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Medicare Initiates Coverage on Genomic Prostate Cancer Test

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Genomic Health Inc. 's GHDX Oncotype DX prostate cancer test recently came under the reimbursement coverage provided by Palmetto GBA, a Medicare Administrative Contractor (MAC), following the latter's initiation of the coverage. This will allow approximately 60,000 qualified Medicare prostate cancer patients across the U.S. to avail this test, and in turn, facilitate optimal treatment decisions.

Interestingly, the news reflects yet another significant milestone for this molecular diagnostic provider, which made it to the headlines within a week after the Centers for Medicare & Medicaid Services (CMS) increased its previously reduced reimbursement rate for Genomic's Oncotype DX breast cancer test by 15%.

We believe these two back-to-back developments will allow Genomic to earn higher profits from its Oncotype DX test portfolio, going ahead.

Notably, on Aug 17, 2015, Palmetto GBA - the renowned MAC for the CMS that evaluates molecular diagnostic technologies - issued the final local coverage determination (LCD) for this test for qualified Medicare patients across the U.S. This final reimbursement follows the draft LCD issued by Palmetto GBA for Genomic's Oncotype DX prostate cancer test in May 2015.

With this coverage initiation, all low and very-low risk prostate cancer patients, as per the standards of the National Comprehensive Cancer Network (NCCN), will be able to enjoy the benefits of Medicare when undergoing the Oncotype DX test.

It is worth noting in this context that prostate cancer is the most common form of cancer among men in the U.S. and affects more than 220,000 new patients, each year. Over 50% of these new patients suffer from low-risk prostate cancer. However, lack of accurate diagnostics often causes such patients to undergo unnecessary aggressive treatment.

So far, Genomic's Oncotype DX prostate cancer test has duly established its effectiveness in assessing whether a patient needs active surveillance or requires aggressive treatment like surgery and radiation. This is evident from its successful implementation in more than 2,000 patients across 14 clinical trials.

We believe this coverage initiation for the Oncotype DX prostate cancer test will usher in significant gross margin improvement at Genomic as the test will no longer weigh heavily on cost of revenues. We expect to start witnessing this margin improvement in the company's 2015 results and further thereafter.

Currently, Genomic Health retains a Zacks Rank #3 (Hold). Some better-ranked biomedical stocks are Anika Therapeutics Inc. ANIK , Amgen Inc. AMGN and Nexvet Biopharma plc NVET . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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GENOMIC HEALTH (GHDX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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