Avid makes Amyvid, an injectable liquid meant to help identify insoluble deposits of protein, called amyloid plaque or beta-amyloid, that are found in the brain. One theory is that such deposits impair memory and thinking.
Lilly paid $300 million up front for Avid, with the potential for $500 million more if milestones were met, but that remains in doubt.
In its draft memo last week, CMS said "the evidence is insufficient" to conclude the test "improves health outcomes for Medicare beneficiaries," and thus it doesn't meet Medicare reimbursement laws.
Lilly and Avid, which had challenges in getting U.S. Food and Drug Administration approval, were disappointed by the latest bump.
"CMS appears to be challenging the value of an adjunctive tool that can assist physicians in making a more informed diagnosis for patients with cognitive impairment," Avid CEO and founder Daniel Skovronsky said in a statement. Skovronsky founded the company in 2004. It still operates from its office on Market Street in West Philadelphia, though now it is fully owned by Indianapolis-based Lilly.
"Restricting coverage could hinder a timely and accurate diagnosis, which is in conflict with the advice of Alzheimer's disease experts and with the administration's National Alzheimer's Project Act," Skovronsky said.
He added that the decision "may stifle future innovation aimed at improving diagnosis."
Skovronsky echoed a familiar refrain in the drug business, which is that if taxpayers and private insurers will not pay high prices for drugs and tests, drug and medical-device companies have less incentive to find solutions.
However, the same demographics that gave Avid and Lilly hope for huge profits scare some people looking at the federal budget.
The U.S. population is getting older, and Medicare is the government insurance program covering mostly people age 65 and older. CMS said it spent $574 billion in 2012 to cover 50.7 million Americans.
CMS said the imaging test could be promising in two scenarios, one being to exclude Alzheimer's in a narrowly defined group and in clinical trials seeking better treatment or prevention strategies. In such closing monitored trials, CMS said, it would pay for one test per patient.
Contact David Sell at 215-854-4506, firstname.lastname@example.org, or @phillypharma. Read his blog at www.inquirer.com/phillypharma.