Transcript Sole source laboratory tests, and their impact on academic

Robert Boorstein, MD, PhD
Founder and Director
ClasGroup
Clinical Laboratory Assessment and Solutions
G2 Webinar
July 24, 2013
[email protected]
ClasGroup.com
Strategies for setting up new
molecular tests
1.
Detailed analysis of the economics of doing a new test.
Volume. Where will you get new tests from? How certain are you of your
projections? Time Frame? Magnitude?
Revenue. What is the expected revenue per test?
What are the true costs.
A.
B.
C.
1)
2)
3)
4)
Reagents?
Equipment?
Labor?
Regulatory?
Apparently small differences in assumptions make big impact on
profitability.
2.
Should you do Laboratory Developed Tests or only tests approved through a
PMA or 510 k process.
1.
How will you deal with Single source or limited source branded tests?
Economic planning for new tests:
Why laboratories fail.
 Volume
 Overestimate
 Revenue
 Overestimate
 Cost
 Underestimate
What financial tool is used to
evaluate profitability of new tests.
 Return on investment
 “A performance measure used to evaluate the efficiency
of an investment or to compare the efficiency of a
number of different investments. “ (Investopedia)
Is ROI useful for clinical labs in
evaluating whether to begin a
project.
 Return on investment
 “ROI calculations can be easily manipulated to suit the
user's purposes. “ (Investopedia)
 ROI calculations are occasionally made at the beginning
of a project.
 The validity of the assumptions and calculations is
almost never used to evaluate the project or responible
persons.
Laboratories are asking a different
question.
 Will the test be profitable compared to other
alternatives?
Biofire RSV
 Cost per test = 129
 Equipment = 45000
 Labor time per test =3
 129 reagent cost
 45,000/1500 = 30
 0.05 hours x 40/hr= 2
minutes
 Total cost = 161
 300 tests per year, 1500
tests/5 years
 If reimbursement is 350,
profit is 189.
 Reimbursement = 350
 NOT BAD
Questions to consider: Revenue
 Are the reimbursements and criteria for payment
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accurate for your jurisdiction?
Will the revenue come from new billing or as a share of
existing revenue based on outpatient pricing?
Will the payers pay for detection of organisms without
specific therapies, and which are generally self limited.
Will the payers pay for detection of organisms out of
season.
Will the payers pay for organisms rarely seen in your
region.
Questions to consider: Costs
 How many people do you have to train and what are costs
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of training.
What is the cost of verification before use?
What are controls? How often do you have to run them?
What are proficiency programs? How expensive are they?
What sort of licensure and training does your Medical
Director need.
How much do inter instrument correlations cost between
multiple Biofires and your other methodologies?
Does the test make economic
sense?
 Major issues to consider
 Test Volumes
 Test Revenue
 Test Costs
 Projections should be documented and discussed
critically.
 Use of a detailed new test planner.
An Example: New test parameters
 2400 tests per year projected
 $208 Medicare reimbursement
 $83 reagent cost
 $150,000 capital cost
 Test run 2 times per week, 1 tech per run.
Project planner for new tests,
Volume projections
Volume
Estimated volume 1 yr after go live.
Source of Volume
Replacement Test
New test, existing samples
New test, existing customers
New test, new customers
2400
100%
0%
0%
0%
Enter projected annual volume at year one
Enter source of tests
Inaccurate estimates of testing
volume are the easiest path to
failure.
 Cost per test will include amortization of startup costs,
assignment of a per test value of fixed costs, and the
average costs of labor and reagents.
 Each of these costs is volume dependent
The difficulty of getting new test volumes, and
the probability of reaching your targets, are
dependent on the source of your work.
 Replacement tests.
 Highly likely to predict volume accurately.
 Use sendout tests as free, real time market research
 New tests, existing samples.
 Minimal change in user behavior necessary.
 New tests, existing customers.
 Must convince, “induce”, users to change behavior.
 New tests, new customers.
 Hardest to achieve, hardest to predict.
Pathwork Diagnostics
 From the Dark Report, www.darkdaily.com
How much confidence does your
team have in its estimates?
Estimated probability of
meeting volume targets
%
10
50
80
100
150
Number
240
1200
1920
2400
3600
0%
0%
0%
0%
0%
Enter probability of
reaching revenue
targets
Project planner for new tests,
Revenue projections
Revenue
Medicare Reimbursement
Average Reimbursement % of Medicare
Average Reimbursement
Percent Denials
Total Annual Revenue
Revenue per test
$ 208.18
100%
$ 208
10%
$ 449,669
Enter reimbursement rate
Enter adjustment for
payer mix
Enter estimated denials percentage
$ 187
Modest changes in each
assumption lead to huge variations
of total effect!
Revenue
Medicare Reimbursement
Average Reimbursement % of Medicare
Average Reimbursement
Percent Denials
Total Annual Revenue
Revenue per test
$ 208.18
100%
$
208
0%
$ 499,632
$
208
$ 187.36
80%
$
150
10%
$ 323,762
$ 134.90
$ 168.63
65%
$
110
15%
$ 223,598
$ 93.17
It is not advisable to use best case
assumptions in modeling revenue.
Project planner for new tests, Cost
projections. Direct Costs Part 1.
Costs for Billable tests
Reagent cost per test
$
Per test
Per Reportable
83
Enter Cost per test
yes
no
$ 198,816
Total Reagent costs
FTE needed technical
0.5
Salary per FTE
$ 75,000
Annual Technical Costs
$ 37,500
Technical cost per test
$ 16
Supervisory FTE
0.2
Salary per supervisory FTE
$ 100,000
Annual supervisory costs
$ 20,000
Supervisory cost per test
$
8
FTE needed professional
0.1
Professional salary per FTE
$ 250,000
Annual Professional costs
$ 25,000
Professional cost per test
$ 10
Annual cost for billable tests
$ 281,316
Costs per test for billable tests
$ 117
Profit/Loss excluding other direct costs, indirect costs, startup costs
Enter Technical FTE
and salary
Enter supervisory FTE
and salary
Enter professional
FTE and salary
$
70
Project planner for new tests, Cost
projections. Direct Costs Part 2.
Other Annual Direct Costs
Controls (Reagents for)
Runs per week
2
Controls per run
2
Total controls per year
208
Reagent costs per year
$ 17,231
Control materials
Cost per control
$
5
Cost of control materials
$ 1,040
Cost of controls
$ 18,271
Control Costs per Reportable
$ 7.61
Proficiency tests
Samples
10
Program
$ 1,000
Proficency cost per year
$ 1,828
Proficiency costs per reportable
$ 0.76
Control + Proficiency costs per reportable
$ 8.37
Service contracts
$ 15,000
Licenses/royalties
$
Commissions
$ 22,483
Other Annual costs total
$ 57,583
Other Annual Costs per test
$
Total Direct Costs
$ 338,899
Total Direct Costs per test
$
Profit/Loss excluding indirect costs, startup costs
Enter number of runs
Enter number of
controls per run
Enter cost of controls
Enter number of samples
Enter program cost
Enter Estimate
Enter Estimate
Enter Estimate
24
141
$
46
Project planner for new tests, Cost
projections. Indirect Costs.
Indirect Costs
IT
$
1.00 $ 2,400
Transport
$
0.50 $ 1,200
Regulatory
5000
Management/Executive
1.00% $ 3,389
Facilities, Utilities, etc.
30.00% $ 101,670
Total Indirect Costs
$ 113,659
Total Indirect Costs per reportable
Profit/Loss excluding indirect costs, startup costs
Enter Estimate per test
Enter Estimate per test
Enter Estimate
Enter % of direct costs
Enter % of direct costs
$
47
$
(1)
Project planner for new tests, Cost
projections. Startup costs.
Startup costs
Personnel
Technical FTE
Personnel validation cost
Reagents
Samples
Controls
Reagent cost
Sample acquisition
Cost per sample
Total cost
Control Acquisition
Cost per sample
Total cost
Comparison testing
Cost per sample
Total cost comparison testing
Other initial costs
Equipment acquisition
IT
Marketing
Miscellaneous
Total startup costs
0.5
Enter Personnel needed
37500
50
50
Enter Number of samples
Enter Number of controls
8284
200
Enter cost
10000
10
Enter cost
500
Enter cost
0
150000
15000
5000
0
$ 226,284
Enter cost
Enter cost
Enter cost
Enter cost
Amortization of Startup costs over
course of the project
Amortization period (yrs)
Startup cost per billable test
5
Ramp up period
Rampup cost per billable test
6
Profit/Loss
Amortization period (yrs)
$ 18.86
Ramp up period (mos)
$ 3.07
$
(23)
Small changes in assumptions or
behavior can have major impact on
financial performance.
 2400 tests per year projected
 $208 Medicare reimbursement
 $83 reagent cost
 $150,000 capital cost
 Test run 2 times per week, 1 tech per run.
 What if we run the test 1 time per week?
 Reduce labor costs from 0.5 to 0.3 FTE
Result of this one change?
• $23 loss becomes $7 loss!
• Is this change clinically acceptable?
• Is this change acceptable to sales and
marketing?
Conclusion: The earlier you identify
your costs and risks, the greater the
likelihood you can meet your
revenue and profit targets.
Cost issues to identify
 Technical and Analytical validation, samples and
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reagents
Proficiency test materials and reagents
Lot to lot, instrument to instrument, and method to
method comparisons.
Training costs, including reagents
Detailed work flow assessment
IT connectivity.
Considerations in setting up new
tests
 LDT vs FDA approved-General Observations.
1) For most laboratories, the vast majority of testing will
use FDA approved protocols.
2) In general, if demand for a test is sufficient to be done
in many locations, an FDA approved test will ultimately be
developed and is likely to become the standard of care,
driving out home brew, or making them very expensive in
real terms.
3) Cost of setting up LDT’s, in terms of validations,
proficiency testing, writing of manuals, and ongoing
reagent production and validation, is likely to be
significantly higher than FDA approved tests.
When does it make sense to do
LDT’s?
LDT’s play an important role for highly specialized laboratories
that are able to have a major share of the national market.
 In such cases, the national market is often relatively small, 100
to 100,000 per year nationwide
 In such cases, the value of the test is likely to be insufficient to
justify the cost of FDA approval, and potential purchasers of
the FDA approved test would not have sufficient volume to
justify the distribution model.
 For such tests, if they are valuable and unique, FDA will have
to grandfather them even if it adds regulatory hurdles.
When does it make sense to do
LDT’s?
Laboratories may view that some combination of existing expertise, access to
Intellectual Property, existing bases of patient populations, and access to research
protocols may leverage investments in LDTs.
 In such cases, investments may be difficult to assess as they may be mixed in
multiple budgets.
 It is important to define standards of success.
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Better patient care?
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What is better patient care?
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Today? A year from now?
Accuracy?
Cost?
Turnaround time?
The justification for the investment is that the test will expand the market share of the
laboratory. What are the targets of such expansion and are resources available?
The goal of the project may ultimately be to commercialize the product, either directly
or through licensing, sale to a corporate entity, development of a spinoff. Without such
commercialization, are the investments appropriate.
Such tests may be done as part of the branding of the organization. Does doing tests
at a substantial loss really improve the brand?
When does it make sense to do
LDT’s
Many “LDT’s” in fact are tests done in labs using RUO reagent kits or using
protocols developed by other labs under license.
 If a large number of labs perform such tests, there is likely to be variation
between different versions of the same test, reducing the overall utility and
value of the test.
 If multiple RUO’s are in use, FDA approval of the test from one vendor is likely
give it a strong competitive advantage and force users of RUO’s to switch.
 Companies selling kits walk a fine line between helping set up tests and making
clinical claims.
 Laboratories using tests under license cannot hold the vendor accountable for
performance since the vendor is not technically making any performance
claims.
 There is some regulatory risk for vendors of kits, both current and future, that
could result in limited availability of reagents.
 In some cases, however, such tests may be the best alternatives on the market
for important analytes.
Make vs buy
 Laboratories should view themselves as in the clinical
information business, not the “test” business.
 If you can get clinical information cheaper, faster or
more accurately from a commercial source, one should
clearly identify reasons to not take that alternative.
[EXAMPLES OF LEVERAGE]
 Very large Laboratories, i.e, Quest or Labcorp, may
find it cheaper to manufacture their own test and run
it as an LDT, rather than use commercial reagents.
However, even they may use the threat of doing this to
drive down prices.
Is FDA approval necessary?
 If your laboratory has a highly useful and unique test,
especially if the test is highly capital intensive and
database dependent, and can be performed in one
location, FDA approval does not help and may hinder
the development and marketing of the product.
 FDA approval is expensive.
 An FDA submission may inhibit test development
Examples
 Mammaprint vs Genomic Health
 Pathworks vs Rosetta and Biotheranostics.
FDA vs LDT?
 Unique content, LDT route is successful.
 Non unique content?
 Should meet clear market need or corporate strategy.
 Investments may be wiped out overnight
Major High Value Molecular Diagnostic
tests are available from only one
vendor.
These tests in include some of the most successful
molecular products in terms of revenue
 Genetic tests
 Cancer Diagnostics
 Multigene Cancer tests, next generation
 Lipid profiles
 Non-invasive prenatal testing
General Historic Role of Regional
Laboratories, Commercial and
Academic
 Provider of High value specialized services
 Developer of new tests and technologies
 Repository of expertise.
 Provide full range of specialized services that define it as a center
of excellence.
 Roughly 100-150 laboratories in the country would fit these
criteria and they all look quite similar to each other.
Regional and local laboratories view
themselves as providing unique services in
their markets: (expertise, quality, service
complex and rare offerings)
 Key question is what is their market?
 Historically, local, restricted by geography, referral patterns.
 As a whole, if the market becomes national, not regional, then each
medical center or regional reference laboratory is no longer unique,
and is competing not only with 99 other medical centers, but with new
distribution models that threaten to be disruptive.
 Historically, if US demand for a test were about 100,000 year (50,000200,000), then most medical centers would provide this. That is 5002000 cases per year, or 2 to 8 cases per day. Examples would include
genetics, renal pathology, neuro pathology, etc.
Growth of high value high complexity specialized
tests provided as branded products by for profit
companies serving national market
 The Investments need to validate such tests are huge (multiple
thousand person plus clinical trials).
 The Investments to develop and ongoing cost to perform such
tests are in increasing.
 A key component of the value of such tests is the database, which
is large and dynamic.
 Companies protect their investment with enforcement of key
patents.
Other factors driving the growth of
national branded diagnostic tests.
 Ease of communications.
 Sample acquisition: Use of commercial express services.
 Report delivery: Via internet
 High capital investment to provide tests favors large entities with
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access to venture capital.
Compilation of databases favors the large single source provider
Ability to influence payers to develop codes and support
payment schedules.
Resources for marketing
Ability to write off failed ventures rapidly.
BRCA1/2
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Myriad Genetics performs about 100,000 tests per year at
$3000/test. Market close to saturation.
>80% of Myriad revenue from this test
Single provider in United States, Myriad Genetics, based on
IP from University of Utah, University of Pennsylvania.
Subject of litigation from AMP, ACLU
Remarkably, technology used in clinical testing is dated,
and threats to company may come from technological
advances as much as from loss of patents.
SPINAL MUSCULAR ATROPHY
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Rare genetic disorder, 1 in 10,000, gene frequency of 1 in 100,
1 in 50 carriers.
Variable presentation.
No general consensus on screening. ACOG says no, ACMG
yes. Conflicts of interest?
Testing only perfomed by Quest (Athena) and Labcorp
(Genzyme, Integrated Genetics).
No demand in public sector hospital, wide demand in
private practice setting.
Standard of practice in New York area, non medicaid.
Estimate 2-10% of pregnancies get testing, or 100,000 to
500,000 tests.
Counsyl.
Universal Genetic Test
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108 condition panel
Includes, CF, Fragile X, SMA, beta Thalessemia, Ashkenazi
Jewish Panel
$595 Cash, includes counseling
3-5 day turnaround time.
What will impact of these types of panels be on traditional
genetics laboratories?
Breast cancer testing
OncotypeDX (Genomic Health)
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First to Market.
21 gene recurrence score on paraffin fixed tissue
Significant amount of supporting data leading
to widespread acceptance for use in treat vs no
treat decision.
Limited role if any for pathologists in choosing
to order the test.
Limited role of pathology informatics for
storage and reporting of data.
Pathology may serve as gatekeeper for ACOs,
managed care.
Test may come out of pathology budget.
Mammaprint (Agendia)
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70 gene signature
Initially approved on fresh tissue.
Not realistic
FDA approved.
Delays development
Provides prognostic information, but limited claims and
use in therapeutic recommendations. Not Actionable
Much smaller market share.
Other Branded Breast Panels
Blue Print
 Breast OncPx
 Caris Target Now@
 Mammostrat
 MapQuant Dx Genomic Grade Test
 PAM50, Nanostring
 Rotterdam Signature 76-Gene Panel
 SYMPHONY Breast Cancer Profile
 Target Print
 Others
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Should you use these tests?
 Expert opinion varies.
 Hard
to find a breast expert who has not
worked with these companies.
Expert opinion
However, Dr. Schnitt agrees that even Oncotype DX has not
been proved to be superior to standard histopathologic
parameters. “I have made the argument that [published
comparisons] are like comparing the New York Yankees as a
team to Manny Ramirez as an individual,” he says. “Most
extant comparisons show that the new assay is better than
any one clinicopathologic factor. But clinicians don’t look at
tumors as one factor,” Dr. Schnitt says. “They look at them as
a constellation.” The pertinent question, he says, is how
Oncotype DX stacks up against a combination of traditional
pathologic factors, as embodied in the Nottingham
Prognostic Index, for instance.
• CAP Today, March 2007
Lessons for pathologists:
 Utility for Oncologists
 Clear actionable information, with link to therapy.
 Readily available tissue
 Easy to interpret results
 Value to insurers
 in preventing overuse of medication
 Value to patients
 Clarity of treatment recommendations
 Basis for value
 Large clinical trials
 Large dynamic database.
What is best method of distributing a
test with US demand of 50 to 100,000
instances a year?
1 company, 300-400 cases a day?
or
100 regional centers, 4 cases a day?
Other Branded Breast Panels
Blue Print
 Breast OncPx
 Caris Target Now@
 Mammostrat
 MapQuant Dx Genomic Grade Test
 PAM50, Nanostring
 Rotterdam Signature 76-Gene Panel
 SYMPHONY Breast Cancer Profile
 Target Print
 Others
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Tumors of Unknown Primary
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Multiparameter tests to determine tissue of origin of
“Cancer of Unknown Origin”
Based on database of multiple markers correlated with
known tumor types.
Examples
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Rosetta Genomics
Biotheranostics
Pathwork Diagnostics.
Rosetta Genomics
miRview® mets2 overview
 Identifies the tissue-of-origin for 42 different types of tumors
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which represent over 92% of all cancer types
Leverages proven proprietary microRNA technology to measure
the expression level of 64 microRNA biomarkers
Measurement is performed using a microarray platform1300
samples used for developing the assay
The test returns either a single tissue of origin or two such
origins
Performance characteristics based on blinded validation set:
Overall sensitivity of 85%
Overall specificity of 99.3%
Sensitivity for single answer 90%
Biotheranostics
 CancerTYPE ID® is a molecular test that uses the
differential expression of 92 genes to aid in the
determination of tumor site of originthe tissue-oforigin for 42 different types of tumors which represent
over 92% of all cancer types
 Despite advances in imaging and pathology, a
diagnosis remains uncertain or unknown in ~30% of
metastatic cases.
 Really?
Pathwork Tissue of Origin Test
 The Pathwork Tissue of Origin Test, available through the Pathwork
Diagnostics Laboratory, measures gene expression levels of 2,000 genes and
uses proprietary algorithms to compare the tumor’s gene expression pattern to
that of 15 tumor types, representing 58 morphologies and 90% of all solid
tumors. The test provides objective genomic information to help the physician
diagnose what type of cancer the patient has. An accurate diagnosis allows
oncologists to match therapy to the cancer.
 The Pathwork Tissue of Origin Test has been extensively evaluated in multiple
independent studies involving more than 1,100 patient specimens, including
large validation studies published in the Journal of Clinical Oncology and the
Journal of Molecular Diagnostics.
 A retrospective study of 111 cases from 66 academic and community oncology
practices illustrates the use of the test in management of cancer patients. Over
two thirds of the cases reviewed showed cancer management changed after the
Pathwork Tissue of Origin Test result was received. The majority of the
oncologists identified the Tissue of Origin Test results as influencing the
decision to make a change in therapy.
Tumors of Unknown Primary
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Minimal commercial success, perhaps 5000-10000 tests in
US.
Companies estimated 50,000-200,000 cases.
Little interest in Pathology community
Pathwork has gone bankrupt
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Investors raised $100 million.
Only one of three companies to get FDA approval.
Gastrointestinal Cancer:
Screening tests
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Three companes currently developing tests
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Exact Cologuard
 Epigenomics EpiproColon
 GeneNews Colon Sentry
No clear clinical utility demonstrated.
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Gastrointestinal Cancer:
Diagnostic tests
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Multiple multifactor tests on the market
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Caris
Diagnocure
Myriad Genetics
Genomic Health
No Generally accepted tests
Prostate Cancer Testing
 Biomarkers- PSA and PSA varients
 Imaging and immunochemical methods, P10
 Fluid market
 Aureon, imaging based, went bankrupt
 PCA3, 10 years in development, FDA approval, but
little demand.
Multigene cancer tests.
 Historic methods, IHC, multiple single gene tests
 Arrays
 NGS
Who is doing Next Generation
Sequencing
.
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Standards for methods and protocols are evolving. As of
November 2012, no NGS approvals for 105 laboratories with
NYS molecular pathology permits.
Multiple Platforms, rapid obsolescence Il
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Ilumina
454
Helicos
Solid
Ion Torrent
Market Leader
Limited support from Roche
Bankrupt
Limited clinical utility
Limited Market share
Issues in validation
and quality assurance
Quality control in NGS
 Recommendation: Utilize a combination of QC
materials, both intrinsic/and or spiked in, that mimic
genomic complexity and the types of mutations the
test is designed to detect.
 What is definition of mimic?
 Copy or imitate closely
 To copy as to ridicule, mock
Quality issues in Next Gen
Sequencing
• Do you need to demonstrate as part of validation and
quality control, the ability to extract, detect and identify all
mutations that you plan to report?
 Use of synthetic control materials
 Use of database materials
 Proficiency testing
Who is doing Next Generation Sequencing
for Oncology
• Corporate vs “Academic” with industry partners
 15 Companies providing services
 30-50 university based programs
 These types of investments probably beyond capability of all
but twenty to forty institutions.
 Foundation Medicine $125 million in venture capital partner with
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Sloan Kettering
New York Genome Center $115 million
MGH and Perkin Elmer
Columbia University and Intelligent Biosystems
Etc.
 Tools useful for discovery may not be best method for day to
day
Advanced Lipid profiles
 Branded panels, offered as LDT’s by companies,
in part distributed by Labcorp and Quest or
others
 Atherotech
 Liposcience
 Berkeley Heart
 Hunter Heart
Are these panels useful?
ARUP's Laboratory Test
Directory
NMR LipoProfile® Test :
2002043
Mnemonic: NMRLIPO
Ordering Recommendation: Standard fasting lipid panel (0020421) is preferred for most individuals. Not recommended for cardiovascular disease risk assessment in most individuals.
Methodology:
Quantitative Nuclear Magnetic Resonance Spectroscopy
Non invasive fetal testing.
 Detection of trisomies at 9 to 10 weeks of gestation
from maternal blood.
 Many years in development, with different
methodologies
 Major impact on prenatal care
 Patent litigation has not been resolved.
 Companies
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Sequenom
Verinata
Ariosa
Natera
Characteristics of commercial
offerings as of January 2013
Company
Trade Name
Partner
Contact #
Licensed by NYS
Available in NYS
Twins
Egg Donor
Under 35
Assignnment
List price
Maximum to patient
Abnormatlities
reported
Gender
Claimed TAT
Time of testing
Time on market
Claimed specificity
Claimed sensitivity
No call rate
Sequenom
Matern21
Ariosa
Harmony
Lab Corp
Verinata
Natera
Verifi
Panorama
Illumina/Perki formerly Gene Security Network,
n Elmer
Quest, BRLI
8552666563
6502494070
TBD
TBD
TBD
TBD
No
TBD
Yes
TBD
Will Accept
TBD
Yes
TBD
1200
tBD
495
TBD
9178367136
No
Yes
Yes
Yes
No
Yes
2300
235
8559274672
No
Yes
No
No
No
No
795
795
13,18,21, Y
Yes
7-10
10 weeks +
15 months
13,18,21
No
10
10 weeks +
8 months
13,18,21,X, Y
Yes
8-10
10 weeks+
10 months
>99.9 %
99.7
1%
100%
99%
TBD
>99.9 %
99.8
TBD
13,18,21,X, Y
Yes
TBD
9 weeks+
1 month
>99%
>99%
TBD
What are implications for regional
Pathology laboratories
 The single source, single site model can be highly and rapidly
successful in an era of easy sample distribution, and IT
connectivity. The vendor can relatively rapidly bring a product to
market, can to some extent bypass FDA constraints, and rapidly
achieve economies of scale.
 Non invasive Pregnancy test will grow from 1000 in 2011 to
200,000 to 300,000 in 2013
 Revenue, at $800 test will be $200,000,000
 FDA Approval has not been obtained.
 Medical Centers cut out of the process.
 Major impact on amniocentesis, and cytogenetics.
It is difficult for individual laboratories
to compete in these sectors.
 Ability to run large enough trials to prove clinical
validity.
 Lack of capital to invest in high throughput systems
prior to development of clinical demand.
 Ability to operate at a loss for extended period until
there is clinical acceptance and steady
reimbursements.
 IP issues
Why is it difficult for Academic centers
and smaller labs to compete by
coordination and collaboration?
 There needs to be consensus and standardization of
methodologies, including platforms, prior to the collection of
data.
 In oncology collaborations, one can send standard drugs to
multiple medical centers to recruit patients for a study. There is
much less rationale to validate diagnostic tests in multiple
centers compared with validation in central facilities.
 IP issues would complicate such standardization.
 Does the academic entrepreneurial model allow truly mimic the
corporate model with acquisitions, mergers, division closures
etc? Does it permit failure?
What about rapid adoption of high value tests
using kits/reagents manufactured by companies
for widespread use.
 Historically, laboratories have been able to provide such services using FDA
approved IVD’s, or to some extent with RUO’s and LDT’s
The model of distribution of kits, reagents and
instruments is in competition with the sole source model
 Distributing kits as RUO faces significant regulatory scrutiny. Companies
cannot make any claims about their utility or aggregate data, and each user
may perform the test in a different manner
 Bringing tests to market through the PMA 510K process can be a very time
consuming and expensive.
 The sole source LDT model has largely skirted the FDA.
 Companies which have gone for FDA approval as a marketing tool have not
had more success
– Revenue is split between the company selling the product, the laboratory
performing the test, and professional personnel involved in validating and
signing out the test. The sole source model keeps all three components of
revenue.
Sole source vs distributed model
and quality of results
• Sole source tests are standardized, and can provide
uniform interpretations and clinical implications.
• Quality of results with distributed tests can be variable, i.e,
her2neu
• Variations between labs in analytical measurements and
interpretation can affect the utility of the measurements.
• Variability in tests or in test quality can reduce the value of
“personalized” medicine and the underlying value of the
associated drugs.
What is the impact of these tests for
regional laboratories?
 Regional laboratories may not fully comprehend the
market impact of branded tests, since they do not generally
perform these tests, and in many cases do not collect
samples for the tests or report results from the tests.
 If a laboratory doesn’t do a test, or a competitor, it tends to




not be familiar with the test.
Pathologists then will not teach residents or medical students
about these tests.
Pathologists have limited involvement in ordering,
interpreting, or data management.
These tests may wind up on pathology or ACO budgets.
Pathologists as gatekeepers.

Distinguish useful and important tests from marketing hype
Threats to diagnostic laboratories
from single source tests
 In some cases, Vendors sell single tests or limited product lines
without any relationship to existing pathology distribution channels.
The laboratory’s role in the selection of tests, interpretation of tests,
and data repository is undermined
 In other cases, Vendors of branded tests may be seen as threats to the
core markets of local laboratories
 Commercial tests competes with local lab
 Commercial tests becomes wedge for selling other tests
 In a capitated environment, high cost single source tests may claim a
disproportionate share of the dollars allocated for laboratory service
In an era of cost constraints
 Laboratories need to understand the demand for and availability
of single source tests, and develop a strategy, really strategies, to
coexist with them.
 Laboratories, hospitals, and ACO’s cannot afford to subsidize
uncontrolled ordering of branded tests that they cannot do now,
or in the foreseeable future.
What can laboratories do?
 Coexistence, with little interaction.
 Tolerance, on unfavorable terms.
 Collaboration on mutually acceptable terms, including comarketing.
 Direct competition, i.e., produce or distribute products as good or better
than the corporate offerings.
 Quality is determined by the users, doctors and patients, not the lab.
 There is a premium on turnaround time, comprehensive but easy to
interpret reports, clear clinical implications, and clarity of
reimbursement
 Counter marketing.
 Develop data to prove non-utility of commercial offerings
 Work with regulators and insurers to limit growth of high cost tests of
limited utility, and claim greater share of portion of testing done by local
pathologists.
How many laboratories are doing high quality
well controlled molecular testing for clinical
purposes ?
 Laboratories with NYS Permits for Oncology,
Molecular and Cellular Tumor Markers as of 7/23/2013
 34 in NYS
 51 outside of NYS
http://www.wadsworth.org/labcert/clep/CategoryPermitLinks/PTSections/oncomctm.html
?
How many laboratories are doing NYS proficiency
testing?
Follow up.
 Using the New test
planning pool
 Survey of Branded tests.
ACCESS TO BRANDED CONTENT SURVEY
Branded Diagnostic Test Categories and Tests
Currently
offer
Do not
currently
offer
Do not
currently
offer but
Plan to
Not
familiar
with
product
Not
applicable
Non invasive prenatal test
Sequenom Matern21
Natera Panorama
Verinata Verifi
Ariosa Harmony
Breast Cancer
Myriad Genetics BRCA1
Genomic Health Oncotype DX
Agendia Mammaprint
Other
Colon Cancer
Genomic Health
Myriad Genetics
Other_______________________________
NGS Panels
Foundation Medicine
Other_______________________________
Cancer of Unknown Primary
Rosetta Genomics
Pathworks
Biotheranostics.
Other_______________________________
Cardiac
Berkeley Heart
Liposcience
Spectra Cell Laboratories
Singulex
Atherotech
Hunter Heart
Other
Laboratory Demographics
<10 Million
10-20 Million
20-50 million
50-100 million
>100 million
Hospital
Owned
Physician
Group
Practice
Private
Commercial
Publicly
traded
Commercial
Other (enter)
Management
Sales
Medical
Technical
Other (enter)
Revenue, annual, est in dollars
Ownership
My Role
Additional Comments:
Please Fax to 866-4158824 or email to [email protected]