Exact Sciences suing Humana over unpaid claims

Exact Sciences is suing the national insurer Humana for its refusal to pay for the company’s non-invasive colon cancer test.

The lawsuit, filed in a federal court in Kentucky this week, argues Humana has illegally refused to pay more than $800,000 worth of claims for the Cologuard test. The test analyzes stool samples for abnormal cells that signal colon cancer.

The FDA-approved test is already covered under Medicare, but the Madison biotech company is hoping to convince more commercial insurers to cover it.

On that end, the company said last month it hit a “major milestone” with getting Anthem BlueCross of California to cover the test for its 4.5 million enrollees, paving the way for similar agreements with more BlueCross insurers. It’s also expecting to sign five contracts by July.

But Exact Sciences argues that Humana, one of the nation’s largest insurers, should cover the Cologuard test, especially in the handful of states that have statutes mandating coverage for colon cancer screenings.

That’s because, the company argues, the Cologuard test is not “experimental or investigational.”

“Humana’s wholesale refusal to provide coverage for Cologuard is in clear violation of state and federal law, as well as Humana’s Plans, and has caused Exact to sustain substantial damages,” Exact Sciences wrote in a filing. “If Humana’s conduct is allowed to continue, it threatens irreparable harm to Exact as well as the patients who depend upon the test that Exact provides.”

In all, Exact Sciences has processed 4,664 Cologuard tests for Humana enrollees in 45 states, adding up to more than $800,000 in unpaid claims. A Humana spokesman didn’t return requests for comment.

The lawsuit could sour relations with Humana and hurt future negotiations, analysts covering the company said, but other options include a potential settlement in which Humana agrees to cover Cologuard.

In any case, the lawsuit is just another indication that Exact Sciences will bring insurers on board slower than it originally projected, those analysts said. Last year, the U.S. Preventive Services Task Force declined to recommend Cologuard, instead listing it as an alternative test. That news slashed the company’s stock price by half, and it’s kept dropping since.

But the lawsuit is also not unusual, as several companies and customers file similar complaints with insurers, analysts said.

“It shows how difficult it is to get insurance coverage for new medical technology,” said Bruce Jackson, a senior analyst at Lake Street Capital Markets.

Kirk Hartley, the founder of the legal firm Law Science Policy, has seen success on similar cases for cancer patients and commended Exact Sciences for suing. Hartley, a Chicago-based corporate lawyer, started the firm after his girlfriend’s cancer returned and she had trouble getting her insurer to cover her treatment.

“I’ve been urging other people to start filing these suits,” he said. “I think they have to do it. I think they’ve been treating the insurance industry as if it acts in good faith, and a few do. But they need to be taken on directly. I’m delighted to see this happening.”

A key part of the lawsuit centers on some states’ statutes that mandate insurers cover colon cancer screenings.

Those statutes include one in Kentucky, where the case was filed, requiring insurers to cover “all colorectal cancer examinations and laboratory tests specified in current American Society guidelines.” The Cologuard test was included in those guidelines in 2014, which the company says clearly means Humana should cover Cologuard.

The lawsuit also details a flier regarding Cologuard that Humana sent to in-network providers in Kentucky and possibly other states. That flier said “Cologuard is not covered under Humana’s commercial plans,” according to the lawsuit.

Last month, Exact Sciences’ lawyers sent a cease and desist notice to Humana asking the insurer to stop sending those fliers. Humana responded by saying it’s stopped using the fliers and that they don’t believe the fliers reached physicians outside Kentucky, according to the complaint. The insurer also said it would “reprocess” any claims denied since Jan. 1 of this year, but the lawsuit argues Humana isn’t addressing claims prior to that.

Exact Sciences is also arguing Humana should cover the test even if states don’t have those coverage mandates. That’s a tougher argument to make, Hartley said, but Cologuard’s FDA approval and other recognitions should help it prove it’s no longer experimental.

“This is a bad case for Humana to contest,” he said.

See the lawsuit.

— By Polo Rocha,