Pappas Capital Announces the Passing of…

CardioDx has spent three years marketing a new genetic test that can tell when a patient’s chest pain is a sign of serious heart disease, or no big cause for alarm. It still has a long way to go before becoming part of mainstream medicine, but now the company has taken a big step ahead by persuading Medicare, the agency that provides health insurance to Americans over age 65, that its test is worth the money.

Palo Alto, CA-based CardioDx is announcing today that Palmetto GBA, the national contractor for Medicare, has agreed to reimburse the company for its Corus CAD test. CardioDx isn’t saying how much Medicare agreed to pay for the test, but it sells for a list price of $1,195 per patient, CEO David Levison says. The decision effectively means that more than 40 million Medicare patients are eligible for the test, as long as their doctor prescribes it.

The CardioDx test, which I wrote about here in November, is attempting to blaze a new trail for molecular diagnostics for heart disease. The Corus CAD test takes a blood sample from a patient, analyzes the extent to which RNA from 23 genes is expressed in the blood, and that says in 72 hours whether a patient is at low risk of coronary artery disease. By using this kind of molecular diagnostic test in patients in non-emergency situations, CardioDx is hoping to help patients and doctors avoid some of the costly and invasive procedures currently used to suss out whether chest pain symptoms are a sign of a larger problem or not.

CardioDx has been marketing this test since June 2009 in a pretty limited way until now. The company has performed the test 30,000 times through a mixture of free offerings, patients paying for it out of their own pockets, or by case-by-case negotiations with private insurers, which Levison calls “hand-to-hand combat.” Winning Medicare reimbursement is a big step in smoothing out that process, which is important, because Medicare is the largest insurer of patients likely to demand the CardioDx product. It’s also important because Medicare’s actions are influential with private insurers.

“This is a very important milestone for the growth of the company. It clearly says our data package is sufficient for a major national payer to reimburse for it for tens of millions of covered lives,” Levison says. “It says the test has clinical utility, and is economically viable. We’ll leverage it.”

The market for a new coronary diagnostic like this is huge, although largely untapped. Heart disease is the leading cause of death in the U.S., and millions of people worry and wonder about whether they’ve got it every year. An estimated 9.2 million people underwent the current standard myocardial perfusion imaging tests in 2005, usually after reporting chest pain, CardioDx says. Those tests typically cost about $800, and take about three hours to yield results. Last November, CardioDx released clinical results that showed its test was better at determining when patients complaining of chest pain don’t have coronary artery disease. The hope is that if doctors feel confident enough to rely on that kind of finding, they could help patients and insurers avoid costly and invasive catheter-based procedures.

CardioDx has fewer than 100 employees today, and a small sales force of 10, although it expects to build up its sales force following the Medicare approval, Levison says. The company isn’t profitable, but it is well-financed for this push, as it pulled in a $60 million equity financing in May 2011. Its backers include J.P. Morgan, Longitude Capital, Acadia Woods Partners, Kleiner, Perkins, Caufield & Byers, Mohr Davidow Ventures, TPG Biotech, Intel Capital, Pappas Ventures, DAG Ventures, Asset Management Group and GE Capital.

Getting Medicare to reimburse for the test is an important step for CardioDx’s effort to get cardiologists to start adopting the test, but there are other hurdles still to clear, says Eric Topol, the chief academic officer at Scripps Health in San Diego, and the lead investigator of a CardioDx trial called Predict.

“Reimbursement is part of the story. Another big part will be about whether cardiologists are willing to change their normal operating procedures,” Topol says. “And I emphasize procedures,” he says, because many cardiologists have deeply ingrained habits for diagnosing coronary artery disease through invasive procedures.

Although molecular diagnostics have made headway in oncology in recent years, it hasn’t caught on as quickly in cardiology, Topol says. One other company, Brisbane, CA-based XDx, has won Medicare approval for a molecular diagnostic of a heart-related ailment, but it’s focused on determining whether patients aren’t rejecting a transplanted heart.

Topol says he likes the way the CardioDx test can save time and money by enabling patients to forgo certain invasive tests. “If it comes out with a low score, the confidence level you’ll not miss someone is high. You will have done someone a great favor by not putting them through a heart [catheterization] test,” Topol says.

Topol says he isn’t aware of any competitor with any test like CardioDx’s in the works, and there’s a lot of potential for such a test. But it can’t answer every question a cardiologist or primary care physician might have about a heart patient, and while it will enable some patients to avoid invasive tests, it won’t replace them. “This is a really nice alternative, but whether it will be widely embraced is hard to predict. Reimbursement has been an issue until now,” Topol says.

CardioDx’s Levison acknowledged a slew of other challenges ahead. Private insurers will want to see a steady stream of data to show the test is effective, and save them money on unnecessary procedures in the short-term and long-term. Doctors will continue to have questions about which patients are right for the test, and which aren’t. And since chest pain is such a widespread symptom that masses of primary care doctors see every day, CardioDx has to get the word out about its test to a lot more than just a couple thousand thought-leading physicians like Topol. The company has been “cautious and deliberate” to not over-promote the product, Levison says, but now CardioDx intends to get the word out a little more now that it has the validation of Medicare under its belt. “This is what we were looking for,” he says.