Transcript of Genetic Testing Regulations Conference Call with Dr. Julie Eggington, Co-Founder and CEO of the Center for Genomic Interpretation

On March 14, The Capitol Forum hosted a conference call with Dr. Julie Eggington, Co-Founder and CEO of the Center for Genomic Interpretation, to discuss how the genetic testing industry benefits from a lack of regulation at the expense of insurers and consumers. The full transcript, which has been modified slightly for accuracy, can be found below.

MR. MICHAEL WILLIAMS: Thank you. Good morning, everyone. And thank you for joining The Capitol Forum’s conference call on Genetics Testing Regulations. I’m Michael Williams, Senior Correspondent at The Capitol Forum. And I’m joined today by Dr. Julie Eggington, Co-Founder and CEO of the Center for Genomic Interpretation.

A quick note before we get underway. The first 25 minutes or so of the call will be an interview with Julie, and then we’ll move into a Q&A format where we’ll entertain questions from the audience. If you do have questions for us, please email them to editorial@thecapitolforum.com. That’s editorial@thecapitolforum.com and Capitol is spelled with an “o/”

So, thanks so much, Julie. I want to thank you very much for joining us today.

DR. JULIE EGGINGTON: Thank you.

MR. MICHAEL WILLIAMS: Yeah. So, Julie, to start off, the accuracy of genetic testing, and particularly prenatal testing, has come under scrutiny in the last few months after The New York Times published an article finding high rates of false positives in a lot of NIPT tests. Some of those same tests, however, are marketed as giving you “total confidence in every result.” And I think that dichotomy is a good way to pose the question to you of what is the Center for Genomic Interpretation, and why did you start it?

DR. JULIE EGGINGTON: Certainly. So we are a 501(c)(3), independent nonprofit organization. Our mission is to save and improve lives by encouraging careful stewardship of clinical genetics, genomics, and precision medicine. And the reason why we started it—so let me give you some background on myself. So I have a Ph.D. in biochemistry—Go Badgers—University Wisconsin-Madison. After my postdoctoral fellowship, I got my career at a hereditary cancer genetics company called Myriad Genetics. And some people love them, some people hate them. They held for many years exclusive patents on BRCA1 and BRCA2. And so they had amassed an enormous amount of data and I ran their variant classification division. So the database, their proprietary database that they have on the interpretation of DNA variants and hereditary cancer, I helped them build that.

So once I left there, I wanted to challenge myself with other things. I joined another company that no longer exists in pediatric genetics. And then that’s when I realized that the type and integrity of science that I had been doing at Myriad Genetics was not the norm in the industry. And there was just a lot of slippery and sloppy work, very much incentivized to issue as many positive results as you could. And that’s not how I was trained. I was trained to look at people’s DNA mutations. And everyone’s got many millions of mutations. We call them genetic variants. Everyone has many, many, many of them. They’re almost all benign or else we’d all be dead. And when we’re trying to interpret a test, the scientists, the laboratory, not only has to accurately detect those mutations, they also have to accurately interpret them and tell you if any of them cause disease.

And a huge bulk of them, people of my type of scientific skill set, we call them uncertain, meaning that we just don’t know. And that’s the truth. There’s just no data about them. But the industry is such that it’s incentivized to issue positive results. The industry—many companies have figured out that you keep your customer, which is the doctor, if at least 10 percent—so one in every 10 results—are positive. And so laboratories will use steps—particularly the variant classification of the very interpretation step, which is entirely unregulated in this country—they’ll use that step to find ways to issue as many positives as they can.

And so when I was in this lab after leaving Myriad Genetics, when I was in this other lab, I was doing my job and then I found out that the chief medical officer was overriding my uncertain classifications and was turning them into positives in order to issue more positives for the company. So that was a problem. And then I quickly got out of there, as quickly as I could. I got recruited to 23andMe, which is a consumer genetics company. We were working on trying to produce a product, working with the FDA on how do you appropriately regulate this type of new product that 23andMe wanted to bring to market. Ultimately, 23andMe made the wise decision not to bring it to market.

And then I became a consultant. And so we started consulting in the industry. We’d get employed by the scientists in these companies—this was back in 2016. We’d get employed by the scientists in these companies who were trying to get more budget to do the right thing and to make pipelines to do the right thing. So we’d get employed. We’d go through and we’d sit down, you know, we’d write our report and then we’d sit down with the CEO and we’d sit there and we’d say, okay, of the positives you’re issuing—this isn’t just for NIPT. This is for like almost all types of modern genetic testing—of the positives you’re issuing, between 30 to 50 percent of the positives you’re issuing are false positives, avoidable false positives. And these are the changes you need to make so you’re not issuing these false positives.

And then the conversation would go the same way every single time. The CEO would say, okay. Does anyone know about this? Are you going to tell them? No, we’re under a nondisclosure agreement. We can’t say anything. Okay. Is there any regulatory agency who’s going to catch this? Well, no. This industry is unregulated. CLIA and CAP—we can talk a little bit more about what

those regulatory bodies are—they don’t look at this type of stuff. This part of genetic testing isn’t regulated. So, no regulation body’s going to catch this.

So then the CEO would say, okay. So you want me to spend much more money on this piece of science, lower my positive rate on this test, have a cost of tests be even more pricey than it is now in terms of how much it costs us to produce it and become unfavorable in the market because there’ll be fewer positives, all because you think that we’re issuing false positives. Yes, that’s what’s happening. Nope. Not going to do it.

So again and again, again, these very large labs, we’d have the same conversation with the CEOs. And so we realized that we had to do something different. While it was a very lucrative job being a consultant in this way, it wasn’t helping anybody. So in 2017, we reorganized into an independent nonprofit in order to start engaging with stakeholders in the industry in a different way. And that’s all to fill the gap in regulation. If regulators were able to do this, we wouldn’t be needing to do this. So that’s why we formed. So we work with health insurance payers and pharmaceutical companies and other stakeholders to try to get them to put pressures on the industry to change.

MR. MICHAEL WILLIAMS: So there’s a lot to unpack in what you said. And I’m sure the listeners are very surprised to learn, for example, the incentives for higher false positives. So we’ll circle back to that in a minute. But you just said that the FDA is incapable of regulating this. Why is this? Is there a lack of scientific understanding of the industry? Or is it a lack of political will, a lack of manpower? What’s keeping government —

DR. JULIE EGGINGTON: Yeah. So the FDA – there’s four regulatory agencies that will come up in this conversation. And the ultimate one, the one that we wish there was legislation, is the FDA. And they are unable to broadly regulate this industry because legislation hasn’t allowed them to. We have laws that do not allow them to do that. And so laboratories can elect to take a genetic test to the FDA and to get FDA approval. They can do that. But of the over 160,000 clinical genetic tests on market, fewer than 0.1 percent of the tests have gone through the FDA.

So it’s by far the least desirable pathway. And the reason the labs will give you, and it’s somewhat true, is that once you’ve taken your test through the FDA, it’s now locked in. You can’t be nimble. You can’t add the next shiny bell and whistle to your test that all the other labs are adding to their tests. And so the other labs are operating under the laboratory developed test landscape.

This is the same regulatory loophole that Elizabeth Holmes with Theranos was operating under. Minimally all you need is CLIA accreditation or CLIA certification for your laboratory to operate of these type of clinical tests. And with CLIA, frankly, you may never have a walk-through inspection. You’re meant to have one within two years of applying and getting accredited for your laboratory or approval for a laboratory. But often the way it works is a lab can pop up, do fraudulent stuff, close down in under two years before CLIA ever walked through. But even if you’re a lab

that stays around, CLIA is not—it’s literally legislation from 1988. It does not address modern genetic testing. So then we have CAP. Can I talk about CAP now?

MR. MICHAEL WILLIAMS: Yeah, absolutely.

DR. JULIE EGGINGTON: Okay, let me go to CAP. So there’s many thousands of laboratories just operating under CLIA, and those are frankly the worst because there’s really no oversight or nothing. We have no idea how they’re really performing.

MR. MICHAEL WILLIAMS: I have a quick question on that. CLIA was established in 1988. The human genome wasn’t sequenced until like 2003, right? So how is it that CLIA is even applicable to genetic tests?

DR. JULIE EGGINGTON: It isn’t. The most it does is it says—so if a CLIA inspector walks through your lab, you’re going to make sure that the chemicals you’re using aren’t expired, and that’s about the extent of how it’s going to impact genetic testing. So it doesn’t at all. And so for full disclosure, I am actually on the committee. So CLIA is operated through CMS, Centers of Medicaid and Medicare, and I’m on the committee with CMS, CDC and the FDA to figure out if we can update those 1988 CLIA regs to be relevant for Next Generation sequencing. So for modern genetic testing,we meet monthly. We have for over a year. We’ve been meeting monthly to talk about what are the perverse incentives in the industry? What are models that could work? And we’re just kind of brainstorming on how this could be fixed.

With that said – and this is literally, CLIA is literally an act of Congress. And so by the time—if a bill is ever drawn up—by the time it’s approved, it will already be out of date with how quickly this industry moves. So we’re doing our best. I’m doing my best to help them update the CLIA regs if it ever happens. But it’s still going to be out of date once it hits. So, okay. So that’s CLIA. It has zero relevance. But you can still somehow magically run—spend two years running genetic tests without anyone taking a look at you, even longer with the advent of COVID.

So if you want to really show off in this industry, if you want to try to convince health insurance payers and say “Oh, I’m a great lab,” then you’re going to go seek CAP accreditation, which stands for the College of American Pathologists. And once upon a time, that was relevant. Once upon a time, a CAP accreditation really did mean that your lab was good, that you could do good science. This was before genetic testing got so complicated. Now CAP accreditation is totally insufficient. It’s still really hard to get. And there’s a lot of laboratories that never bother to get CAP accredited. But it still won’t mean that the tests coming out of the laboratory are clinically valid or accurate.

MR. MICHAEL WILLIAMS: Why is that?

DR. JULIE EGGINGTON: There’s a few reasons. One, so let’s pretend CAP is working exactly how it should that you as a laboratory—and we’ll get to, in a minute, how you can evade and use loopholes to make sure it doesn’t work exactly how it should. But let’s pretend for a moment CAP accreditation is working how it should.

Every other year, the way it works, is that a small group, three to six people I think it is, of your peers, your so-called peers, people who understand—who are meant to understand the technologies you’re using—volunteer their time to fly out and to walk through your laboratory. And they’ll spend, at most, about six hours onsite at your laboratory. They haven’t pre-prepared for it. It’s not like you’ve sent them reams of your protocols or how your lab works. This is just they show up. And you might have 50 or 100 or 200 different genetic tests on your test menu that you’re offering. They’re there for no more than six hours to look at something that’s so incredibly complex, when we do a review on these tests, we take over a month to look at a single test.

So, this is very, very complex stuff. They’re there for six hours. They’re going to say they have a checklist that they have to run through very, very quickly in six hours. Which means that when they say, oh, I want to see this, I need to see your validation of this, they’re not looking at all the tests. They’re going to say, show me one or two tests and show me how you validated that product, that testing product. And they’re going to look at it.

But you’re going to hand them, you the lab, are going to hand them the best test you have, the thing that you actually worked on. With that said though, if it’s all working the way it’s meant to, CAP has not defined for these laboratories how you validate, how you do your math. The general guidance is basically do the best you can. I mean, effectively it boils down to do the best you can and we’ll give you a participation trophy is effectively what it boils down to. There’s not a minimum. There isn’t a thing that says—there’s a minimum in terms of what you had to have done. Like you had to have a validated your test. But what does validation mean? You get to define your own math.

So if there’s a really good lab – let’s say, Lab A is a really, really amazing lab and has just put enormous amounts of resources into creating a really accurate and clinically valid test, and they passed the CAP accreditation. That’s Lab A. I’m Lab B. I’m bottom of the barrel. I’m like deeply fraudulent, both scientifically and in billing fraud and every way I can be. I get my CAP inspection. I can make up the math. I can decide my own mathematics and which validation samples I used so that I look even better than Lab A. And CAP allows you to do that. And so I get CAP accreditation too. And so this is just enormously problematic. That’s if it’s working the way it’s meant to.

But on top of that, there’s these there’s really profound loophole in CAP, which I just find horrific because it is abused even by very large, major commercial laboratories. And that is to protect trade secrets, you can say to CAP, okay, this year when you send inspectors in, I don’t want my competitors knowing the cool stuff I created. So I’m going to write down a list of the labs that

compete with me so that you don’t send me a volunteer from any of those labs. I’ll lose a trade secret then. So you can write down laboratories. You can exclude certain people.

So the way it’s abused is that some laboratories will choose to list—and literally I’ve had one CEO outright say this to me, and I’ll quote them exactly as I can. They’ve said what we do is we write down every lab that has a Next Generation sequencing instrument in it in this country. CAP has no choice but to send us immunologists to inspect our laboratory who have never seen a DNA sequencing instrument in their life. We pass every single time. Because CAP allows you to do that. I thought that was crazy. I thought this guy was just bragging. And so I went to our liaison that we had at CAP and said, is this loophole true? Can this actually happen? And he confirmed it. Yes, it can happen. So the worst—even these very high-volume labs that have been operating for many years may never have had a legitimate CAP inspection. But they’re operating full-fledged CAP.

MR. MICHAEL WILLIAMS: Okay. So that is shocking. And it sounds like CAP is there—the auditors that at least get to go into the facility—are there to validate results. Are we looking—is this a problem of the science or the analysis of the results and the validation of the results? Is this a problem where there’d be an easy fix if everybody used some sort of generally agreed upon validation metrics?

DR. JULIE EGGINGTON: Yes, and that’s what we’ve attempted to do. So what we’re attempting to do is to—so we work with health insurance companies as a nonprofit service. We work with health insurance companies to reevaluate. If they’re worried about a certain type of test or something new that’s come on the market or if they’re worried about something that they’ve been reimbursing for 20 years and they’ve got questions about it now, we’ll go in and we’ll do a comparative analysis across the major laboratories that they’re using or thinking about using, such that we effectively revalidate them with the same math. But I wouldn’t say revalidate them. We assess them with the same math. And that has never been done before. Being able to compare apples to apples in this industry has never, ever been done

MR. MICHAEL WILLIAMS: By the same math, you mean the same math you would apply to one laboratory, you’d apply to another, not their in-house mathematical analysis they’d want you to use.

DR. JULIE EGGINGTON: Correct. Yeah, we’re going to define it. And this there’s no reason why this can’t be done by CLIA, by CMS, by CAP. They have just chosen not to do it.

MR. MICHAEL WILLIAMS: Okay, that brings up an interesting perspective from the insurer’s side of it. If I’m an insurer paying for a test, I would want essentially the most accurate test. And this seems like genetic testing companies have almost a false marketing issue on their hands if they are telling the insurers that they have accurate tests and there’s really sort of funny math behind

those validation results. What’s the interest on the payer side of it to implement something like CGI practices or industry standard practices? That seems to be a no brainer.

DR. JULIE EGGINGTON: It seems to be a no brainer. But when we first start talking—and we’ve been working with insurers for about three years and it’s taken us about two and a half years to get to the point where anyone’s actually said, okay, we’re going to do this. Because the first time we go in to speak with a payer, these large insurance companies, we start with a quote from the NIH. The NIH, by the way, the National Institutes of Health, has a website. They’re not a regulatory body. But they’re so concerned by what’s going on and the lack of regulation in clinical genetics. They actually have a web page dedicated to this where they say this industry isn’t regulated.

So that’s the first slide we show when we go into brand new—to a health insurance company, we say, did you know that this industry is virtually unregulated, that the clinical validity of these tests have not been independently evaluated? And they say, no, no, no. That can’t be true. There’s CLIA and there’s CAP. And then we have to spend many hours giving many lectures, some of them are CME credit for doctors, where we start breaking down, okay. This is what the regulation does, and this is what it does not do.

And basically, you can get away with anything with the way the regulatory landscape is unless your take your test through the FDA. So let me just mention this really quickly. So the New York State Department of Health, their regulation is such that if a test is going to be sold in New York state, it has to have their stamp of approval. And they are much, much more aggressive than CLIA or CAP. They’re going to not accredit a lab. They’re going to accredit a test. And they’re really actually quite good at looking at some basic what we call analytical stuff. Like how do you actually do the test, the genetic test, at what we call the wet lab or the bench? How are you using the chemistry? How are you like handling the reports?

What they can’t do, and nor can the FDA, what they can’t do is they can’t figure out like, okay, well, what’s appropriate for how you interpret the mutations you find? So I’ll say that even better than CAP accreditation is if a test has New York state approval. Because then at least you know that they’re somewhat decent on how they’re doing the basic chemistry of the test, and it’s reproducible.

The best thing are these FDA approved tests. But even there, they’ve really put them through reproducibility studies. The FDA is keeping a close eye on the clinical claims that the laboratory is making for these tests. Again, I will stress though, that even the FDA does not have the technical capability to really closely watch these laboratories on how they interpret the DNA. So you could, in theory, still have an FDA approved test with an extraordinarily high clinical false positive rate, again, because the FDA doesn’t know how to regulate that. So that’s why it’s happening. But the reason why it’s so hard with trying to communicate with the health insurance companies that they

need to act is they really believe that the U.S. regulatory landscape is protecting them, is doing its job. And it’s not.

MR. MICHAEL WILLIAMS: And as you’ve very clearly pointed out. I want to circle back again. You were just mentioning the high rates of false positivity and how FDA and even the New York Department of Health have a tough time figuring that out. You said that there are incentives in the industry towards false positives. And I guess I have a two-part question then. One, why specifically are there these incentives, given that a lot of these genetic tests are to identify some pretty heavy, pretty serious genetic variations in diseases. And secondly, looking back at the payer side of it, you could be identifying diseases that may not be there, but the payer may be spending millions of dollars to take care of a disease that isn’t there. Or a woman that gets a mastectomy because they show a genetic predisposition towards breast cancer. There seems to be a huge cost of having these false positives. Why wouldn’t there be a bigger crackdown on that, or understanding of that, if so much is dependent on these tests?

DR. JULIE EGGINGTON: Again, it’s that belief that the regulatory agencies in the U.S. are protecting the precision medicine space. This whole industry has been pitched as precision medicine. You get a genetic test. It tells us precisely how to treat you. We’re going to remove your breast, your ovaries. We’re going to terminate your pregnancy. We’re going to put you on this drug. We’re going to do this and this. It’s presented itself as precision. And the laboratories and the laboratory societies have spent an enormous amount of money lobbying with the idea of it’s part of precision medicine. Don’t question our tests. The existing landscape is sufficient.

Going back to the question. What’s interesting about doctors and why it keeps working, there’s no feedback loop. There’s very rarely a feedback loop that there’s been a false positive. So if you think about a woman who’s been told she has hereditary breast and ovarian cancer, she has a false positive BRCA1 mutation, for example. The variant is there. It’s technically in her DNA, but it’s been interpreted incorrectly by the laboratory, who has said that it’s going to cause breast cancer. So she’s going to have her breasts removed, like Angelina Jolie did. That woman is going to have her breasts removed and ovaries removed so she never gets cancer. Well, guess what? She never gets cancer right? You never find out it was a false positive.

MR. MICHAEL WILLIAMS: It’s a future unknown is what you’re saying.

DR. JULIE EGGINGTON: Yes, a future unknown. Let’s take a precision oncology case. Let’s say somebody has tried a bunch of different cancer therapies. They have so far failed. So now they switch to a very expensive, what we call, a solid tumor genomic profiling test or a comprehensive genomic profile test. And the laboratory says, oh, you have this type of mutation and your solid tumor that will respond well to this very expensive and very costly precision therapy precision drug.

And so now that the oncologist is going to put the patient on that precision drug. If it doesn’t work, we don’t have a mechanism in this country where that’s reported back, where anyone says, hey, I used this test. It said that I’d have good results on this drug. I didn’t. They died as if I hadn’t given the drug. Or even worse, they died with side effects from the drug. There’s not a way to loop that back. So this whole—they get away with it.

So the doctors are excited because they’re getting these positive results. It’s confirmation bias. So they’re excited because they feel smart because they’re like, oh, I chose to order this test and I was dead on. I got a positive result. I can do something with this. Aren’t I great? I have literally sat down and talked with oncologists about confirmation bias and they’re like, yep, it’s tough to hear, but what you’re describing is exactly how I feel when I get a positive. And I’m so excited, I keep ordering that test from that lab. I had no idea these could be false positives.

And so the confirmation bias is happening. Everyone’s cheering precision medicine. The pharma companies are making their money. And yet, for years now, there’s been academic research labs publishing papers saying there’s a problem. We did this study. Look at the extraordinary false positive rate. We did this. Look at the false negative rate. I’ve been focusing on false positive. But a recent paper that came out in December showed that there’s an extraordinary false negative rate happening with detection, particularly in the oncology space. So you have a patient who has a tumor that could be treated with a precision drug. But the laboratory has just outright missed it because of a false negative. That’s never—no one questions that. No one says, oh, gee. I was expecting a positive. No one questions that either. So there’s no feedback loop. You have confirmation bias impacting this. You have the marketing of what precision medicine is. You have the perception of regulatory bodies doing their job and no feedback loop. And it’s just created this environment where hundreds of laboratories get away with murder.

MR. MICHAEL WILLIAMS: Okay, that’s hard to digest. We’re getting a bunch of questions from the audience. I have one more question and then I’ll turn it over to the audience. And I guess my question is a way to sort of sum up a lot of our discussion. So you have pretty good insight into false positivity rates and you work with insurers about using that test so that they’re not paying for treatments that – well, one, they’re not getting junk tests. But two, because they’re not getting junk tests, the results that they’re getting are accurate and that procedure was worthwhile to spend money on or that treatment was a worthwhile treatment. When you go to insurers, is there any—have you done any sort of math on not necessarily how much you could save them, but how much they may be spending on treatment for false positives? Is there anything you’ve done in that regard?

DR. JULIE EGGINGTON: Yeah, it’s very disease specific. It’s extraordinarily disease specific. To use an example that will make many people uncomfortable on this phone call, it’s cheaper to terminate a pregnancy than to actually give birth. So in that scenario, a false positive, saves the insurance company money. No one ever finds out. But now let’s look at the exact opposite of the spectrum. Let’s look at some of these precision gene therapies that are truly amazing. By the way,

I just love the gene therapies. They’re really cool. And it’s not their fault that the laboratories are giving false positive results.

There’s a precision gene therapy drug that costs $2.125 million. It’s a single treatment in a lifetime drug. It’s a miraculous thing for what it does. But that math, if you treat that patient under that math and it doesn’t work, you just lost $2.125 million. Now, the insurance companies have figured—have been smart in how they’ve arranged those contracts. So they’ve arranged contracts where after six months, if they come back and the patient hasn’t improved or the disease hasn’t halted, they recover those $2.125 million from the pharma company.

That seems all great. But all these drugs now are concluding clinical trials on treating asymptomatic patients. What that means is the drug manufacturers have said, oh, wouldn’t it be great if we can pre-treat people before they ever get the disease and they’ll never get the disease? Because these treatments don’t reverse. They only halt the disease. So what then? You have no way to measure a false positive and retrieve your funds back. And it just cost you $2.125 million for a single patient, which is going to bankrupt the entire industry if we don’t figure out how to avoid the false positives.

MR. MICHAEL WILLIAMS: Got it. I agree with you, especially if it’s $2.125 million per treatment. So we’ve got some questions from the audience. I think this is a good lead-in from what you just said. What happens if a test fails your validation or is at the bottom of the validation? What does the insurance company do?

DR. JULIE EGGINGTON: They don’t see it – oh, our validation? Great question.

MR. MICHAEL WILLIAMS: Yes, your validation.

DR. JULIE EGGINGTON: Okay, I see. So our validation, that is to be determined, quite honestly. We have done this for payers. It’s been somewhat recently and they are still trying to figure out how to handle the information. We’ve had some spectacular fails. We’ve had some spectacular files from labs that have not only CLIA, CAP, but also New York State Department of Health approval. And this is very troublesome. So the payers right now are still trying to figure out how to handle that information. What can they do?

What I would like them to do is I would like them to stop paying, like stop reimbursing their tests, let the laboratory go away and fix their problems. Come back to us, retake our evaluation and then go back to the payer with extraordinary scores and say, look, we have an accurate test now. That’s what I would like them to do. But it’s totally up to the payer. And we may not even know what these payers do with the results.

MR. MICHAEL WILLIAMS: Just a follow-on for me. Do you sometimes feel like you’re opening a bit of a Pandora’s box for the insurance companies by highlighting how widespread and systematic this can be? Like ignorance might almost be better on the part of the insurer.

DR. JULIE EGGINGTON: Definitely. And I’m going to tell you a real quick story about that, and it might make some people on this phone call uncomfortable. And I’m not, for this particular conversation most definitely, was not under non-disclosure agreement, which is why I’m able to share it and I will name names. Okay. So when we were first conceiving of this whole process, it’s called Elevate Genetics. And so these are the different services that we have for payers to be able to use.

We first tried to pitch it to the laboratories. We went around the country. We were making phone calls to all these laboratories saying, wouldn’t you want to voluntarily do this? If you do it yourself, you’ll get your results. You’ll find out you have problems. We won’t make it public to anyone. You’ll fix your own problems. You’ll retake the test. You’ll do great. And then you can take that as part of your marketing to the payers. And this will be a great piece of marketing to explain why you should get paid more than your competitors.

We went to more than 30 labs across the U.S. This was three years ago. Not a single one of them decided to do it. They all said the exact same thing. We’ll only do this if the payer makes us do it. So that’s why we pivoted and started saying to the payers, okay, you’re going to have to make them do it. In amongst that discussing with the labs and getting their feedback and pitching it to them, we called—we got a hold of a Vice President at the nation’s largest reference lab, LabCorp. So LabCorp—and I will go on record on this because this is, again, not under nondisclosure, is honest to goodness what happened.

LabCorp offers any diagnostic test out there, cholesterol, urinalysis, anything, now even genetic tests. It also offers a bunch of genetic tests. They have very complicated contracts with health insurance companies. And so these contracts are bundled, very deeply bundled. And so you can’t—it’s very difficult for a payer to say, I don’t want to pay for this type of diagnostic at the contract rate. I don’t want to pay for it all. But I want to have these other diagnostics at your contract rate.

So I’m on the call with the VP of LabCorp, and I explained to him what I’m doing. And he outright says it doesn’t matter how inaccurate our genetic tests are, our contracts are so deeply bundled with the health insurance payers, they will keep paying us for them. Doesn’t matter how inaccurate they are.

And so I went away and I talked to some payers and I’m like, is this true? And they’re like, yeah, actually. It would be really, really, really hard, perhaps impossible, for us to stop paying for a really inaccurate test out of one of these reference labs if the contract is really thoroughly bundled with us. Which is why we need regulation, right? Which is why we’ll do what we can do. But we really

want CAP, most particularly we want FDA, to step up to the plate. We want Congress to give the FDA power to be able to start regulating because we need LabCorp to not be able to do that. And there are many other labs that are doing that. They need to be able to have their tests regulated and be able to say, okay, it may not be the best test on the market. You’ll need to use CGI to figure that out. But at least, it isn’t horrible. And that will only be accomplished by regulation.

MR. MICHAEL WILLIAMS: Well, I couldn’t agree with you more on that. And I’m also happy that that conversation was not under NDA because that’s an incredible story. Another question from the audience, and this is about FDA regulation, so a good segue. How labor intensive would it be to get FDA approval on the part of the genetic testing company? Is it that they don’t want to get FDA approval just because they can’t be more nimble?

DR. JULIE EGGINGTON: Yeah, it is labor intensive and it is expensive. And it’s mostly because there’s no benefit in it. Right now on the current landscape, there’s no benefit. Even though we have what’s called companion diagnostic, the handful of genetic tests that have gone through the FDA, if they’re to guide treatment like a drug therapy, they are labeled with what’s called CDx, Companion Diagnostics, CDx.

Doctors do not care one little bit that a test is CDx. They’ve been marketed to such that they believe that the non-FDA tests are even better than the FDA tests. Because the labs go to them—the labs that are not FDA go to them and say, oh, look, yeah, we’re not FDA, but we’ve got this really cool thing and we’ve got this other really cool thing that we just added and we’ve got this other really cool thing that we just added. And it just sounds so much better. Why would you go with that clunky old two-year old test that’s been on market for two years when you can get the shiny brand new one that sounds a heck of a lot better? So there’s incentives not to take your test through the FDA because of marketing.

MR. MICHAEL WILLIAMS: Do you see any sort of, I guess, coming together of FDA regulations and the speed at which the genetic testing market advances? Because I get that side. I do get the company’s side of it. I also very much get the need for FDA regulation. Do you think there’s a way that the FDA can get more nimble too with regulating these and keeping up with advancements?

DR. JULIE EGGINGTON: Yes, there’s a bill before Congress right now called the VALID Act, V-A-L-I-D, the VALID Act, which would give the FDA the ability to regulate these types of tests. There’s a counter bill called the VITAL Act that is trying to say, no, no, we want business as usual. Of course, we support the VALID Act, which would bring greater protections to patients. If that were to pass, it would take a long time for the FDA to spin out a program. They would use a lot of contractors just to handle the extraordinary bandwidth. But what you would also see is you would see a lot of these what I call Garage Labs just go away. The worst of the worst would just be like, okay, we’re going to go con medicine some other way. This has now become too hard. So my estimate is that 50 percent of the industry will just throw up their hands and say the game’s up.

We’re not doing this and walk away. Which will then allow the other 50 percent of the industry to say, okay, time to grow up. Time to do what the big boys have to do and prove that our tests have value.

MR. MICHAEL WILLIAMS: So, basically, just by the sheer announcement that the FDA would be regulating this, you could cut a lot of the wheat from the chaff just right off the bat.

DR. JULIE EGGINGTON: Yep, just right off the bat. Yep.

MR. MICHAEL WILLIAMS: Okay, that’s interesting to know. Another question from the audience. Are there particular tests or areas of concern that insurance companies have regarding genetic tests? I guess this is saying are insurance companies concerned about NIPT tests or cancer tests or something else, I think this is the thrust of the question.

DR. JULIE EGGINGTON: Yeah. So, I mean, obviously, they’re concerned about NIPT right now because of The New York Times piece, but also there’s been a lot of billing fraud in NIPT that’s very easily caught. And if they’ve been paying attention to the laws, to the take backs and the news that’s been had, they’ve been keeping their eye on NIPT for a long while. Not for the false positives, just because of the false billing that these companies often do so. NIPT, of course.

The next biggest one is anything that is, I would say, it’s your oncology genetic genomic tests. So anything that is new and is being rapidly adopted and is very expensive. So right now, a lot of focus on the payers is on that space, is what are these magical tests that are so expensive, that is supposedly telling you which very expensive precision drug I should put you on. And rightfully so, there’s a lot of interest in the payer organizations about whether or not these tests have clinical validity, whether or not they’re regulated, et cetera. Those are the two biggest ones right now.

MR. MICHAEL WILLIAMS: So billing fraud and irregularities in billing have been an issue we’ve reported on at The Capitol Forum, and others have reported on. What are some of the billing frauds going on with the NIPT and prenatal testing that either you’ve been seeing with CGI or you just have seen in the industry more broadly?

DR. JULIE EGGINGTON: Yeah. So, I mean, I’ve got to hand these companies credit. Like they just figure out the most creative ways to bilk the insurance companies out of money. I mean, it’s just extraordinary what they try and what they get away with. So, the big one with NIPT, there’s been a lot of attention on one case in particular of an NIPT laboratory throwing in a CPT code for an instrument and a technology they didn’t even need or have in their laboratory.

So payors tend to be so oblivious and so confused by this whole space, they don’t even know if they’re getting the right CPT codes billed from these laboratories. And so one—this is in the press. So I can tell you. So Natera was throwing in a CPT code for an instrument they didn’t even have

for a long time. And some payers figured it out. Some payers went and got some of their money back. Other payers haven’t done that.

There’s another thing that many labs do and is deeply fraudulent. And so a lot of these tests, you’re not just testing for one thing. You’re testing for multiple things, multiple genes, multiple markers, multiple different things. And you’re meant to use what’s called the most specific CPT code, meaning the code that best and most succinctly describes your test and that was done on a single day. And that’s what you’re meant to use to bill.

But what a lot of labs do is they have one test that they run on a single day, but then they break that test apart for that patient. They break that test apart and they pretend that they ran 12 or 20 or 30 smaller tests over a period of a year or more. And the patient doesn’t know this is going on until two years later, they get a bill from the laboratory for thousands and thousands of dollars saying, “Oh, this is the part your insurance company didn’t pay for.” And when you see that, when the bill comes to the patient 22 months or 24 months later and it’s for many thousands of dollars, that’s when the laboratory has like fraudulently chopped up the test and has used separate nonspecific billing codes to pretend that it was many different tests. And so labs do that. Just really creative things that they do.

MR. MICHAEL WILLIAMS: Yeah, and especially when you’ve got some panel tests that have 274 genes on them.

DR. JULIE EGGINGTON: Yeah, you can march through and maybe 20 of them actually get reimbursed. And so you can just slowly march through and use them.

MR. MICHAEL WILLIAMS: Okay. And we have one last question from the audience, and it deals with an issue that’s been in the news a little bit. And you and I actually talked about this a little bit last week. With all the attention around this company called MGML, My Genome, My Life, as you remember, that’s the—

DR. JULIE EGGINGTON: Nonprofit company.

MR. MICHAEL WILLIAMS: Yeah, prior authorization company last week. Can you think of any reason why companies would use not for profits for prior authorizations with insurers?

DR. JULIE EGGINGTON: You know, yes. So when I first heard about that, because I hadn’t read the story from a while ago, and hearing about that from you, my immediate thought was, oh, it’s about the head count. So in commercial companies, in big genetic testing companies, you could easily have about one-third of your staff, a quarter to one-third of your headcount, doing nothing but dealing with the insurance companies. That’s all they do is just try to get paid. And so it’s an enormous drain on a company just to deal with health insurance companies. And so by creating a

separate pathway that is a nonprofit, one, you enjoy the benefits of being a nonprofit. I run a nonprofit. So there’s lots of great things about being nonprofit in terms of lower costs of everything, less corporate taxes, the whole thing. There’s that. But most importantly, I would actually say it’s hiding the head count from the investors.

So a game we see played very frequently in large commercial labs that care very much about the stock prices is that they’re trying to keep their head count low. What they’re trying to do is they’re trying to show their investors that they’re making a ton of profit—I wouldn’t even call it profit for a lot of labs, but they’ve got a lot of revenue. And “Oh, look, we did this with very minimal headcount.” If you have taken a quarter to one third of your employees and then just shifted that over to a service, which is this type of thing, you’ve made your headcount look a lot lower and investors love that. Oh, here’s your revenue. Oh, and your headcount was so low. That is actually my suspicion as to the driving force more than anything else is to make the appearance of your headcount look. Which is why a lot of labs have fully integrated full-time employees, but they’re paying them through temp agencies. It’s to keep that headcount low.

MR. MICHAEL WILLIAMS: Okay. That would appear to make sense. Okay, all right. Well, I am not showing any more questions from the audience and we’re bumping up on about an hour here. So Julie, I want to thank you so much for speaking with us about this. This has both been fascinating and honestly a little bit frightening how you’ve illuminated how the industry operates. I’ve got to say I gave my dog a genetic test last year, and now after this conversation, I’m not so sure he’s a beagle anymore. But really, honestly, this has just been, like I said, both fascinating and frightening. So I really want to thank you for taking the time and walking us through these very complex issues.

DR. JULIE EGGINGTON: Thank you. And we’re here to help and serve. So if anyone wants to reach out and get some more advice or some help, let us know.