Genomic Health Wins Medicare Coverage for High-Priced Colon Cancer Test

9/30/11Follow @xconomy

Health insurers usually aren’t wild about paying big bucks for diagnostic tests, and things probably won’t get easier for diagnostic companies as Medicare’s budget comes under increasing pressure. But Redwood City, CA-based Genomic Health has found a way to persuade that very big insurer that its test for predicting the risk of colon cancer recurrence is worth the price.

Genomic Health (NASDAQ: GHDX) said today that Palmetto GBA, the national contractor for Medicare has agreed to a national policy for coverage of a genetic test that predicts recurrence risk in colon cancer patients. The test, known as Oncotype DX, costs $4,000 per patient for breast cancer, and $3,280 for colon cancer. As it has with original Oncotype DX product for predicting breast cancer recurrence, Genomic Health has contended that its colon cancer test can save the healthcare system money by helping doctors and patients decide when to avoid unnecessary chemotherapy or choose more aggressive treatment when need be.

“This coverage decision allows all appropriate Medicare patients access to Oncotype DX for colon cancer and further recognizes the value our tests are delivering to physicians, payors and patients,” said Kim Popovits, Genomic Health’s CEO, in a statement.

The policy covers men and women with Stage II colon cancer. Genomic Health estimates that Medicare covers about one-third of the patient population it is aiming to address, says Emily Faucette, a company spokeswoman.

Genomic Health first started marketing the Oncotype DX test for breast cancer in January 2004, and the company received Medicare coverage for that test two years later, in January 2006, Faucette says. The colon cancer test reached the market later, in January 2010. About 200,000 tests for patients with breast and colon cancer have been ordered by doctors through June 30, Genomic Health says. The company has said it expects to generate $200 million to $210 million in total revenue this year, and make a profit of $3 million to $5 million.

Shares of Genomic Health climbed 4.4 percent to $20.82 at 12:47 pm Eastern time after the news.

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