Clinical laboratories and the in vitro diagnostics (IVD) market face a number of reimbursement and market pressures. Labs in particular are grappling with Medicare reimbursement cuts under the Protecting Access to Medicare Act (PAMA). These challenges, however, don’t appear to be scaring off investors, who see growth opportunities in next-generation sequencing (NGS), cancer testing, and companion diagnostics technologies, Kimberly Scott writes in the July issue of Clinical Laboratory News.
“While many smaller regional laboratories are experiencing stagnant revenue growth due to PAMA, large national labs are largely offsetting the cuts through acquisitions, partnerships, and new revenue sources. Publicly traded companies in the specialty lab business that perform esoteric testing, in some cases, are benefiting from the changes to the clinical laboratory fee schedule,” Scott writes. An example of this is CareDx, whose stock prices have risen by 23% in 2018 due primarily to a payment increase for its AlloMap test and the launch of its AlloSure test for kidney transplants.
Large national laboratories such as Quest and LabCorp are leveraging mergers and acquisitions, lab management agreements with hospitals, and revenue diversification to counter the PAMA cuts. LabCorp in 2018’s first quarter reported revenues of $2.8 billion, up 18% over the same period in 2018, an increase that’s largely due to acquisitions. Quest’s reported revenue of $1.88 billion represents a 3.7% increase from 2017. “Key growth drivers for the quarter were prescription drug monitoring, QuantiFERON Gold for tuberculosis testing, and noninvasive prenatal screening,” Scott reports.
Market challenges haven’t slowed down the IVD market, which is experiencing big growth spurts in molecular diagnostics, companion diagnostics, and NGS. Though a small part of this market, NGS companion diagnostics may get a boost from Medicare’s recent coverage decision that allows NGS cancer panels approved or cleared by the Food and Drug Administration to automatically receive full Medicare coverage.
Another area that may experience a breakthrough is liquid biopsies. Mainly used as a secondary approach to traditional biopsy, some test developers anticipate that liquid biopsies could eventually become a primary diagnostic tool for some diseases, including an early detector for cancer. Infectious disease testing, rapid tests for antimicrobial sensitivity, noninvasive prenatal screening, latent tuberculosis blood testing using interferon gamma release assay, and pharmacogenomic testing, represent other up-and-coming areas in diagnostics.
“Among segments experiencing solid growth are immunochemistry, point-of-care (POC) testing, and molecular diagnostics, which represent about 30%, 10%, and 8% of global sales, respectively. Areas experiencing slower growth include hematology and coagulation, as well as traditional diabetes testing, which is being affected by sensor-based technology,” Scott indicates.
Pick up July’s CLN to find out what strategies top IVD companies are using to strengthen and expand their product lines, and why this market is well-positioned to weather reimbursement pressures, regulatory hurdles, and healthcare budget constraints.