce anything.   Additionally, a key provision is the phase in. Reductions at 10% per year in the first 3 years, then 15%...no guardrail in the CMS tech change adjustment.  

Further, the ADLT provisions for new technologies is something we support.  There are some key terms TBD.   There will be decisions by the agency.  Some buckets could have huge impact.  The definition of “applicable laboratory.”   Majority of lab revenue under CLFS or PFS.   We need full market representation.  See Burr & Hatch on the floor, hospital outreach labs were to be included.   What is the payment rate, including copays?  We believe it should be the “allowable” amount in the private market.   The reporting period….TBD…for a large lab with 750 tests, they may have 1200 payment rates “for each” – and the volume – for every code, while risking high civil penalties ($10,000 per day per piece of data!).  Also, the weighted median calculation.

Turning to the other major event, the FDA draft guidance.  Contentious.   Advamed and ACLA here on different side.  Last week’s public 2 day meeting, very different viewpoints.  We have a strong stance, FDA lacks the authority, and even if so, they must do regulations not guidance.   LDTs are under CLIA, and we support modernization of CLIA (clinical validation and updates since 1988).   We’ve retained two high profile counsel – Clement and Tribe.   But there’s no decision to litigate.

PEZALLA (AETNA)

Aetna had no stance on PAMA or FDA LDT.  We care about quality and patient outcomes, whether test is lab test, imaging, is it accurate and reproducible.  There have been issues in the past, KRAS an example, we got very different results lab to lab.  We had to restrict testing to one national lab partner for quality. 

Patient outcomes are extremely important for coverage.  In general, we’d like data for patient outcomes improved by use of the test, this can be very difficult on a small manufacturer, we may accept data that patient care changes.   Patient is being used in deliberations and decisions and has a positive outcome on changing therapy.   Adopt or avoid an Rx, or a monitoring protocol.  Look to the published literature, we also look at FDA filings, and guidelines from recognized bodies.  Professional societies in US, sometimes Europe, or NIH panels. 

SMOLINSKI

The CMS regulation is key.   What will it be?  Hospital lab reporting, copay accounting, reporting period.

TODD

For hospital rates, it’s early.   We want a full picture, in the final regulation, CMS bundled a lot of the lab services, some are in DRG or APC, so they’re not a true independent payment “under the CLFS.”  We want an accurate market.   Sen. Hatch wanted a full survey.  AHA doesn’t have a position, or it’s, “Don’t burden us” but we think hospital rates are often higher.  ACLA and AHA may work on that.

Reporting period, that touches burden also.   With drug reporting in Part B, it’s quarterly.  We were concerned about burden, so q 3 years.   My guess is, if the bigger guys say we can be accurate with 2 months of data, it could be that.   Copay, it’s reasonable to include that.  Sometimes they are there, or not.  Would their be copays on CMS tests in the future?

BRANHAM

We’ve talked a good deal with CMS.  One of the most recent conversations, every question was “a good question” per CMS – they are grappling with this A to Z.   What is the reporting period?  “A good question!”  

MCGOOHAN

Re Hospitals, it’s too early to say, and there’s some resistance based burden.  But some hospitals would like to report.   The period, we’ve all been working together, there are large national labs, AMCs, esoteric labs, what will be adequate?   We suggest 6 months.   But a lot of labs say it takes 6 months to collect, certify, and submit the data.   1H2015…2H2015…we don’t know.

Subsequent data collections can be surveys or samples, but not the first cycle.  We agree on total allowable amount as the benchmark.  

PETERSON (?)

We now after NGS panels, many genes, do you pay for “exogeneous content” like Foundation Medicine – off label use – or Myriad, MyRisk.   And what about Z codes?  

PEZALLA

We continue to evaluate the panels, we look at these individually.   We’re concerned, it’s not a good idea to screen for everything all the time!  Too many false positives and anxiety and cost of care.  It’s better to do patient specific tests.  Test those at risk.  There are some things you might screen for, see USPSTF – look to them.   You want access to the right tests, like in Colon Cancer, characterize for that battery of tests.  Things that are unrelated to the issue at hand – very concerned about false positives.

PETERSON

And Z coding?

PEZALLA

A lot of people are seeking sequencing for various purposes, we have begun to open up our rules…in the past, we said, not pay if you can’t do something, like trying to test for Alzheimer’s risk.  We’ve begun to open up there, there is the promise that more Dx, more Rx, will be developed based on genetic profile, and patients will know they can enter an early clinical trial, it’s becoming more important.  We’ll end up expanding some of that.   But not wide open.  

SMOLINSKI

On that point.  The saying is, Private payers tend to follow CMS… do you?

PEZALLA

We have some internal policies to follow CMS, that has to do with helping providers sort it out.  Eg in DME, our rules are similar to Medicare rules.  Also:  Where Medicare buys most of it, we mostly buy DME for Medicare members.   We don’t follow CMS for everything, though.   There are things in the commercial business, where CMS follows US.   CMS is the major payer in oncology – tests, meds, surgery.   But there are plenty of commercial patients too.  

BRANHAM

Another part of the statute.  CMS has the authority to designate 1-4 MACs for diagnostics.   For coverage and payment, or just process claims.   Palmetto has been way out front on Z codes, and assessments, coverage, will Palmetto become the designated MAC?  Or will there be more than one, but echoing Palmetto.

TODD

Palmetto is a leader, certainly, mixed results depending who you talk to.  But they took on the process and make it more transparent and systematic, which Congress likes.  They were positive on Z codes, what are we paying for?   The right KRAS?   The new system will be more granular, the current system is not.   And it addresses volume issues also.

With regard to consolidating MACs, for these companies, it’s not a provider in a region, if they are based in Noridian MAC, they get non coverage, that’s like an NCD.   So it’s a different consideration in the lab space.

MCGOOHAN

Consolidation tracks to other areas in Medicare.  1-4 MACs.  We aren’t opposed – the more important thing is clear, predictable coverage.  Palmetto has leadership, and share policies with other MACs, making them a de facto national contractor.  On Z codes, the granularity allows a payer to differentiate among tests.  Such as KRAS.   That allows a payer to be more specific what they are willing to pay for. 

QUESTION

Fits and starts with FDA – now the 9 year LDT plan.   Will this put undue burden on small labs?  Heated session at AMP – this will be stifling.   How will the plan evolve?

MCGOOHAN

Lots of discussion since 7/31/2014.   The impact is hard to determine now, so many things are not explained.  Major areas: basic definitions of risk classifications, driving what requirements on what entities.   FDA has alluded to some exemptions, unmet needs, rare diseases, “traditional LDTs” – which is not well enough defined.  Much work needs to be done before you can access impact.  Slowing of tests, and limitations on marketed tests, for labs with 1000 LDTs, they aren’t profitable and wouldn’t warrant PMA.   They ‘d pick what they can still afford to offer.

Harmonization with CLIA regulation is left to a third authority right now – CLSI.   FDA promised to release three guidance documents, one being CLIA and FDA harmonization, but it seems to be no longer an agency priority. 

BRANHAM

We support a level playing field, a risk based approach, the guidance takes that.  It focuses on high risk, it’s phased in slowly.  It allows existing low risk LDTs to remain on the market.  Overall FDA has been thoughtful, while, we’re developming some comments and improvements.

TODD

Following the guidance, E&C held a hearing, but where the committee wanted to go – it’s unclear.  Dr. Shuren was adept at answering questions.  It defaulted to process questions, like N&C rulemaking.  There is this split at ACLA, Advamed, and potential ligitation.  That’s a lot of noise and could actually slow down Congress, see also the HELP committee at Senate.  House is further ahead at thinking about this.

QUESTION (TYNAN)

What was the intent of ADLT?  Wide?  Narrow?  There’s the three legislation conditions with much latitude for interpretation.

TODD

We spent a lot of time on those words and now CMS is.   Our intent was that it’s a bit different than commodities, there are different issues.  CBO recognized that it’s a scorable part of the legislation, that paragraph is a Cost of legislation, so it’s written narrow.   There’s yearly reporting, one manufacturer, I suspect CMS will narrow it, and the CMS perspective on the market is: Labs will charge whatever they want and CMS will just pay it.  I don’t think labs have that much leverage.

QUESTION SMOLINSKI

21st Century Cures Initiative.  Any ideas there?   To impact PAMA or LDTs?

TODD

My sense is no.   The public testimony talked about reimbursement challenges – we’ll see how PAMA works.  There’s C.E.D.  Device folks would like some “fourth hurdle policy” re parallel review, diagnostics would like that, but pharma has NO interest.  

MCGOOHAN

Some of the 21st Century Cures roundtables, value based reimbursement for genomics was often raised by stakeholders.   We’ll have to wait and see the bill.  They’ve looked at FDA regulation, but at a headline level, writ large.  Understanding the entire field.   Are the barriers for IVD kits appropriate?

TODD

One trick, on E&C, it’s split jurisdiction with Ways and Means in the House.   That’s tricky.   E&C can stay closer to FDA.

PETERSON

Uniformity and KRAS.  How much of a concern is that, inconsistent reported results?

PEZALLA

This goes to quality of care for members and for Americans.   We expect that findings are going to be accurate and seriously impact care.  Tests aren’t perfect, there are variations.   Payers want to pay for reliable things that matter, but it’s hard to measure and we don’t normally see results at all.   We can’t be the monitor.   But tests come from many places, so some regulation of quality, CLIA, other, is important.  

QUESTION

One point, value based pricing for IVD tests, how would the agency calculate such a value?   Across the care pathway?  At the point of intervention?   What is the value for the agency?   I think value based pricing is the incentive for IVD companies to develop new important technologies.  

TODD

There’s a lot of delivery system reforms in the ACA.  What they do well at CMS is “bundling.”  If you can make a value WITHIN a bundled payment, it should have uptake, and that’s the CMS comfort zone, see their CMMI oncology white paper. 

QUESTION

Health care economics?  Save overall costs?

TODD

The challenge is the source of data.  People came in all the time, you’ll save money, rarely did it.  CMS grapples with that, very very suspicious of such claims.
QUESTION
Given constraints on data, how do we develop the value of a test?  How much to pay?

MCGOOHAN

Difficult question.  Right now Medicare focuses on “cost” the easy metric. 

PEZALLA

For some interventions, you can do ROI, or cost utility, we are less likely to use $/QALY.   For diagnostics it’s very tough.   A diagnostic is part of the long pathway of care.  It’s not usually “the only turning point.”  You can put the diagnostic in one arm of a study only….tough.   A lot of assumptions otherwise.  We do our best.   We focus first on access to quality care.

QUESTION (KLEIN)

Re bundling.  We have DRGs, more outpatient bundling.  We at my AMC have a bundled care team, we offer cardiac surgery at a price, is global bundling a trend?  

PEZALLA

We see bundling as a larger trend.  ACOs are the mega bundle.   Capitation revisited?  Hopefully smarter.   In particular we look at bundles in Oncology.   Contract one group at a time, with some successes, and oncologists have pretty clear pathways and what to manage for, for common tumor types.   Then you need triggers, when to escape the bundle (something happened).   If done right, this can contribute actually to innovation.  Pay for systems innovation.  If I use this more expensive medication, I can avoid doing X or Y.

TODD

CMS knows how to do bundle.  But they can go both ways – they just stopped a global surgical fee; they saw savings in ESRD that made it more profitable, that irked them.   CMS will look at “total cost of care” but they have the problem, getting a handle on their data, their patient attributes, snowbirds and who is the primary care doc?

QUESTION

I’m an entrepreneur in medical devices, I’m working on two good technologies, they’ll be mobile apps, cloud, physicians, valuation is good, how do we figure out the revenue and reimbursement model?  How do we value the company?    Who has ideas here?

MCGOOHAN

HIT is emerging, and federal agencies are diving into it.   FDA has stratified risk frameworks.  It will be highly dependent on the role of the information, but assigning a value to the practical output, the role in management, it’s too case specific.

TODD

The package to get recognized now is Meaningfull Use in the ONC (Office National Coordinator).  But if you are required Meaningful Use, now the customer is mad at you (forced on them.)   FDA will be increasingly aggressive, is it guiding treatment, a busy two years now.

MCGOOHAN

Much of what the feds look at it, what is the dedicated cost [eg 45 minutes on an MRI] and how does software fit that?  It’s strained and uphill.


# # #



Harnessing the Power of Next Gen Sequencing - 
The View from the Industry

• Chad Robins, CEO, Adaptive Biotechnologies Corp.
• Randy Scott, Chairman and CEO, InVitae
• George Yancopoulos, President, Regeneron Laboratories & Chief Scientific Officer
• John Stuelpnagel, DVM, 10X Genomics 

Moderator: Tycho Peterson, Senior Equity Research Analyst, J.P. Morgan




NOTE: These are personal notes taken in real time during the webcast.  They are *not verbatim* but attempt to capture most of the main points of each speaker. 


PETERSON

Thank you – leveraging NGS.  One of the panelists, Mike Pellini, can’t be here (Roche deal).  John will replace him – a founder at Illumina. 

YANCOPOULOS

Regeneron.  We are different, we’ve been around longer, we’re primarily delivering therapeutics.   Our efforts have been founded on genetics.   For 25 years.   NGS is a critical component.   We are employing these technologies and are really committed.  WE have one of the largest sequencing efforts, tied to sequencing the right types of individuals, collaborating with Geisinger and others, very large family groups.  Also Columbia.   Many pipeline products are initiated from genomics.

STUELPNAGEL

I’ve worked on exciting projects since Illumina, including prenatal testing, and cell free DNA of the fetus.  It’s competitive, also, we’re not along, approaching a million samples a day [?].   [Reference to Sequenta.]   Recently, have I been sequenced??, No.  I didn’t feel a need.   It was about the idea that sequencing still isn’t as good as I’d like.   We lose through short read sequencing structural variation, lose haplotypes, 300K errors per genome….we are working on 10X GENOMICS, where the goal is to preserve that information from short reads.

ROBINS

Genomics 1.0 was hardware, 2.0 is what to use the hardware for and inform patient care.  Individualized treatment of the patient.  At AB, we sequence your B and T cell receptors.  NGS was designed to sequence a static genome.   To sequence the rearranged receptors, is our forte.  A unique xray to the immune system.  And the immune system touches many therapeutic areas.  Vaccines, transplantation.   There are two areas, we have a research product for 40 pharma clinical trials.  Predictive biomarkers of response in hematologic malignancies.  To look at minimal residual disease (MRD).   To sequence a tumor, or the host response.    See the Foundation deal last night, mutational status of tumors.  There’s also a lot of information in the TIL – tumor infiltrating lymphocytes.   For prognosis or stratification.  

SCOTT

We filed an S1 for In Vitae so we can’t talk about ourselves but I can talk about everyone else!  We’ve watched the Moore’s law theme come into sequencing, and far exceeding Moore’s law.  What does this mean clinically?  

We’re excited, sure, sequence the genome.  You and you and you.  Everyone has a genome and every one impacts the owner’s health care.   There are hundreds of genetic disorders and 4000 tests on Genetest.org and 600 companies.  What makes sense?  It’s not yet the $1000 genome.  Clinical grade accuracy is still quite expensive.  Some genes are easy, some are very hard.   There are complex mutation types, CNV, inversions, etc.   Here’s the term:  HIGH DEFINITION CLINICAL GENETICS.  Like pixels.  Different mutations along a gene, different affects.  It’s not just “30 x coverage.”   You want high definition, as many pixels as possible.   You have non clinical variants.   They map differently.   A gene can have thousands of mutations with a great spectrum – it’s not just BRCA mutation, but WHICH one.

We’re hitting the beginnings of high definition sequencing.   Illumina, PACBIO, Moore’s law will deliver the equivalent of a first personal computer.  Clinical grade.   And potentially for everyone on the planet.

PETERSON

Genomics and drug development.  How are Regeneron’s activities going, what are timelines?

YANCOPOULOS

We support the enthusiasm.  It’s still true, the actual linkage of gene to disease and the ability to TAKE ADVANTAGE and directly therapeutically intervene, that’s still very rare.  Few genes are fully “druggable” yet.   We’ve done some of them.   What’s really limiting?   It’s not all about “innovation.”  We have to link human genes and disease, the gene part is not the hardest part.  We are out engineering the sequencing problems, but aligning to human phenotype and THEN understanding the therapeutic that works.   Main point, sequencing is not limiting, biology is.  I’ve done this for 25 years.   How did you do it?   Deliver on the pipeline?  Keep a focus on what things people want to avoid, it’s about biology and disease and medicine, and seeing the true bottlenecks.   Sequencing is a tool.

Geisinger has the sequences, yes, but they are fully aligned on the deep phenotypic information and it’s digital, searchable.   Even more than one generation.  And Columbia has 1000s of families, phenotypes, they needed the help on finding the genes, and we found 40-50% of the genes in those families.   But then what is the intervention?  You have to build a whole company to do the intervention.  You start with insights, pick the applicable ones, etc.   There’s a vast clinical superstructure in pharma on top of the sequencing.

STUELPNAGEL [Robins?]

Agree – Regeneron does the hard work!   In drug development, there are some simple applications that are a lot easier than that.  Sequenta, now Adaptive, use sequencing to see if a drug (that you have) is working.   MRD…Some of these molecular markers could be endpoints, and you can find out more quickly, is the cancer burden trending down, that’s a “simple” clinical application, a low hanging fruit.  And it supports drug development. 

SCOTT

I’ve moved away from the hard fields!   We are used to a “world of scarcity” and how do you choose who to sequence, and that won’t matter so much, you don’t have to design all that up front, you can just sequence and it’s not so much scarcity.   You can have the sequencing library up front and go back to it.  That’s a few years away.  That’s a transition, when you have that.

Exciting that Foundation Medicine is building this huge oncology database, and an open source network, an internet of genomics.

YANCOPOULOS

Everybody has to understand, you can have too much information…in a field I know, I see a lot of wrong Google information.  In a field I don’t know, what do I get?   Linking genetics to phenotype is not easy.  Is a gene linked to glucose?  Hemoglobin?  You have the number.   The problem is the noise.   Very noisy.  If you have a lifetime of glucose measurements, it’s different again.  You do the math differently, the data differently, it can have a huge impact on the math and the logistics and results.  Where is the noise, the bottleneck, the problem.   The insights and savvy, the usefulness, will be decisive.

SCOTT

The move from phenotype to genotype is really hard.   But the certain areas of stuff will fall off the table, you’ll have some decisive genomics and you’ll understand it.   Everybody carries 20-40 knockout mutations (maybe only heterozygous).   There’s no normal genome.  Other things will be very hard to solve.  But there’ll be plenty of “wow” results too.

YANCOPOULOS

It’s often going to be very hard and complex.  Sure, yes, there is some low hanging fruit.

ROBINS

How are drug developers using genomics?  We’re working with many drug companies working on anti PD1.  They want to know, what do the drugs do?   Second, to understand which patients will respond or not?   Do we prime the immune system, then give the checkpoint inhibitor?  Do we combine them, CTLA4 PD1?   How do we figure this out?  Dose studies?   Then there’s residual disease.  There are lots of ways to rationalize clinical trial design.   Cancer immunotherapy will mushroom in the next 5 years.   From a payer and patient perspective the drugs have autoimmune like side affects, let the immune system go into overdrive on the tumor.   The rational targeted design is an area where sequencing the immune system will help.  

STUELPNAGEL OR YANCOPOULOS

Characterizing the TIL is critical.   Are you talking about the genome of TIL…

ROBINS:

Looking at repertoire and number of rearranged T cells.  

YANCOPOULOS LEAVES.

PETERSON:

What about payers?  Where are we with NGS?

SCOTT:

There’s enormous progress in 10 years.  10 years ago, very few payers have R&D groups, no genomics specialists, they have a tough choice and limited dollars.   Diagnostics hadn’t changed much in 20-30 years, then boom.

There was a shock to the system (of payers).   You start with rigorous clinical validation.  There may be some areas with unique products, high margin.   But post Supreme Court, with no I.P., it drives to a consumer market rapidly.  Prices will drop a lot.   Payers will have the opposite problem, Medicare locks in a 3 year payment and costs drop in half q 12 months.   That’s a new dynamic for the system.   A company has 1000 genes for testing.  The cheapest was $500, most $1000, so their catalog would be 1000 x $1000 or $1M.  At least $500,000.   That’s clinical grade sequencing.  Those prices will plummet like mad, more like $1 per gene, but of course, in an Exome or large panel.

These new prices open up a new world.   Do we need payers?  Let consumers buy for themselves.

STUELPNAGEL

Don’t payers do best if they “don’t pay.”  We have to pair what we do with cost savings.  Today you won’t get wide acceptance rapidly from payers on value, it’s better if you have cost savings, and we priced Ariosa at a cost savings to the tests we were replacing.  Us, $800, Amnio, $1500.

If you replace what’s done for low risk normal risk, the price would be $400 someday to still be cost effective.

ROBINS

It’s still very rough, many payers, economics, but you can still hope for home runs.  We see this in MRD testing after we pre identify a cancer clone, can we predict relapse earlier to guide clinical decision making.  We are showing that from blood, and not from bone marrow (BM), so you don’t have anesthesia, etc.  Avoiding BM is a big deal.

By combining Adaptive and Sequenta, we can combine data sets.

PETERSON

Where is the next innovation?

STUELPNAGEL

Accuracy, speed, etc, look at the value chain and business “rent.”   Illumina collects more than its fair share.  How will that shift?  Will it?   Applications with IP support have an opportunity to collect their fair share.  Pieces of the chain will be commoditized too.   Where can you have a sustainable competitive advantage.

At 10X, we think we have that, more information from sequencing, vastly more.   We still need to improve both accuracy and information content. 

QUESTION:
LIQUID BIOPSY?  Is the technology there?

ROBINS / STUELPNAGEL

The challenge is that any tumor DNA is highly highly diluted. That is a challenge.  You need extreme accuracy.   The current accuracy is insufficient for most of this in cell free tumor DNA.  But it will improve.  We saw some Illumina data, some point mutations can be picked up, important for the Rx.  They want the accuracy of 0.1%.

SCOTT

It’s a big program at Genomic Health.   From the original diagnosis and that mutation panel, to the later treatment, it will happen.  Do it at first diagnosis, in metastatic disease, it’s late to “start” sequencing.  Monitor in the blood. It’s a sample and signal problem, not a sequencing problem, it will get solved.

QUESTION

Long term of CLIA and FDA models?

ROBINS

We want to be a product, not a service company.  The parallel is hardware software.  You started with mainframes, then PCs.   The same thing with NGS.   We have benchtop sequencers, MYSEQ, which will get smaller.  We have the razor blade (kit).   The kits for immunosequencing will be more platform agnostic.   Move to the major hospital, hospitals not central labs.   Don’t cut out the middle man of the hospital pathologist.  We have an RUO kit.   That would be the backbone for FDA kits.

When the economic rent shifts, people buy the box to do the clinical application.   Someone at Penn wants to do adaptive kit immune sequencing, and then reach out to buy an Illumina sequencer.

ROBINS OR STUELPNAGEL?

This should be figured out in a marketplace, not the FDA.  Get things out, work on guidelines, reimbursement, physician advocacy.   That’s not the winning model.  That’s the entry.  With critical mass, you want to transition that out to an FDA kit.  Many service businesses can run efficiently at 50% gross margin and do the services.  The marketplace will want this.  As scale develops it should migrate to FDA.

SCOTT

FDA is well intentioned, but the technologies can move very quickly, HISEQ X10, 4000, all rapid innovations.  The FDA platforms would run 2 years behind.  Genomics will then be done…overseas.

FDA has made strides 2006 to 2014 but it’s still chilling.

# # # #
















Panel:
Technology Led Disruption in Healthcare –
A discussion with leading digital health companies on the future of healthcare

• Dan Burton, CEO, Health Catalyst
• Sean Duffy, Co-Founder & CEO, Omada Health
• Adam Jackson, CEO, Doctor on Demand
• Jeff Tangney, CEO, Doximity, Inc.
• Nat Turner, Co-Founder and CEO, Flatiron

Moderator: Bryan Roberts, Partner, Venrock Assocs



NOTE: These are personal notes taken in real time during the webcast.  They are *not verbatim* but attempt to capture most of the main points of each speaker. 



Dan Wilson with JP Morgan introduces the panel.  Second Annual panel.  Each panelist has a great entrepreneurial spirit and drive.   We’re also lucky to have Bryan from Venrock moderating, he had six exits last year.

BRYAN ROBERTS

[Shows several quick slides].

We all need there is a drastic need for healthcare change, and this terrific companies are part of that.  $3.1T, supposedly $900B wastage, and 50% more US spending than the next company, and 40th in outcomes.   That $3T seems to run with 3% margins.  And that’s driven by the commercially insured paying a high “tax” (over Medicare Medicaid). 

In the great recession of 2008 2009, there was no negative quarter with healthcare jobs lost. (!)

Key factors are:  Information liquidity; New incentives; Stakeholder interest; Entrepreneurial talent.

Information – electronic not paper; public data sets; Medicare data; other health data.   New incentives such as the death of the old doctor visit fee minus $10 copay.  Doctors compensated sometimes by outcome, whether capitation, surrogate endpoints, targets, bonuses, etc.   Many more stakeholders are engaged, employers more than before.  Employers “insourced” the cost and “outsourced” the thinking (e.g. a TPA). Now they might buy Omada, etc.   And talent and innovation, as we’ll discuss.  Some really brilliant tech entrepreneurs are looking into healthcare.

ADAM JACKSON
DOCTOR ON DEMAND (SF)

We are a large virtual medical practice, with a robust interface, devices with cameras, 1400 physicians, urgent non emergency care, Rx when appropriate, new behavioral health visits.  

We have our roots in consumer products, my roots, our cofounders include Dr Phil McGraw on TV.  We have early consumer traction.   We’ve also picked up scale the last couple quarters, enterprise side.  See telemed as a costsaver with real ROI.   We throw out the PMPM fee and plug in for plans and employers on demand (on utilization).

NAT TURNER
FLATIRON

We’re complicated, behind the scenes, mission to organize the world’s oncology information for patients, physicians, researchers.  Our focus is oncology, my background is Google.  4% of patients go to clinical trials.  96% don’t.  Tons of info sits in server closets, we bring to the cloud.  Find data in the 96%.  Then provide the data back to Point of Care, and researchers, academics, etc.   How is cancer care really delivered??

JEFF TANGNEY
DOXIMITY (Prior, Hipocrates)

Largest online doctor network, 400,000 physicians.  All active and verified as members.  Larger than AMA.  Larger than any EHR.  Bigger than Linked In for MDs.  Oncologists are the least friendly specialty, with the fewest connections, but pediatricians all have 40 colleagues connected. 

Bryan, Todd Park, the Datapalooza team, represent people changing the dialog in DC.

SEAN DUFFY
OMADA

We build digital programs, PREVENT is a digital weight loss and lifestyle program for T2DM.   We were founded in response to the CDC national prevention effort in the ACA.  It’s proven you can help people headed to T2DM if you intervene high touch with individuals. 

We work with employers, health plans, and deliver the interventions digitally.

DAN BURTON
HEALTH CATALYST

6 years as a company.  Enterprise data warehouse (EDW).   We install in large and small clinics, along with applications, to see care variation, to see inefficiency.  We’ve rolled out the data warehouse for 35M patients now.  We service 140 hospitals and 19 clinics.

BRYAN

For Dan Burton, you provide this data and insights to care providers for the first time.  What’s it change?  What do doctors learn and do differently?   That they couldn’t do?

DAN BURTON

What comes out is psychologically challenging.  We’ve found many times, before we install the data warehouse and give the visibility, most clinicians believe they do follow best guidelines 90% of the time.

When we look at the data, it’s systematically far lower, 30%-40%.   The data presents some real challenges.   Much work is “art” – how to deliver bad news, and work clinicians around the defensiveness.  We work to understand the evidence, to understand compliance, to understand a path between them.

If we dump the data, no context, it won’t succeed.

BRYAN

Do doctors change?

DAN BURTON

We’ve seen big change and no change.  Up front, before we agree to a contract, we really insist on significant clinical leadership and governance.  We include a full “heads up.”   It’s then less of a surprise.

In many practices, less necessary, unnecessary inductions are 20% and can drop to 2% in six months. 

BRYAN

Your announcement with ALINA/ELINA? (ph)

DAN BURTON (?)

It’s scary.  It’s the first and biggest example of a concept of shared risk and accountability extended to the tech partner. We have a ten year relationship and use tech as a means to outcomes improvement, our money where our mouth is.  

BRYAN

Flatiron, you have a ton of data, how does it impact care?

NAT TURNER

With Flatiron, we had a family case of pediatric cancer, we “lived” in a cancer center, and we found oncologists don’t really communicate.   They didn’t know how many breast cancer patients they have.   He pulled up a year old tumor registry.  The data model was “Chemotherapy Yes No.”  Weak tools!!  And they weren’t sharing with anyone.

We have 220 cancer centers, most are outpatient, private practice, analytics tools, also a billing system.  All in the cloud in one place.  We’re google guys, so hope to disrupt with software, but we also like to think “we don’t have bad habits” from the industry.   We have the data in one place, 700K patients in 12 months, 20% of the US is in Flatiron.   We see “the bulk of their treatment” – every dose, toxicity, biomarkers.    The oncologists say, “Great” but we can also tell him: How many breast cancer patients he has.

One basic report, graphing patients by line of therapy, tumor type, what drugs are Rx by line of therapy and tumor type, and what is or would be the impact of biomarkers, and how you compare to other cancer centers.   We can compare 2013, 2014.   We see cool stuff.  People didn’t realize what they were doing and there is massive variability.  A drug can be 100% for Dr A and 0% for Dr B.

We’re in the second inning of the game.  We want to do a lot more, outcomes.  We have survival, we’ll have more outcomes.   We’ll have report cards and help better decisions.

BRYAN

Do you track variance to NCCN guidelines?

NAT TURNER

We have a partnership with NCCN.  Now, NCCN is like a six lane highway.   You could be WILDLY outside it, but more likely, you’re on the edge of it.   We do see a lot of variance.  Anti emetic use is a big deal for NCCN – do patients get it?  We see some poor docs, some good ones, for that.

Docs can improve from 20% to 90%.

BRYAN

The employer side – Sean, Omada.   Employers have healthcare as a cost center.   If you’re self insured or if you’re a payer, you might have different horizons (even shorter for payers).   How do you present your value?

SEAN DUFFY

There’s a lot of literature on the economics on delivering diabetes prevention, the DPP Diabetes Prevention Program, reduce risk 58% at 5 (10?) years. 


If you send some down this path and others randomized not, what are the savings?  Recover costs in year 2.   The clinical headwinds are helping medical directors evaluate this for employers.   They’ll recommend for the self-fundeds.

BRYAN

Which employees?  Duration?  Persistence?

SEAN DUFFY

When you send an employee to lose weight, they don’t.   Giving a pamphlet is standard of care.  But a lot of support makes a difference.   It’s difficult to get any outcomes in this space, it’s like dropping in paratroopers, but we do it digitally and scalably.  It should be “beautiful and neat.”   The head of our brand team for employers came from IDEO.   It’s like a consumer sell.   Then a host of little elements make people successful.   We put you into a similar matched group, a scale with a cell phone chip, a coach, we unlock lessons weekly.   We did data for 1 year in Diabetes Educator and we EXCEEDED benchmarks, and we are publishing 2 year data and have even longer data on file.  

BRYAN

You change behavior after people finish?

SEAN DUFFY

That’s the idea.  Now, you don’t help everyone.   We do our best with each person.   When we enroll someone, 80% complete 16 weeks.  That’s the core.  We continue to engage with graduates.  We see [XX] % of people log in monthly, 50% weigh in monthly.  We don’t charge if people regress (wt loss > 5%).

BRYAN

Telemedicine has lacked traction.  What’s new.

ADAM JACKSON

I’m new to it too!  I had no track record what it “should be” or if it “shouldn’t work.”   I’m a patient.  I have pinkeye.  I want to see a doctor.  I want to stay home.  Design that from the ground up.  

We expect great apps – Amazon, Uber.   We want the product to be sticky at Doctor on Demand.  Repeat usage is high.  

The second piece we learned, it helps if someone else pays and not out of pocket, not HAS.  We have companies paying for it now.  Let’s do a good job in the enterprise space, which means being aligned with the employer.   With add on PMPM, the sales guy sells, and it’s on HR now (at the employer).   We threw out PMPM but did marketing and developed battle tested apps to survive the app reviews (!).  We customize for Comcast, etc. 

BRYAN

What’s the typical use case?

ADAM JACKSON

We can treat 17 of the top 20 things you’d go to Urgent Care for.  Video is not easy, but crucial.  You can’t take a picture of your tonsils yet, but rashes, ankles, mom can take pictures, etc.


BRYAN

Tell us more about your 400,000 docs.

JEFF TANGNEY

By the way, we still want more docs on line.  It’s not easy to be a doctor on line.  MDs get fired for their Facebook – or being a “Friend” of a patient.  Physician tweets might be HIPAA violations.   At Stanford, you’d have a garden party, white lab coat party, now, they start computer training at 8 am then at lunch they scrub your social media profiles.   Many MDs use pseudonyms on Facebook, 10% of MDs may be on LinkedIn (looking for jobs outside medicine).   They get ping’ed by pharma reps.

We are the bouncer, we keep people out.  Physicians have their own HIPAA secure place, exchange information on questions, and career aspects are there, docs can share their salary by specialty and county, and understand the market trends.  You make less in SF than in Wisconsin, and you’d make a lot more as a Wisconsin doctor.

BRYAN

Your revenue?

JEFF TANGNEY

We make money off recruiters, we have 300 hospitals, help find the subspecialist, a bit like Linked In.  The salary and city HAVE to be in the invitation.   Not “Sportsman Paradise.”  

For a passive applicant doctor, he won’t spend a half hour finding what the answers are.  If he can make 3X in Lubbock TX, the email will say so.

BRYAN

Some broad questions.  There are many investors here.  Some of you are B2B2C, some are B2B.  How do you think about the pro’s and con’s of those different business models?  

SEAN DUFFY

We viewed the opportunity as Enterprise.  It takes a lot of work and that brings the price point above the consumer price point.  But the chronic disease cost goes to the employer.   The consumer won’t pay several hundred dollars.   We well enterprise. 
NAT TURNER

It’s still first quarter, so we aren’t sure at Flatiron.  We started as second opinion for patients.  We fell flat!    Direct to patient is very hard in healthcare.   Uber can do it B2C.  But B2P…patient…hard.

So we use the nodes where patients aggregate.   We are highly turned to the enterprise, B2P too hard.

[ANSWER]

We are also enterprise – let’s say only that it’s “less hard” B2B than B2P.   The trend is here.   It’s a more defined economic model, but it’s not ideal at all.   The sales cycle is very, very long, especially for a “transformative” product that goes against current decisions and models.   As the industry payment structure shifts, it will open up models for us also.   

JEFF TANGNEY

At HIPOCRATES, we sold Visa card via Doctors, and very tedious at hospitals.  Hospitals are easier now, a little.  We can walk in and 55% of their physicians are members.  We have 300 hospitals in a year. 

BRYAN

Value based pricing and risk models came up.  How fast are payment models changing?  I hear, hospitals say it’s new, but they also say “We make the most money off cardiologists.”

ANSWER

It’s not changing fast enough.  A lot of health systems would like to do the right thing, but the system makes too many economic downsides for more efficient behavior, it’s FFS for giving care out.

There are 300 Pioneer ACOs, etc, but 10% of payments may be shared risk.  90% aren’t.  So it’s schizophrenic and it limits the variation reduction type projects – if the variation and over use is profitable.

Huge opportunities exist and it’s so needed, but it works after you shift the profit economics.

BRYAN

If you succeed with each company, whose ox is gored?

ANSWER

We hope to kill the fax machine salesman, 15B faxes, and they still use Pagers.   Motorola antique pagers.  

Free agent nation….some higher end specialties may go back to private practice…

SEAN

Probably the direct to consumer health offerings, the Jenny Craigs.   It’s well studied, you can do that, but it doesn’t teach them long term.

ANSWER

We focus on primary care, we may keep people out of ERs.

ANSWER (NAT)

The CRO’s.   The amount of human and manual effort in a clinical trial is colossal.  With the right wiring and plumbing, it should be easier.

ANSWER (DAN)

I think if we can be successful, healthcare will be smaller!  Delivery…the big problem is to solve waste.  There’s a $700M of waste.  That’s the target.   It’s a glass half empty, half full…today is unsustainable.  It will be a big challenge for the industry.

LAST QUESTION
New in 2015?

ANSWER (JEFF)
Interstate national licencing !!  It hurts telemedicine to lack this.   At least start this path.

ANSWER
We’ll see more systems large and small treat patients more like consumers.  When we interact with the local hospital, bang, it’s 1998 now.

ANSWER
See a trend to private practice to hospitals; and some high end specialties may be pushed out because the overhead is very high.   Also, earn-outs are ended and going private may be the math again.

ANSWER
Should be a big year for telemedicine.  The world will evolve: Outcomes delivered remotely.   We’re hearing a lot about that.  

ANSWER
I hope for:  A trend toward more shared risk.   Scary but healthy.







































   

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