Exact Sciences (EXAS): Rate Reversal Prospects
Key Takeaways: With FDA’s early approval of Exact Sciences’ (EXAS) Cologuard Plus last week coming on the heels of CMS’s preliminary rejection of EXAS’s requested 25% rate increase ($636) relative to the legacy product ($509), we see low odds of reversal in the final rate decision due mid-November. Commercial payers may therefore also balk at this valuation. However, FDA approval likely entitles EXAS to Advanced Diagnostic Laboratory Test (ADLT) status, with Medicare reimbursement at the company’s list price for an initial three quarters starting as early as 1Q25, before being reset at the commercial median.
- A review of CMS rate determinations over the last five years (2020-2024) shows that – in aggregate – the agency has reversed just 10% of preliminary decisions.
- So-called “fractional” rate recommendations such as these [e.g., legacy Cologuard ($509) x 1.25 x $636] are themselves very rare, representing just 4% [N = 22] of the 508 total payment applications CMS has reviewed since 2020.
- Of those 22 fractional payments endorsed by the Clinical Laboratory Fee Schedule (CLFS) Advisory Panel, CMS has agreed to just four (18%), all of which were included in the preliminary decisions, with none involving a change for the final rate release.
- In this particular case, we also note that the Advisory Panel did not actually recommend a 25% premium, which was rather the opinion of a minority (4/9) of panel members, with the majority (5/9) having endorsed a straight 1.0 crosswalk to the legacy test valuation (i.e., $509). It was this majority opinion with which the agency’s preliminary decision agreed.
- Recall also that reimbursement decisions are ultimately driven by an assessment of the marginal resource costs associated with performing any given test, and with EXAS having publicly acknowledged in June that “the unit cost of Cologuard Plus is lower than existing Cologuard by about 5%,” the prospects for an atypical reversal in November, arriving at a still more atypical fractional conclusion, would appear slim.
ADLT Timing & Reimbursement
Notwithstanding this lack of formal CMS endorsement, FDA approval of Cologuard Plus should make the test eligible for ADLT status, and therefore payment at whichever list price EXAS selects for at least three quarters following that designation. This earlier- than-anticipated approval should allow the company to submit its ADLT request during the current application window, implying a decision in mid-December and the payment rate taking effect Jan. 1. A worst-case scenario would likely be a delay to April 1.
Source: CMS
Recall that agency guidance specifies that reimbursement for such tests is to be set at the “actual list charge” / “publicly available rate,” defined below:
- Actual List Charge: The publicly available rate on the first day a new ADLT is obtainable by a patient who is covered by private insurance, or marketed to the public as a test a patient can receive, even if the test has not yet been performed.
- Publicly Available Rate: The lowest amount charged for the ADLT that is readily accessible in such forums as a company website, test registry, or price listing, to anyone seeking to know how much a patient who does not have the benefit of a negotiated rate would pay for the test.
This means that, should EXAS establish a cash price of $636 (i.e., $509 x 1.25) at launch, that will serve as the Medicare payment rate as well before resetting at the end of three quarters – and annually thereafter – “based on the weighted median of private payer rates.” The durability of this ADLT rate will therefore depend on the extent to which private insurers push back against any Cologuard Plus premium, but we note that most prior ADLTs have seen Medicare rate stability long after those initial three quarters expire, as shown in the table below.
