Trends & Perspectives

Published: March 28, 2012
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Bill proposes modernizing IVD regulations

The “Modernizing Our Drug and Diagnostics Evaluation and Regulatory Network (MODDERN) Cures Act” (HR 3497) would modernize the U.S. drug and diagnostics evaluation and regulatory network by encouraging the discovery and development of new treatments for the many diseases that have few or no options.

By: Richard Park

Congressman Leonard Lance (R-NJ) introduced legislation to promote the development of meaningful treatments for patients with chronic or rare diseases. The “Modernizing Our Drug and Diagnostics Evaluation and Regulatory Network (MODDERN) Cures Act” (HR 3497) would modernize the U.S. drug and diagnostics evaluation and regulatory network by encouraging the discovery and development of new treatments for the many diseases that have few or no options. It would also create a system that rewards efficiency and effectiveness to the benefit of all people with chronic diseases.
The bill would promote the production of co-developed diagnostics by allowing the developers of new diagnostic tests to apply for a temporary Healthcare Common Procedure Coding System (HCPCS) code until a permanent code is established, allowing for more timely access to new diagnostic tests. In addition, the legislation creates incentives for drug and biologics manufacturers to develop diagnostic tests for their products by granting additional periods of data exclusivity.
Some industry analysts believe that Lance’s proposed legislation would have very little direct benefit for the IVD industry. “Rather, the bill would appear to have a more indirect impact on IVD companies and clinical laboratories by encouraging drug and biologics companies to seek out companion diagnostic development opportunities,” said Jonathan S. Kahan, JD, a partner at Hogan Lovells LLP (Washington, DC).
Kahan noted that the legislation does provide an excellent summary describing the potential benefits of companion diagnostics and advanced diagnostic products. “The bill specifically highlights the uncertain regulatory and reimbursement processes that lead to the lack of development of drugs and diagnostics,” said Kahan. “The bill also points out deficiencies in intellectual property protections for therapeutic treatments as a barrier to the development of products intended to treat rare diseases.”
Kahan added that the legislation proposes mechanisms to overcome such barriers to development. For example, section 102 of the bill aims to ensure that drugs and diagnostic tests are reimbursed at higher rates when they are used together. But while higher reimbursement for IVDs certainly would be welcome, it may not be helpful if the pathways to market remain unclear.
Section 103 states that if the validity of a companion diagnostic test can be established using peer-reviewed literature, the drug or biologic for which the test is used will be granted additional marketing exclusivity. This should encourage drug and biologic companies to seek out or develop companion diagnostics, but it may benefit IVD companies only through their interactions with drug companies.
“The bill also appears unlikely to benefit IVD products directly because it does nothing to address the uncertain regulatory pathways that exist for IVDs and laboratory-developed tests (LDT),” said Kahan. “While the bill may encourage drug and biologics companies to seek out new IVD methods, it does not provide a mechanism for ensuring how such products will be regulated, either as IVDs or exempt LDTs, once they are developed.”
Other industry analysts are even more skeptical that the legislation will benefit the IVD industry. “While well intentioned, I am highly doubtful that the bill will result in adding any new incentives toward the development of dormant therapies or innovative diagnostics for chronic diseases, unless the regulatory and payment processes are streamlined and focused to expedite approval of affected drugs and IVDs,” said Thomas M. Tsakeris, president, Devices and Diagnostics Consulting Group (Rockville, MD).
Tsakeris pointed to the fact that the bill creates an additional bureaucracy, the Advanced Diagnostics Education Council (ADEC). This group is charged to “promote an improved understanding of key concepts related to innovative diagnostics by recommending standard terms and definitions for use by patients, physicians, healthcare providers, payers, and policymakers.”
“Although some representatives from the IVD industry would likely participate in ADEC activities, I am highly doubtful ADEC would be able to come to any agreement on definitional issues anytime soon related to innovative diagnostics that could accommodate all stakeholders and consumers,” said Tsakeris.
At the same time, some analysts believe the legislation could benefit the IVD industry. “The way the bill leverages existing incentives for drug development to encourage the development of companion diagnostics could provide significant benefits to the IVD industry,” said Bradley M. Thompson, JD, an attorney at Epstein Becker Green (Washington, DC).
“Under the bill, in exchange for developing a companion diagnostic with a new drug, a pharmaceutical company would be rewarded with six to 12 additional months of market exclusivity and patent protections for that drug,” said Thompson. “Depending on the drug, an extra six to 12 months could mean a lot of money, which is a clear incentive to get companion diagnostics out there. This could lead to more partnerships between the pharmaceutical and IVD industries, and creating new markets for IVDs that can predict responses to new drug therapies.”
Thompson added that the bill’s proposed reforms for reimbursement of novel diagnostics should also benefit the IVD industry. The bill establishes factors to be used in current gap-filling calculations, creates a reimbursement advisory panel with patient, clinician, and technical expert representatives, and calls on the Department of Health and Human Services to examine and develop improved rate-setting processes.

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