Budget & Regulatory Environment in DC Alan Mertz President ACLA CCLA November 4, 2016

Summary Budget/Reimbursement Regulatory PAMA Gapfill CLFS 2017 Update Regulatory FDA/LDTs Election & What It Means For Labs Reimbursement Confidential – Do Not Distribute

PAMA In Context CMS Was Proceeding With Repricing Before PAMA Experience with CMS Instructive OPPS 75% Gapfill 60% Congress Was Going to Cut CLFS in Addition to CMS Labs Did Not Have Anything to Negotiate As With Past Threats Statute Provide Some Guardrails Annual Caps on Cuts No Cuts Before 2017, Later 2018 Tech Adjustment Authority Repealed ADLTs Confidential – Do Not Distribute

PAMA Proposed -- Final Rule Applicable Lab Defined by TIN – Defined by NPI Inadequate Time For Implementation – Delay to 2018 Data Collection Period One Year – Reduced to Six Months No Specific Gap Between Data Collect & Report – Six Months Data Reporting Period Three Months Established Data Reporting at CLIA level – Data Reporting at TIN Level Applicable Information Unclear – Patient cost sharing included, bundled payment & zero payment excluded ADLT excluded protein tests – ADLT included protein tests Confidential – Do Not Distribute

Gapfill & 2016 Final Pricing Determinations Process lacks transparency, results in drastic cuts to innovative tests CMS should instruct MACs to provide rationale for rates Without data as basis for rates, can’t evaluate accuracy or fairness Final gapfill rates dramatically lower than private payor rates Final gapfill rates for innovative tests Medicare prices on order of 60% Rates are all over the place, no basis to the criteria for setting rates ACLA filing requests for reconsideration of some codes Confidential – Do Not Distribute

CLFS Update 2017 No Cuts in 2017 from PAMA or Productivity Adjustment Assume 2016 Rates Only Unknown is Whether CPI Will be Applied CMS will Announce Whether CPI (Approx +1%) is When Final CLFS Rule Issued in November 2016 Confidential – Do Not Distribute

The Battle Over Regulation of LDTs Congress Looking At Alternatives to FDA Guidance After Issuing Draft Guidance in October 2014, No Final Guidance as Of November 2016 Law Requires FDA to Notify Congress 60 Days Before Issuing Final Guidance, With Summary of Guidance Two Initiatives in 2016 That Impact Issuance of Final Guidance Both House & Senate Committees Looking at New Pathway for LDTs House Energy & Commerce Committee Senate HELP Committee Important Stakeholder Activity House Appropriations Committee Report Language What Happens in 2016, Next Year? Confidential – Do Not Distribute

Election & What It Means for Labs Control of Congress Watch for Major “Reconcilation Legislation” in 2017 Reimbursement Issues FDA Confidential – Do Not Distribute

Thank You! Alan Mertz amertz@acla.com