Genetic Testing

Three Common PGx Compliance Traps for Laboratories to Avoid

By Adam M. Walters

Walters Law, P.C.

In recent years, many clinical laboratories have started offering Pharmacogenetics Testing (PGx) to assist physicians in avoiding prescribing medication doses that may cause adverse reactions in patients with certain genotypes and/or alleles. For example, people with the HLA-B*1502 allele are at a higher risk of developing toxic epidermal necrolysis (TEN) when using the anti-convulsant Carbamazepine. By using a PGx test for the HLA-B*1502 allele prior to prescribing Carbamazepine, a physician may prevent Carbamazepine induced TEN.

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While the PGx test is a highly valuable form of medical test, it is also presently one of the most highly scrutinized tests test by CMS. While not an exhaustive list, following the below referenced guidelines should enable laboratories to minimize compliance risks associated with PGx testing.

  1. Documenting Medical Necessity of PGx Tests

Many recoupments, false claims act cases and indictments are based on billing for tests that lack medical necessity. At least for purposes of Medicare, PGx testing is not medically necessary unless a practitioner is considering (or already prescribing) medications that are medically necessary and have a known gene-drug interaction that has been demonstrated to be clinically actionable.

While laboratories do not determine medical necessity, they can still get into trouble for encouraging practitioners to order medically unnecessary tests. The following education and documentation actions may help prevent, or assist with the defense of, an audit or investigation:

  • Encourage the ordering practitioner to send a letter of medical necessity to the insurance company for pre-approval and that the letter outlines the benefits of the test, a description of the test, relevant clinical notes, FDA information and the primary reason for the test;
  • Require the ordering practitioner to sign an acknowledgement: (i) of the limits on the use of PGx testing; (ii) that the practitioner is treating the patient and considering (or already prescribing) medications that are medically necessary and have a known gene-drug interaction that is clinically actionable; and, (iii) that the ordering practitioner is qualified to diagnose the condition being treated and prescribe the relevant medication; and
  • Properly educate practitioners on the clinical benefits, proper documentation and appropriate uses of PGx testing.
  1. Billing of PGx Tests

In addition to policies and rules that apply to billing for all clinical laboratory test, laboratories should follow these additional steps when billing for PGx testing:

  • Ensure that a multi-gene panel is only ordered and billed if more than one gene is clinically actionable for a medication or multiple medications are being prescribed; and
  • Properly document the medication at issue on the claim form.

3. Sales and Marketing of PGx Tests

Several indictments involving genetic testing have involved the use of telemarketers, physician brokering and misleading marketing materials. To avoid such troubles, laboratories should follow these guidelines in marketing PGx testing:

  • Use an employed sales force whose compensation is not based on the number of tests ordered, amount billed/collected from insurance companies or patients referred from a practice; and
  • Review your marketing materials and ensure that they are straightforward, honest and do not overstate the uses and benefits of PGx testing.


Recognize that PGx tests are currently in the crosshairs of federal and state enforcers. Following the guidelines above should help you steer clear of trouble. And, as always, laboratories should scrupulously document their compliance efforts for not only PGx tests but all tests and services for which they bill.

About the Author: Adam Walters is a veteran health care attorney in Savannah, Georgia representing health care providers in business transactions, fraud and abuse compliance, government investigations, HIPAA, reimbursement disputes, employment issues and licensing. His representative clients include clinical laboratories, dialysis centers, physicians, physician organizations, and telehealth providers.

Prior to re-locating to Savannah, Adam practiced in the health care departments of multiple national law firms and was of-counsel at a health care boutique in Atlanta, Georgia.

He is currently serving his second term as co-Vice Chair of Publications for AHlA’s Physician Organizations Practice Group. He is also a member of the Georgia Academy of Healthcare Attorneys and Savannah Exchange Club.