Interpace Diagnostics Faces Crossroads as PancraGEN Discontinuation Sparks Concerns Over Medicare Coverage and Profitability

Interpace Diagnostics (OTCQX: IDXG) has entered a pivotal phase as it prepares to discontinue its PancraGEN® test—a molecular diagnostic tool for assessing pancreatic cyst cancer risk—effective May 2, 2025. The move, driven by a final Local Coverage Determination (LCD) L39365 from the Centers for Medicare & Medicaid Services (CMS), marks a critical inflection point for the company. While the discontinuation resolves a costly reimbursement battle, it also underscores the fragility of diagnostic firms reliant on Medicare coverage and the need to pivot toward more sustainable revenue streams.

The Discontinuation: A Policy-Driven Blow

PancraGEN®’s fate was sealed when CMS’s Medicare Administrative Contractor, Novitas Solutions, issued LCD L39365, denying Medicare coverage for the test. The decision, finalized in January 2025, followed years of advocacy by Interpace to demonstrate the test’s clinical utility. Over 80,000 patients have used PancraGEN® since its 2013 launch, with the test guiding personalized treatment plans and reducing unnecessary surgeries. However, CMS’s stance—that the evidence for PancraGEN’s necessity does not meet coverage thresholds—has left Interpace with no financially viable path to continue offering the test.

The delay of the effective date from February 24 to May 2, 2025, granted by the incoming Trump administration, provides a temporary reprieve. The administration’s request to review PancraGEN’s clinical data hints at potential policy reversals, but CMS’s final decision remains unresolved. Interpace CEO Tom Burnell has criticized the LCD as “inconsistent with advancements in personalized medicine,” arguing that the test’s proven track record—supported by up to eight years of follow-up data—should warrant coverage.

Financial Impact: A Hit to Growth, But Not Survival

While PancraGEN® contributed to Interpace’s revenue growth in recent years, the test’s discontinuation does not spell immediate doom. In Q3 2024, Interpace reported a 35% year-over-year revenue increase to $12.3 million, driven by PancraGEN and its thyroid-focused suite, ThyGeNEXT® + ThyraMIR®v2. However, PancraGEN’s specific revenue contribution was not isolated in financial disclosures, making it challenging to quantify its exact impact.

The company has emphasized its thyroid diagnostics franchise as a “strong and profitable foundation.” In 2024, the Endo business unit—which includes ThyGeNEXT® and ThyraMIR®v2—delivered record test volumes and 61% gross margins, up from 55% in 2023. These metrics suggest the company can navigate the loss of PancraGEN revenue. Burnell noted that restructuring efforts will focus on maintaining profitability through cost efficiencies and cross-selling opportunities in the Endo segment.

Market Reactions and Risks Ahead

Investors have yet to fully price in the PancraGEN discontinuation, as Interpace’s stock has held steady amid broader healthcare sector volatility. However, risks remain:
- Medicare Policy Uncertainty: The CMS decision reflects a broader trend of stringent coverage criteria for molecular diagnostics. Interpace’s other tests, such as RespriDX® (lung cancer origin differentiation) and BarreGEN® (Barrett’s esophagus evaluation), face similar reimbursement hurdles.
- Dependence on Thyroid Tests: While the Endo unit is profitable, its success hinges on sustained demand for thyroid diagnostics. A downturn in this niche market or regulatory setbacks could destabilize the company.
- Operational Challenges: Restructuring to offset PancraGEN’s loss may strain resources. Interpace’s Q4 2024 cash balance of $2.1 million, down from $5.0 million in 2023, underscores the need for disciplined capital management.

Conclusion: A Narrow Path to Profitability, But Hope Remains

Interpace Diagnostics’ pivot to its thyroid-focused business provides a lifeline, but the company must now prove its ability to thrive in a CMS-dominated environment. Key data points reinforce this outlook:
- Thyroid Test Dominance: The Endo unit’s double-digit volume growth and 61% gross margins in 2024 highlight its profitability.
- Clinical Pipeline: The BarreGEN® clinical evaluation program and RespriDX®’s niche utility offer long-term opportunities, though reimbursement approvals are uncertain.
- Temporary Reprieve: The delayed effective date for PancraGEN’s discontinuation buys time for potential policy changes or negotiations with CMS.

Investors should monitor Interpace’s ability to maintain cash flow and secure reimbursement for its remaining tests. While the PancraGEN discontinuation is a significant setback, the company’s focus on operational excellence and its profitable thyroid franchise position it to weather the storm—if Medicare policies don’t slam another door shut.

In the end, Interpace’s story is a cautionary tale for diagnostic firms: reliance on a single test or payer’s whims can be perilous. Its survival now hinges on diversification and the staying power of its Endo business—a bet that may yet pay off.