March 2007: Volume 33, Number 3
The New Integrative Approach To Diagnostic Medicine
How Will the Acquisitions of Abbott, Bayer, DPC Impact Clinical Labs?
By Julie McDowell
Just as Siemens’ purchase of Bayer HealthCare’s Diagnostics Division and Diagnostic Products Corporation (DPC) was finalized earlier this year, General Electric (GE) surprised the laboratory community with an announcement that it plans to acquire two diagnostic business units from Abbott Laboratories. Representing a combined investment of over $16 billion in the in vitro diagnostics (IVD) industry, the acquisition of these major companies by two international corporate giants signals the beginning of a new integrative approach to diagnostic medicine, say observers. Officials with GE and Siemens have been clear about their visions for combining their current clinical information technology (IT) and imaging capabilities with IVD technology to create comprehensive diagnostic corporations that will reshape the future of healthcare. While industry analysts speculate what these changes mean for the IVD sector, clinical laboratorians who use instruments and reagents from these major diagnostic manufacturers need to prepare for this shift in the diagnostic landscape—as lab medicine, diagnostic imaging, and clinical information technology begin to converge.
In its January announcement, GE Healthcare (Fairfield, Conn.) revealed plans to acquire two Abbott Laboratories (Abbott Park, Ill.) businesses—the core laboratory and point-of-care operations—for more than $8 billion. The acquisition, which is set to be finalized the first half of this year, does not include Abbott’s Molecular Diagnostics and Diabetes Care businesses. The unexpected announcement came only days after GE’s primary rival in the diagnostic imaging market, Siemens (Berlin and Munich, Germany), announced that the $8 billion acquisition of Bayer Diagnostics (Tarrytown, N.Y) and DPC (Los Angeles, Calif.) was finalized as of Jan. 1, 2007. These businesses were combined to form Siemens Medical Solutions Diagnostics (SMSD), which will be headquartered in Tarrytown and Los Angeles. Anthony Bihl, former President of Bayer Diagnostics, was named as SMSD’s CEO (see Sidebar, p. 6). DPC’s former President and Chief Operating Officer (COO), Sidney Aroesty, is now COO of SMSD.
While there are obvious similarities between the two deals, there are also distinctions, explained IVD industry analyst Greg Stutman, a consultant with Boston Biomedical Consultants, Inc. (BBC), based in Waltham, Mass. “With Siemens, this is an example of industry consolidation, specifically in the area of immunoassay tests, by bringing together Bayer Diagnostics and DPC,” he said. “In the case of GE, as it stands right now, this is merely a change in product portfolio ownership. Nevertheless, the sheer amount paid—greater than $15 billion—demonstrates the value that IVD plays in the healthcare chain.”
GE Healthcare’s CEO, Joe Hogan, had been looking at acquiring an IVD business for the past 5 years, explained company spokesman Brian McKaig. Just 3 years ago, the company paid $9 billion for Amersham Plc (Buckinghamshire, U.K.), whose healthcare and life science businesses manufacture diagnostic imaging agents, as well as technologies for gene and protein research, drug screening and testing, and protein separations systems for the manufacture of biopharmaceuticals. “Integrating Amersham’s businesses into GE Healthcare brought our biochemistry strengths to the table,” explained McKaig. “Without that, any partnership, acquisition, or collaboration with Abbott would not have made sense, because we really needed the biochemistry element. Now that we have the bioscience in place, we can bring the contrast agents, molecular medicine of our in vivo imaging, the point-of-care and in vitro diagnostics together to provide the broadest continuum of care from bedside testing to diagnosis to treatment.” In recent years, the company also beefed up its IT business, with the purchase of IDX Systems Corporation, a healthcare IT provider based in Burlington, Vt. in January 2006.
Abbott, GE: Committed to a Seamless Transition
Due in part to the Abbott Diagnostics acquisition, GE Healthcare is forecasting $20 billion in revenue for 2007, representing a 10% growth over last year’s revenue of more than $16 billion. But many clinical laboratorians are nervous that these aggressive growth and corporate restructuring plans will impact their customer service needs.
However, officials say that both companies are intent on providing stronger support to customers, and GE has no plans to eliminate or consolidate immunochemistry systems or platforms. Abbott officials are also working to communicate details about the changes to customers through letters, e-mails, calls, and personal visits from local sales representatives. “We’re committed to keeping our customers informed throughout the process as well, so it’s a seamless transition for them,” said Abbott spokeswoman Kelly Morrison. “There should not be disruption or impact to the customers or physicians or patients they serve over the coming weeks and months.”
While the deal is still in its infancy, officials from both companies also believe that there will be little upheaval at the management level. “Our vision for this acquisition is really a plug-in business with the point-of-care and the core laboratory businesses being an add-on to our existing structure,” said GE Healthcare spokesman Brian McKaig. Because this is a new area for GE, officials don’t envision any redundancies, and will rely on the Abbott businesses to further their strategy of improving healthcare delivery through early detection and solid informatics systems.
“We want to find that asymptomatic patient and detect disease before the onset of symptoms,” said McKaig. “Abbott fits in beautifully with our strategy and vision of early health. Not only early detection, but also allowing healthcare systems to deliver healthcare more efficiently with better transparency.”
These acquisitions allow both Siemens and GE to automatically establish themselves among the top IVD companies, with products spanning multiple markets—including automation, clinical chemistry, immunoassay, hematology, and point-of-care testing, explained BBC’s Stutman. “The purchase of Bayer Diagnostics also provides Siemens with an entry into the fast-paced molecular diagnostics market, which Siemens has highlighted as a key development area, especially in its focus on preventative medicine and the pairing of in vivo and in vitro testing,” said Stutman. “While the GE deal did not include Abbott’s molecular business, we expect GE to leverage its acquired Amersham technology in entering the molecular IVD space.”
Many IVD industry watchers believe these deals are the beginning of a more comprehensive diagnostic approach to medicine, particularly as the future becomes more focused on molecular technology. “GE and Siemens see that there’s a lot of synergy between the different diagnostic modalities, including imaging and laboratory medicine,” said Dennis Weissman, President of the clinical laboratory consulting company, Dennis Weissman & Associates, LLC, and Founder and Executive Editor of Washington G-2 Reports (New York, N.Y.). But Weissman cautioned that the industry and clinical laboratorians are likely not to feel any immediate impact, as both companies’ focus is more long term, particularly in the area of clinical data and bioinformatics, which will be integral to developing a national electronic medical record system. These companies see robust IT operations as vital to developing a national electronically linked healthcare network over the next few decades, and they want to put themselves ahead of the curve, he explained.
“In addition to combining imaging and lab diagnostics under one roof, the glue here is the clinical IT,” said Weissman. “Information technology is the critical juncture and without that piece, this diagnostic model doesn’t work. But there are many obstacles to overcome right now, as we’re seeing with electronic medical records, to ensure that this kind of system would work smoothly. Although President Bush’s national goal was to have an electronic medical record system up and running by the end of this decade, it’s going to be many years after that before the system is truly operational.”
As the IVD manufacturers combine diagnostic modalities, healthcare organizations are likely to do the same, although significant restructuring in both laboratory medicine and radiology would have to happen, explained Bruce Friedman, MD, Emeritus Professor of Pathology and former Director of Pathology Data Systems at the University of Michigan Hospitals in Ann Arbor. He also writes about the integration of radiology and laboratory medicine, in addition to laboratory IT news, on his blog, www.labsoftnews.com. “If you have this confluence in the for-profit sector, it’s going to increase the pressure for this kind of convergence in the academic and hospital settings,” he explained. “To me, it makes sense for a hospital or other healthcare facility to converge the pathology, laboratory medicine, and radiology departments to form a ‘Department of Diagnostic Medicine’. On the one hand, we have the laboratory apparatus plus the pathologist working in surgical pathology who is able to render diagnoses, and then on the other hand, there is the radiologist, who frequently delivers ‘impressions’ that need to be clinically substantiated.”
This kind of diagnostic medicine organization has already been implemented in some hospitals around the country, such as those run by the U.S. Department of Veterans Affairs (VA). Beginning in the mid-1990s, the VA hospital system was reorganized into a 22-member network called the Veterans Integrated Service Network (VISNs). As VA administrators began to analyze how the laboratory medicine and radiology departments should be organized, they realized the two entities had a lot of similarities, according to Richard Friedberg, MD, PhD, who was then the Chief of Pathology and Laboratory Medicine at the Birmingham VA Medical Center in Alabama. This facility is part of VISN 7, or the Atlanta Network, which encompasses eight VA hospitals and four university affiliates in Alabama, Georgia, and South Carolina.
In 1996, Friedberg helped to launch the Diagnostic Medicine Service Line, which combined the pathology, laboratory medicine, nuclear medicine, and radiology into one department. “It became clear to me that radiology and pathology were just different sides of diagnostic medicine,” said Friedberg, who is now Chairman of the Department of Pathology at Baystate Health and Medical Director of Baystate Reference Laboratories, both located in Springfield, Mass. “In both fields, something comes in the front door, you do something scientific to it, you have to make a clinical interpretation, and then you get a report out with results. Our radiology and laboratory personnel are working with a lot of technology and a lot of science, and imaging and diagnostic testing are really the interface between science and medicine.”
Making Medicine More Personal
Any immediate impact of the GE Healthcare and Siemens acquisitions is likely to be minimal, predict industry watchers. Leaders from DPC and Bayer have assumed top positions at Siemens, and while GE Healthcare’s acquisition plans are in the early stages, both Abbott and GE officials have promised a smooth transition for their customers (see Sidebar, p. 4). However, in the long term, the acquisitions could mean better prices for laboratories. If a hospital is purchasing imaging equipment, as well as laboratory equipment and supplies from the same company, lower rates and prices might be negotiated, said BBC’s Stutman. “The convergence of in vivo and in vitro holds great possibilities to improve the quality and lower the cost of the patient encounter, while allowing for early detection and preventative medicine,” he explained. However, educating physicians and laboratorians about this convergence will take time, Stutman added.
With both GE Healthcare and Siemens anxious to pursue the promise of molecular technology, diagnostic medicine will also likely make personalized medicine a priority. This is also what patients are demanding take precedence in healthcare, said Friedman. “Patients are getting more sophisticated and are saying to their physicians, ‘I want to know what’s going to happen to me in the near future, even if I am not symptomatic from those problems today’,” he said. “Right now, the best bet for screening for presymptomatic disease is using large panels of biomarkers, the use of which is currently controlled by clinical pathology.”
Abnormal results from such biomarker panels could then be followed up by very focused imaging, said Friedman. “We need to recognize the powerful synergy between molecular diagnostics and some of the more sophisticated aspects of medical imaging including molecular imaging.” he said.
So while the IVD industry and laboratorians watch how this convergence evolves, it’s clear that major transformations are in store for diagnostic medicine. Laboratorians and industry watchers alike will speculate on these changes, and in July at the AACC Clinical Lab Expo in San Diego, everyone will get the first glimpse of the new vision of integrated diagnostics as Siemens and GE Healthcare unveil their new identities.
Building a Diagnostics Value Chain
CLN Talks to Siemens Medical Solutions CEO,
The former President of Bayer HealthCare’s Diagnostic Division, Tony Bihl has more than 25 years of experience in the medical diagnostics, diagnostic imaging, and biotechnology businesses.
CLN: Why did Siemens decide to acquire Bayer and DPC, and thus enter or expand its footing in the diagnostic testing market? How will this integration of medical diagnostics improve healthcare delivery?
Siemens sees the future of healthcare from a holistic perspective. The company is working to deliver solutions that support early detection of disease, aid in diagnosis with in vitro and in vivo capabilities, deliver therapy, and support ongoing care—linked together with innovative IT capabilities that are expected to help manage costs while optimizing clinical workflow.
Furthermore, bringing together DPC and Bayer Diagnostics’ broad product portfolio will allow us to offer what is potentially the strongest and most flexible set of core laboratory productivity solutions in the diagnostics industry. In addition, bringing together medical imaging, laboratory diagnostics, and the clinical IT value chain under one roof puts Siemens in a unique position to leverage trendsetting technologies for an improved quality of patient care at reduced costs, as well as propelling us into a position of market leadership.
CLN: What specific product lines are included in this acquisition (urinalysis, self-testing, diabetes, hematology, etc.)?
The acquisition brings together the full portfolios of DPC and Bayer, including immunochemistry, clinical chemistry, blood gas, hematology, urine (central laboratory and point-of-care), and molecular testing (HIV, HCV, HBV), as well as laboratory automation, informatics, and consulting services.
CLN: Why is Siemens interested in moving in to the IVD industry? Could you comment on your vision of becoming an “integrated diagnostics company”?
From early detection, to therapy and care, diagnostics plays a vital role in improving patient outcomes. The acquisitions of DPC and Bayer create a comprehensive portfolio that covers the full range of immunoassay, clinical chemistry, point-of-care, and molecular testing. We have integrated Bayer’s broad offering of core laboratory diagnostics with DPC’s breadth of immunoassay capabilities to create a comprehensive offering of systems and tests to meet the needs of the central laboratory.
For example, DPC’s IMMULITE immunoassay capabilities and Bayer’s ADVIA Centaur immunodiagnostics products can be offered as stand-alone placements or integrated with ADVIA lab automation. Siemens Diagnostics already has a number of sales where customers were able to select from the combined ADVIA and IMMULITE product offerings to create custom solutions for their needs.
We also want to capitalize on opportunities in molecular medicine, where our in-vitro diagnostics portfolio and Siemens Medical Solutions molecular imaging technologies will help labs and clinicians predict the effects of medications, select and tailor treatment for individual patients, and diagnose disease at an early stage.
CLN: What role will bioinformatics and your IT strengths play in this integration?
Siemens knowledge-driven healthcare IT solutions are at the core of our vision for being a comprehensive, full-service diagnostics company. Siemens’ existing IT strengths in workflow and process optimization are helping to drive healthcare efficiency by reducing costs and increasing quality, and over time, we will bring this same approach to the laboratory. In addition, by combining the clinical data available with Siemens imaging and laboratory diagnostic solutions, as well as comprehensive patient information collected and managed by our intelligent IT systems, Siemens will look to help our laboratory customers truly make a difference in the delivery of healthcare.
CLN: How will this acquisition impact laboratories that are operating DPC or Bayer equipment?
Customers of DPC and Bayer that I’ve spoken to in recent weeks are impressed by the ease of this transition. Our sales and service professionals worldwide are working very closely with customers to ensure a seamless transition that maintains our standards for service. Moving forward, our customers can be assured that we will continue our strong focus on the lab market and will continue to grow and invest in our core laboratory, POC, and molecular products. The combination of Bayer and DPC will allow us to enhance our solutions offerings to the lab market, and continue the great traditions for customer service excellence of each company.
CLN: In terms of future plans, how does Siemens see itself in the diagnostic testing industry in the near future? Five years from now? Ten years?
Siemens is the world’s first full-service diagnostics company—bringing together a unique set of products and services that will speed the development of molecular medicine capabilities, and improve the efficiency and quality of healthcare. Siemens has anticipated the convergence of social, economic and political challenges facing the healthcare industry over the next five to ten years, and has responded by developing a comprehensive portfolio of innovative solutions, from medical imaging and healthcare IT, to management consulting and, now, laboratory diagnostics to address the trends we see emerging in the years ahead. We expect that laboratory diagnostics will play an increasingly important role in personalized healthcare, as tests are developed that will uncover molecular and genetic tests to predict and diagnosis disease and monitor treatment. The potential for the future is bright, and Siemens is uniquely positioned to be at the forefront of the discovery and delivery of solutions that will ultimately transform patient care.