By Aaron Krol 

October 17, 2014 | Foundation Medicine, provider of the FoundationOne tests for cancer mutations and an investor darling in the world of genomic medicine, has announced an agreement with Michigan-based non-profit insurer Priority Health to cover both of the company's flagship tests. Foundation Medicine aims to deliver actionable reports to oncologists for treating cancer cases by sequencing a wide array of cancer-related genes in patients' tumors, and connecting the mutations found to research on cancer prognoses and therapies in the medical literature.

The model is an increasingly popular one, with competitors like MolecularHealth rapidly establishing their own services. In addition, sequencing giant Illumina, which provides the sequencing instruments for Foundation Medicine, recently announced plans to develop its own broad cancer assay. However, Foundation Medicine currently claims the most comprehensive tests on the market, short of whole exome or whole genome sequencing. The FoundationOne test, for solid tumors, sequences the complete coding regions of over 300 genes, while FoundationOne Heme, for blood cancers, covers over 400 genes and also includes select RNA sequencing. 

Foundation Medicine's reimbursement has always been on shaky ground, as both private and government insurance plans weigh the costs and benefits of extremely broad, exploratory sequencing. Foundation Medicine, and other companies like it, argue that the astronomical cost of cancer drugs means that saving even one incorrect treatment will more than pay for the tests — but they are far more expensive than traditional targeted DNA or protein tests, which are used to evaluate whether a tumor would be susceptible to one specific drug. So far, Foundation Medicine has usually negotiated with payors on a case by case basis, and while its tests carry nominal price tags of roughly six to seven thousand dollars, financial reports have revealed that average reimbursement is closer to three thousand. The company is also listed as a Medicare provider, but terms of reimbursement through the Centers for Medicare and Medicaid Services have not been worked out.

Priority Health's decision to cover both tests for its more than 600,000 patients is therefore a minor landmark for genomic medicine. The precedent makes it easier to accept investigative sequencing as a standard part of cancer care, including for hematologic cancers, and not a last-ditch measure or luxury service.

Foundation Medicine faces other challenges besides reimbursement and increased competition. The FoundationOne tests are laboratory developed tests, a class of diagnostics that was until recently exempt from FDA regulation. With the FDA's recent decision to begin subjecting these tests to the same scrutiny it gives other diagnostics, Foundation Medicine now faces a regulator that has signaled a particular wariness of genetic tests used to recommend drug courses, citing concerns for patient safety.

Still, the core business plan for genomic testing companies looks just a little more secure today than it did a week ago. That's likely good news for patients, who could stand less risk of a promising therapy being overlooked early in the course of treatment — and might be good news for the healthcare system, where cancer drugs are a substantial expense and are typically effective in only a minority of cases.