The Three Year Outlook for Diagnostics
Continued Uncertainty, Renewed Focus on Value Predicted
By Genna Rollins
Buffeted by uncertainty and unstable economic forces, the in vitro diagnostics (IVD) industry nonetheless is showing its resiliency and dynamic response to changing times, trends that will continue during the next 3 years. That’s the collected wisdom of industry leaders asked to consider the near-term challenges and opportunities for a sector, like most of the healthcare industry, in flux. Even though the field is facing steep challenges, experts emphasized that circumstances are favorable for lab medicine to shine in an otherwise gloomy outlook.
“I’m optimistic that as we look to the future and take a tough look at all aspects of care, the lab will fare well in that analysis,” said Susan Evans, PhD, vice president of corporate strategic planning at Beckman Coulter. “Through diagnostics there’s an opportunity to really impact the cost of patient care by providing information earlier and supporting an earlier diagnosis.” Evans is a past AACC president.
Other insiders shared Evans’s assessment, but many expressed particular concern about uncertainty surrounding the massive healthcare reform law passed in March 2010. How exactly various provisions of the law will impact labs remains to be seen, especially in light of the mid-term elections in November, which threw majority control of the House of Representatives to Republicans, many of whom have pledged to dismantle, if not repeal, the law. “Healthcare reform is a big unknown, but most of the industry thinks it will cost them in some way, shape, or form. There’s also a concern that it could negatively impact investment in research and development,” cautioned William Maggio, president and CEO of IMMCO Diagnostics. “Whether they’re Independent, Republican or Democrat, anybody would be kidding to say they know how the new law is going to impact healthcare.”
In theory, the law’s emphasis on preventive services and expanded coverage to approximately 32 million individuals who currently are uninsured, bodes well for lab medicine. However, analysts also are concerned that healthcare reform could lead to reimbursement cuts, which could moderate or even negate benefits to labs from other provisions. “We’re predicting an increase in lab tests and a decrease in reimbursement, so there’s uncertainty about how all of that will affect labs,” observed AACC president Ann Gronowski, PhD, DABCC. “A lot of people are asking whether we’ll be asked to crank out a lot of results without funds to do it.” Gronowski is associate professor of pathology and immunology and associate medical director of clinical chemistry at Washington University in St. Louis.
An online survey of CLN readers reflected this anxiety. A strong majority of 85% of respondents indicated that they believe healthcare reform legislation is one of the top near-term issues facing the IVD industry and their comments revealed concerns about how labs will fare as the law takes effect. (See Survey, below)
A Look Ahead
How do Readers Feel about the Future?
In addition to our discussion with lab medicine leaders,CLN surveyed readers about the outlook for clinical labs. More than 600 responded to the online survey in November.
Like the observers we spoke with, a strong majority—85%—of CLN readers cited implementation of the healthcare reform law passed in March 2010 as one of the top issues facing the industry during the next 3 years. Although readers made a range of positive and negative comments about the impact of the new law, one individual summed up the thoughts of many. “I think there will be an increase in preventive testing and treatment, but I also expect far more scrutiny over paying for testing. Supporting diagnoses may be more limited for testing, and perhaps with improved technology the need for repeat testing will be reduced. I fear that laboratorians will work harder and be appreciated less.”
Slightly more than two-thirds of readers also cited the lab workforce shortage as a major concern in the next 3 years, but like their colleagues interviewed for our article, most did not feel there was an easy solution. As one reader succinctly couched the dilemma, “The average age of clinical chemists is 55. This fact is going to drive a lot of what happens in our industry over the next 10 years.”
Readers also cited implementation of electronic health records (EHR), technological innovations, and potential changes to oversight of lab-developed tests as the most pressing issues facing labs in the near future. On the economic front, nearly 90% of respondents believe hospitals seeking ways to improve the efficiency of labs will be more important in the next 3 years than today. They were less confidant about how other trends would play out, although nearly 60% said they believed that hospitals outsourcing lab operations would gain importance, followed by 55% who said more hospitals would seek to expand their reference lab businesses, and 50% who indicated that IVD manufacturers would continue to purchase niche companies to expand their lab test menus.
While a clear majority—86%—of respondents believe lab tests will be valued more during the next 3 years than today, CLN readers were less certain about how they themselves would fare. Slightly more than 60% reported believing that laboratorians would be more highly valued than today, but 37% indicated that they felt uncertain or thought they would be valued less.
Most readers also see the cost and volume of test increasing during the next 3 years, although there was a more divergent opinion about costs. While nearly 55% of respondents said they believe the costs of tests will rise, a solid 45% see costs holding steady or declining.
Click here for reader comments.
Making a Value Proposition
Even with lingering doubts that labs may experience some negative fall-out from the legislation, observers emphasized that the law and other circumstances have created a golden opportunity for the lab industry. “There’s increasing visibility and scrutiny of new tests related to their clinical value, cost-effectiveness, and outcomes value,” said Jay Wohlgemuth, MD, vice president of science and innovation at Quest Diagnostics. “We’ve been talking about it for a long time, and it’s been a tenant of the diagnostics industry that there has to be clinical value, but it’s coming from all angles now, and everything’s converging around value.”
Labs will do well to act now and capitalize on the push for value by positioning themselves as good stewards of healthcare resources, contended Gronowski. “They may want to look at test utilization and formulating some plans about what physicians can and can’t order,” she said. “That’s a way to approach both the cost and effectiveness of ordering, and it’s something that can make the case for labs providing value. Having outcomes-based studies as to why you want to implement certain formularies or limit the type of ordering that’s done, will help make sure each organization is getting the biggest bang for its healthcare dollar.”
Hand-in-hand with demonstrating value and developing testing formularies is lab medicine’s essential role in educating physicians about the evidence surrounding and best practices supporting various lab tests. “One of the reasons doctors order excessive tests is they don’t necessarily understand the clinical utility of the tests,” observed Judy Ogden, director of new business and technical development at Tosoh Bioscience. “That’s not to say they’re not well-educated; it’s just that no one can be an expert on everything. A lot of physicians still order certain tests that are somewhat archaic, and they need to understand that there are better options.”
What will FDA do?
Uncertainty about healthcare reform is not the only cloud over the IVD industry. The regulatory environment also is in a state of flux, and how it will impact the field remains to be seen (See Q&A with Alberto Gutierrez). Most notably, the Food and Drug Administration (FDA) announced its intention to exercise active oversight of lab-developed tests (LDT), and held a public meeting last July to hear from stakeholders on the subject. Much of the impetus for this review apparently emanated from a proliferation of over-the-counter genetic tests, but FDA has signaled interest in broader oversight of all LDTs. One proposal that appeared to have traction, both within the agency and among laboratorians, involved full FDA review only for high-risk LDTs, with lab accreditors exercising tighter control of low- and moderate-risk LDTs. However, if and when this approach will be enacted is unclear. “What FDA has said is that they’re looking first at tests that have the most impact on patients, and most of us would agree with that. The question is, where does that line get drawn and how many tests does it affect,” said Gronowski.
FDA also indicated that it plans to update the 510(k) approval process, and in 2010 announced collaborations with both the National Institutes of Health and the Centers for Medicare and Medicaid Services to streamline the regulatory process and related coverage decisions. The agency also implemented changes to Medical Device Advisory Committees and their procedures in 2010. These changes all were made in advance of an Institute of Medicine report on FDA’s regulatory process that’s expected in 2011.
In the long run, IVD manufacturers view these developments positively, but representatives of several companies contended that for now, FDA appears to be struggling with the device approval process. “What we’ve seen is that FDA is requesting stakeholder feedback to strengthen the 510(k) process in general, but what we’ve been experiencing, and a lot of other companies have been too, is delays in how quickly we can get things to the market,” contended Christian Borjesson, senior director of marketing for microbiology and infectious diseases at bioMerieux. “We believe that in the short-term the turnaround time for manufacturers’ approvals probably will increase.”
Some manufacturers expressed hope that FDA would go so far as to consider diagnostics separately from other IVDs. “Medical devices encompass a very broad description of products. The regulation of them seems even more complicated because you can’t apply all the rules to each submission. Invasive products require different types of data and more extensive data collection than in vitro diagnostics,” said Ogden. “We’d like to see FDA break the IVD section out of medical devices and specifically address diagnostics.”
An Intractable Workforce Shortage
Another hot topic and issue of continual concern is the laboratory medicine workforce shortage. To a person, industry observers cited this as a major challenge facing the industry, but no one saw any relief on the near-term horizon. CLN readers shared this sentiment; two-thirds of survey respondents rated the shortage as one of the most significant issues facing the industry.
Gronowski emphasized that laboratorians need to do a better job of touting the profession. “We have an obligation to tell people about this whole industry—everything from people who work for manufacturers developing assays to people in labs, to medical directors and policymakers. The industry is huge, and we don’t do a good enough job of informing young people about all the possibilities,” she said. “A lot of our field is a black box to the average consumer and maybe even to physicians, and we need to change that.”
Manufacturers are feeling the workforce pinch too and are responding with products that enable hard-pressed laboratorians to do more with less and to do it more easily. “Basically every lab I go into is understaffed in microbiology and infectious diseases, and they’re being asked to do more with less resources, which is unsustainable,” observed Borjesson. “Everyone is looking for efficiency in informatics. I’ve been following people in labs and seeing how they manually copy and paste things into worksheets to provide information to decision makers. That’s very frustrating to laboratorians.”
Ogden agreed that manufacturers feel the urgent need to develop technology work-arounds in response to the manpower shortage. “We have a responsibility to make sure that we provide reliable products that have a lot of uptime, automation, and fail-safes built-in, so that as things happen the end users are more readily aware that they need to investigate,” she explained.
Evans also pointed out that increased harmonization of assays would go hand-in-hand with both manpower constraints and patient safety considerations. “It’s hard to say what can be accomplished in the next three years with regard to test harmonization, but as a global community looking to improve the quality of patient care and diagnostic efficiency, that’s an important initiative to get behind,” she said. “We need the information delivered to physicians the same way, whether they’re in Boston, San Francisco, or London, and we need the information to be transferrable to wherever the patient is.”
The Golden Era of Information
Another force to be reckoned with in coming years is the fast-paced advance of science, which is driving both new products and new roles for laboratories. “There’s a shift taking place in some segments of the market from a focus on churning out results in a laboratory environment to a situation where the product is really the information, or the interpretation of the information, with less emphasis on the data being generated in the lab itself,” said Wohlgemuth. “For example, some of the molecular methods are getting to the point where, we might, in the future, need a sequence of DNA to make a clinical call, but assuming the sequence was generated with the right standards, it may not be as relevant where it was generated. However, how that information is delivered to physicians and how it’s interpreted would be very relevant.”
Evans agreed that informatics will be crucial in the coming years. “Using lab automation and information systems to bring information together to improve productivity, safety, and accuracy is an important area of focus for us,” she indicated. “Providing better integrated reports and information instead of a traditional data stream is of interest to labs, physicians, and hospitals.”
As labs transition in the coming years from being not only producers of lab results but also purveyors of information, efficient, effective electronic health record (EHR)-laboratory information system (LIS) links will take a front-row seat. However, information system experts see a few bumps in the road ahead. Of particular concern are the meaningful use criteria in the Health Information Technology for Economic and Clinical Health (HITECH) economic stimulus package passed in 2009. One criterion requires that at least 50% of clinical lab results that are in either positive/negative or numerical format be incorporated in certified EHR technology as structured data.
“The lab community understands structured data to be LOINC, but we’re finding many EHRs out there are not understanding what was meant by structured data,” explained Lisa Conley, territory vice president of lab sales for McKesson Provider Technologies. “Many of them are incapable of taking in that LOINC coding and doing something with it. That’s probably going to be a sticking point for many EHRs.” As adoption of EHRs in hospitals, physician practices, and other clinical sites picks up steam, this critical incompatibility could bring the process to a screeching halt. Yet Gronowski worries that labs often are not considered in the EHR implementation process, perhaps because they already have a LIS and people assume the EHR and LIS are interoperable. “In my discussions with colleagues across the country, I’m aware of organizations that had electronic ordering systems—including lab ordering—ready to go and have never had a laboratorian in a meeting. That’s a bad situation,” she said.
Both labs and manufacturers also feel the pressure mounting to improve turnaround times. “The need for more rapid testing is a driver in diagnostics,” said Borjesson. “If you look at the research and development portfolios of companies, there’s a lot of activity in that area. It’s an extremely important factor in hospital economics, as they look to treat patients faster, decrease length of stay, and get patients out of the system faster. So a lab test that gives results quicker is an absolute value.”
Borjesson also thinks mass spectrometry is the 800-pound gorilla waiting to make a charge on the industry. “It will have a huge impact, especially in infectious diseases. Instead of the biological based methods we use today, with mass spec you can do direct specimen testing and have results in minutes. That can potentially become a threat to the molecular industry,” he predicted.
Gronowski agreed that mass spectrometry is a transformative technology, but questioned the speed of its adoption in the near term. “It’s still not so user-friendly that every lab can utilize mass spec. Will we ever reach the point where every lab will have mass spec? That will come, but it’ll take a while,” she predicted.
Manufacturers also reported interest from their customers in multiplex systems to simultaneously measure numerous analytes at once, as a partial solution to workforce, turnaround time, and cost considerations. “Labs are looking to bundle assays that perform or operate on multiplex systems so they can have higher throughput at a cheaper price,” said Maggio.
The Macro View
Taking a broader look at the overall IVD industry, observers see a mixed bag of positive and negative news. “Over the next two-to-three years, we’re a little more bearish. The economy’s getting a little better, but we’re not going to see pre-2002 growth numbers, although the industry will be much more stable,” said Borjesson. He also believes unemployment will remain frustratingly high at near-double digits but that the volume of lab tests will increase slightly even as pressures on costs escalate.
Ogden expects the trend of IVD manufacturers acquiring boutique start-ups to continue. “Molecular testing is a primary example of why companies need to partner, merge, and acquire others. There’s so much development going on, but because of patent and intellectual property issues, partnering with other companies will provide the only opportunity for growth for those companies,” she suggested.
Even with so many unstable forces in play, observers, including Gronowski, consistently expressed optimism that the lab industry will whether the storm well. “It’s a rapidly changing field, but we’re in a great position to demonstrate value and continue the innovation that’s been a hallmark of the profession.”