NantHealth, the precision-medicine company started by billionaire Dr. Patrick Soon-Shiong, is in negotiations with 13 additional health insurance companies and large employers to cover its costly genome sequencing test for cancer patients.
But NantHealth, which went public earlier this year, still faces a host of obstacles, including mounting deficits and questions whether its cancer test is effective and worthy of its price tag. Steven Halper, a financial analyst at FBR Capital Markets & Co., estimates the company charges $11,000 per test.
Among the new groups in negotiations with NantHealth are eight Blue Cross and Blue Shield affiliates and two self-insured employers, Soon-Shiong told investors Wednesday. Independence Blue Cross was the first insurer to pay for the test, which is called GPS Cancer. As of this month, six payers cover the test.
“We are very encouraged by the willingness of major commercial insurers and self-insured employers to enter into negotiations with us,” said Soon-Shiong, who made his fortune largely from his invention of cancer drug Abraxane.
The GPS Cancer test is a centerpiece for NantHealth and a bellwether for the precision-medicine movement. The whole genome sequencing test looks at patients' tumor genomes, compares them with patients' normal genomes, and then lists potential treatment options and predicts how patients will respond. Oncologists and insurers can use GPS Cancer with NantHealth's other big-data software.
As of this month, the number of patients who have a cancer diagnosis and are covered by an insurer that reimburses for NantHealth's test reached 200,000. The 13 pending payers represent another 400,000 “covered cancer lives,” Soon-Shiong said. However, insurers can put restrictions on who can get the test, and it's unclear how much patients owe in cost-sharing.
Before it filed for its initial public offering this year, NantHealth was able to secure a reimbursement commitment from Independence Blue Cross. Executives said that was essential to lining up future targets. “We felt (it was) important that the payers understand the value of this test before we took it to market,” Soon-Shiong said.
But the test's value is unclear.
“Even though NantHealth believes its sequencing benefits far outweigh the high costs, physicians, oncology stakeholders and (payers) may not agree,” Halper wrote in a research note Wednesday. He added that GPS Cancer is a “largely unproven approach to the diagnosis of cancer.”
Further, oncologists have to feel comfortable using the test, which some observers see as a challenge. “Experts we have spoken (to) have noted that it may not be as easy for the broader oncologist community to handle the information overload,” Cowen and Co. analyst Charles Rhyee wrote in a research note. Soon-Shiong said the company is educating more physicians about the test's clinical value, and physician buy-in has been spurring discussions with insurers.
Despite growing revenue and new insurers, NantHealth continues to lose a lot of money. NantHealth lost more than $324 million as of the first quarter of this year. The second quarter produced another $54 million in net losses, as the company invested more in research and ran up high administrative costs.
“There is always the possibility that the company could never reach profitability,” Halper wrote. However, despite those investment risks, he remained bullish on the company's long-term prospects and said it was “poised for rapid growth over the next years.”
More data about the accuracy of the cancer test also will push more insurers to reimburse it, Halper said in the note. Obtaining coverage from Medicare would also be a boon for NantHealth, although it would undoubtedly raise questions about the program's spending.