Medicare Non-Coverage Threatens Pacific Edge’s US Growth Momentum
Pacific Edge reports stable test volumes in Q3 FY25 despite Medicare reimbursement uncertainties and seasonal slowdowns, while gearing up for legal action against a flawed Medicare coverage decision.
- Q3 FY25 test volumes steady with slight 0.7% growth
- Medicare Local Coverage Determination (LCD) finalized as non-coverage, challenging growth
- Pacific Edge plans legal challenge and seeks LCD revision or withdrawal
- New Blue Cross Blue Shield contracts provide alternative US revenue streams
- Robust clinical evidence program underway to support reimbursement and guideline inclusion
Steady Test Volumes Despite Headwinds
Pacific Edge, the New Zealand-based cancer diagnostics company, has reported steady test volumes for its Cxbladder suite during the third quarter of fiscal 2025 (Q3 FY25). Total laboratory throughput edged up 0.7% to 7,092 tests, with US volumes rising 2.2% to 5,808 tests, offsetting a seasonal holiday slowdown in the Asia Pacific region. This stability comes amid significant uncertainty surrounding Medicare reimbursement in the US, which accounts for approximately 54% of Pacific Edge’s US commercial tests.
Medicare Coverage Decision Sparks Legal Response
The company faces a major challenge following the finalization of Novitas’ Local Coverage Determination (LCD) L39365, which classified Cxbladder tests as non-covered under Medicare. Pacific Edge has criticized the LCD as fundamentally flawed, citing a misunderstanding of clinical practice and ignoring new peer-reviewed evidence demonstrating the clinical utility of its tests. The decision has forced Pacific Edge to reduce commercial investment and has dampened growth prospects.
In response, Pacific Edge is actively seeking to negotiate a revision or withdrawal of the LCD with Novitas, its parent company GuideWell, and the Centers for Medicare & Medicaid Services (CMS). Failing a satisfactory resolution, the company has resolved to pursue a preliminary injunction in US Federal District Court to prevent irreparable harm to its business and Medicare patients relying on Cxbladder.
Diversifying Revenue Through Blue Cross Blue Shield Agreements
Amid Medicare uncertainty, Pacific Edge has secured new commercial contracts with Blue Cross Blue Shield (BCBS) entities in Texas, Illinois, and Iowa/South Dakota, granting in-network status for Cxbladder tests. These agreements provide a more certain reimbursement pathway and represent a growing non-Medicare revenue stream in the US. BCBS covers over 115 million members nationwide, positioning Pacific Edge to mitigate some of the financial risks posed by the LCD.
Robust Clinical Evidence Program Underpins Future Growth
Pacific Edge continues to invest heavily in clinical studies designed to validate and demonstrate the utility of Cxbladder tests. Key studies include the recently completed STRATA trial, which showed significant clinical utility in reducing unnecessary cystoscopies, and the DRIVE study focused on US veterans, with results expected to be published soon. The upcoming CREDIBLE randomized controlled trial aims to further establish Cxbladder Triage Plus’s clinical utility in microhematuria patients, with enrollment commencing in February 2025.
The company’s evidence generation strategy is central to its efforts to overturn the LCD decision and secure durable reimbursement and guideline inclusion. Pacific Edge has also commissioned an independent medical review of the Novitas LCD to bolster its case.
Outlook Amid Challenges and Opportunities
While the finalized Medicare LCD presents a significant hurdle, Pacific Edge’s steady test volumes, new commercial contracts, and comprehensive clinical evidence program provide a foundation for resilience and future growth. The company’s legal and regulatory strategies will be closely watched by investors, as will the impact of its expanding payer network beyond Medicare.
Bottom Line?
Pacific Edge’s next moves in challenging Medicare’s LCD and expanding commercial contracts will be pivotal for its US growth trajectory.
Questions in the middle?
- Will Pacific Edge succeed in securing a revision or withdrawal of the Novitas LCD?
- How quickly can new Blue Cross Blue Shield contracts offset Medicare reimbursement losses?
- What impact will upcoming clinical trial results have on payer and guideline acceptance?