While still just a tiny part of the overall in vitro diagnostics (IVD) market, next-generation sequencing (NGS) is poised to take off over the next 5 years, making it one of the fastest growth areas in the sector, according to industry experts. Kalorama Information, which every 2 years publishes the Worldwide Market for In Vitro Diagnostic Tests, projects sales of tests performed using NGS to grow from about $250 million in 2016 to $800 million in 2021, with an annualized growth rate of 26%. All market data are based on factory sales of reagents and instruments to the end user.
Similarly, other molecular methods that not long ago belonged solely to the realm of researchers are poised to keep surprising the field with rapid penetration and proliferation in the clinic. Noninvasive prenatal testing (NIPT), which uses maternal blood to identify genetic abnormalities in the gestating fetus, also is showing exceptional growth, with an anticipated annualized growth rate of 20% domestically and even more internationally, according to healthcare analysts at Piper Jaffray investment bank. This is being driven largely by high-risk pregnancies as well as early adoption by average-risk patients. Currently, the U.S. represents about 75% of the market, but the global market is expected to pick up in the next few years.
Liquid biopsy and circulating tumor cell (CTC) tests, which also represent a small fraction of the market, will grow from about 100 million in 2016 to 300 million in 2021, with an annualized growth rate of 25%, according to Kalorama.
William Quirk, a senior research analyst with Piper Jaffray, is bullish on liquid biopsies, and he believes they could be one of the more transformative shifts in diagnostics. “Liquid biopsies’ first application was noninvasive prenatal testing, which had one of the fastest conversions in modern memory, and we expect traction to increase over the coming years in oncology and organ transplantation,” Quirk said.
Kalorama estimates that traditional core lab test segments, which make up about 65% of the market, will grow in the low single digits over the next 5 years. Clinical chemistry and hematology are expected to have an annual growth rate of just 2% during that time while non-molecular tests for infectious diseases are projected to have an annual growth rate of about 4%.
Total Market Slowing
The world market for diagnostics was estimated at $60.5 billion in 2016 and is expected to grow by about 4% annually to $72.3 billion by 2021, according to Bruce Carlson, publisher of the Kalorama report. This is slower growth than in the previous decade, when the IVD market grew 5%–6% per year, he noted. Kalorama attributes this slowdown in part to an essentially flat IVD market in Europe and to Medicare’s price cutting in the United States. These factors are partially offset by strong sales growth in China and India, as well as other emerging markets, such as Brazil, Turkey, Korea, Saudi Arabia, and Mexico.
Also slowing sales is a decrease in Pap smears performed in the U.S. and Europe, a decrease in reimbursement for anatomic pathology tests in the U.S., and migration of previously low volume tests such as D-dimer, preeclampsia, procalcitonin, vitamin D, and HbA1c to integrated analyzers, which decreases the cost per test, Carlson noted.
Nuances in the Molecular Market
While it represents one of the fastest growing segments in the diagnostic market, overall molecular diagnostics has not achieved the lofty 20% growth rate once projected by industry observers. On average, clinical molecular diagnostics is growing at about 8%–9% per year, said Mark Hughes, a vice president with Enterprise Analysis Corporation (EAC), a strategic consulting firm specializing in diagnostics. “It’s hard to grow a $5 billion market by 20% each year,” he commented.
Part of the discrepancy between past projections and the current reality has to do with expansion of lab-developed tests (LDTs), which has cramped growth in the commercialization of test kits and reagents, Kalorama’s Carlson said. Another major barrier is reimbursement. For many molecular diagnostic tests, getting paid remains challenging, with payers demanding compelling evidence of analytical and clinical validity before approving coverage.
Quirk, however, believes the challenging reimbursement landscape has done little to slow the pace of innovation in advanced diagnostics, although he thinks it may be affecting commercialization efforts as companies look to alternative business models, such as directly charging institutions.
As payers continue to move away from fee-for-service toward value-based care, IVD companies have a higher bar to clear in efforts to bring new molecular diagnostic tests to market, notes Hughes. “Manufacturers will have to demonstrate that their products improve patient outcomes or save money somewhere else in the healthcare system,” he said. “Vendors will have to provide additional support for their submissions for new products or their requests for reimbursement.”
Among the large IVD companies, Cepheid and Roche are showing solid growth in clinical molecular diagnostics, added Gerard Conti, vice president of strategic planning for EAC. Roche is the largest player in the market, with about a 21% market share, according to EAC. Hologic, Cepheid, Qiagen, and Abbott are virtually tied for second place, each with a 10%–11% share of the market.
Regulation Versus Innovation
Innovation often outpaces regulation in the IVD market, especially when it comes to some of the more esoteric, high-growth areas like NGS and NIPT, according to experts. But in some cases, regulation actually threatens to hinder development of new tests. For example, some groups—including AACC—have expressed concern that the Food and Drug Administration’s (FDA) recent draft guidance on NGS tests used for suspected germline diseases could hinder NGS testing. The draft guidance, issued in July, provides recommendations for designing, developing, and validating NGS-based tests for germline diseases and discusses the use of FDA-recognized standards for regulatory oversight of these tests. However, AACC noted that a number of professional organizations and state entities already offer guidance on how to ensure quality and accuracy of NGS tests.
AACC also has a number of other concerns about the proposed guidance, asserting FDA’s proposed accuracy requirements are unrealistic due to differing NGS technology metrics and pipelines and that FDA’s proposed precision requirements, while achievable by medical device manufacturers, would be cost-prohibitive for academic medical centers (AACC’s comment letter is available at www.myadlm.org/health-and-science-policy).
Worries that innovation would be hampered by proposed FDA guidance on LDTs have now been put on the back burner with the agency’s announcement that it would delay the draft guidance. Given the president-elect’s pro-business and anti-regulatory stance, many expect it will never be finalized.
Even the European Union seems to be getting tougher on IVD regulation. While it historically has been easier to win approval in Europe than from FDA in the United States, that is changing, explained Michelle Keane, a senior consultant with EAC. “It’s now becoming more difficult to get the CE mark in Europe,” she said. “We expect that it will take longer to get products on the market in Europe, which has the potential to hamper development of new products, especially for smaller companies.”
But experts agree that even with all the challenges facing the diagnostics industry, the IVD market will continue to grow—if not rapidly then at least steadily—in the coming years, driven by an aging worldwide population, increased demand from emerging markets, and global initiatives targeting specific health problems, such as cancer and infectious diseases.
“There are a lot of promising developments,” Carlson noted. “From new biomarkers to new companion diagnostics to the Cancer Moonshot initiative, there are many opportunities for growth in the IVD industry.”
Kimberly Scott is a freelance writer who lives in Lewes, Delaware. +Email: [email protected]