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Post Mortem for Pathwork Diagnostics

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Pathwork Dx Defunct; Future of Tissue of Origin Test Unclear from GenomeWeb

Pathwork Diagnostics has gone out of business as of April 2.

Here is the timeline:

– Launched in 2006 when Predicant Biosciences merged with Pathwork Informatics and the merged entity, based in Redwood City, was called Pathway Diagnostics;

– Marketed a microarray-based 2,000 gene RNA expression panel (the “Tissue of Origin” test) coupled with proprietary algorithms for cancer diagnosis in difficult to treat cases;

– Since its launch the company had publicly disclosed a total of $61 million raised in three private funding rounds;

– Pathwork’s test was meant to serve the currently 150,000 newly diagnosed cancer patients each year for whom no definitive diagnosis can be made;

– The test received 2 FDA clearances, one in 2008 for frozen tissue samples and one in 2010 for paraffin-embedded samples, and was validated by studies involving over 1,100 patient samples, studies which were published in the Journal of Clinical Oncology and the Journal of Molecular Diagnostics;

– Medicare issued a positive coverage decision for the Tissue of Origin test in 2011;

…and still the company folded, after having seemed to do everything right.

Why?

The author of a GenomeWeb article covering the fall posited that reimbursement issues were possibly to blame.

“Inconsistent or low reimbursement for the Tissue of Origin test may have been a negative pressure for Pathwork. A report released last year by the Office of the Inspector General tracked the variability in payment rates between state Medicaid and federal employee health benefit programs for several genetic tests, including Pathwork’s Tissue of Origin test, and reported that the test was reimbursed at above $900 by Iowa’s Medicaid program, but among FEHB plans the reimbursement varied from $5 to $38 (PGx Reporter 6/20/2012).”

Perhaps. Certainly such low reimbursement would barely cover the cost of a technician pulling on his or her gloves, and if the average approached anywhere near that level it is hard to believe that physicians would be motivated to use it.

The assay was also a bit clumsy in execution, which may have also contributed to low adoption rates. To begin with it was a microarray, which is the favorite platform of just about no one, especially in clinical laboratories. It was also a kit that required the clinical lab to do all of the sample prep, labeling, and detection, but then send the results over the internet to Pathwork’s servers, which would do the actual comparative analysis before sending back the results. This is a somewhat unorthodox approach at best, being sort of a hybrid IVD/LDT, and presents all kinds of opportunities for customer service issues.

An interesting question to ask is if adoption would have been higher if Pathworks had pursued a straight LDT route and eschewed FDA review, a la Genomic Health and its oncotype DX panels. GH is certainly one of the leaders in the LDT field in terms of reimbursement, which is the result of its considerable investment in clinical studies to gain medical society endorsement and payor support. GH has also undertaken financial analyses and provides programs for gap financing of testing costs.

If Pathwork had chosen the LDT route its own investments in clinical data and economic analysis (which were substantial) may have supported consistently higher reimbursement rates when all of the work was being done in its own (already certified) CLIA lab. Test margins may have been lower, but supportable prices might have been much higher, and the testing process would have been a lot more seamless for MDs.