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XDx: Navigating Regulatory & Reimbursement Challenges

Laura Elias and Michael Alvarez
Stanford University

Summary and key issue/decision: This case focuses on XDx, a molecular diagnostics company, that had introduced their first product, AlloMap®, to the market. When the United States Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) announced policy changes that had the potential to adversely affect AlloMap’s adoption in the marketplace, the XDx management team was forced to decide whether to proceed with a passive strategy of waiting for the uncertainties to unfold before taking action or to undertake a very costly business model reformulation. XDx chose to rebuild their business model with the hope of maximizing market adoption of their novel diagnostic and preserving company value but in the process incurred significant costs.

Companies/institutions: XDx, Centers for Medicare and Medicaid Services (CMS), US Food and Drug Administration (FDA), Division of Laboratory Services

Technology: AlloMap, a molecular diagnostic test that aids in the identification of heart transplant patients with a low probability acute cellular rejection

Stage of development at time of issue/decision: AlloMap was on the market, and XDx’s laboratory was certified under the Clinical Laboratory Improvement Amendment Act (CLIA). The California Medicare contractor had granted reimbursement for AlloMap. XDx was anticipating an Initial Public Offering (IPO).

Indication/therapeutic area: Heart transplantation monitoring

Geography: US

Keywords: XDx, Initial Public Offering (IPO), Laboratory Developed Test (LDT), Clinical Laboratory Improvement Amendment (CLIA), In Vitro Diagnostic Multivariate Index Assay (IVDMIA), 510(k), molecular diagnostics, genomics, heart transplant