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A View from the Clinical LabStephanie [email protected]
Managing DirectorWashington G-2 Reports
• What’s Now
– Lab industry background
– Molecular diagnostics (MDx) market overview
• What’s Next
– MDx market trends
– Shifting regulatory environment
– Sequencing in the clinical lab
• Growing 6.7% annually last 10 years
• Strong growth in esoteric, AP, cytology
• Aging demographics, higher utilization, personalized medicine
• Offset by recession, reduced admissions, increasing DSO, cutbacks in workplace drug testing
• G-2 estimates that the U.S. clinical laboratory testing market will grow by 8% in 2010 to reach $63.1 billion
• Continued 6%-7% annual growth of health care expenditures and with lab share remaining at 2.3% pushes lab industry revenue to an estimated $98.4 billion by 2017
Lab Industry Represents 2.3% of Total National Health Care Expenditures
Medicare Part B Lab Spending Up 11% in 2009
• 2009 lab spend = $8.049 billion
• Lab-related carrier services up 10.5% yoy to $4.712 billion
• Lab-related services, up 12.3% yoyto $3.337 billion
• CMS projects that Part B spending on lab services will reach $18.38 billion in 2019, an average annual increase of about 8.6 percent
Lab Industry Market Share by Revenue
• Hospital lab market accounts for approx. 60% of lab test revenue
• Independent labs represent 35%
• Hospital and independent labs have higher percentage of high complexity/higher reimbursed tests than POLs
Major Testing Segments
• Routine testing accounts for bulk of market, slowest growing
• Esoteric and Anatomic Pathology each account for ~18% of market, fastest growing segments
Test Mix: LabCorp
LabCorp Esoteric:CETCMBPDianonEsoterixMonogram BiosciencesNGIOTSUS LabsViromedGenzyme Genetics (pending)
Test Mix: Quest Diagnostics
• What’s Now
– Lab industry background
– Molecular diagnostics (MDx) market overview
• What’s Next
– MDx market trends
– Shifting regulatory environment
– Sequencing in the clinical lab
A Brief History of MDx
• Evolution driven by scientific innovation– PCR and sequencing– Efficiency-focused innovations
• High-throughput sequencing• Improved amplification methods
– Now: Workflow and multiplexing• Driven by efficiency, labor concerns, science
MDx Innovation: A Virtuous Circle
ResearchIdentifies molecular marker (mutation, etc.) and clinical implications
Test DevelopmentWith demand comes need to improve test effectiveness and efficiency
Molecular Diagnostics / Methods• Cytogenetics• FISH and FISH derivatives• PCR and PCR derivatives• Direct Sequence Analysis• Southern Blot Analysis• Variable Number Tandem Repeats• Mutation Scanning• Gene Expression Profiling• Proteomics• Loss of Heterozygosity• Methylation Assays
Molecular Diagnostics / Applications• Clinical diagnosis• Neonatal screening
– PKU, congenital hypothyroidism• Prenatal diagnosis
– Trisomy 21• Carrier testing
– Tay-Sachs disease, thalassemia• HLA typing
– Transplant medicine, autoimmune diseases associated with specific HLA types
Beyond Early Detection
Early Detection Prognosis TherapeuticResponse
Beyond Early Detection…and the bounds of pathology?
Early Detection Prognosis TherapeuticResponse
Imag
ing
Imaging
Source: Quest Diagnostics
Source: Clarient
Lifecycle of a Molecular Test
Reference Laboratory
Research Laboratory
Central Hospital Laboratory
Decentralized Testing
Cost
Complexity
Molecular Diagnostic Testing Market
• Washington G-2 Reports estimates that the market for molecular diagnostic testing will grow by approximately 12% per year (to $6.2 billion in 2010), compared to 5% growth for most other areas of laboratory testing
• Molecular tests are becoming the standard of care…– FDA clearance, professional association guidelines,
reimbursement
• …But are still offered by only a fraction of clinical laboratories
MDx: Market Drivers• Aging population• Hospitals working to streamline care and reduce
testing costs• Growing number and breadth of available tests• Improved reporting of complex results• New technologies that allow the necessary
quality control and data capture from tests• Advances in instrumentation• Rise of the MDx-savvy: scientist, clinician,
vendor, media, patient
Source: CDC National Ambulatory Medical Care Survey, LabCorp
0-18 18-44 45-54 55-64 65-74 75+
Patient age (years)
Relative Number of Lab Tests per Year
MDx: Market Drivers (cont’d)
• Cost-benefit analyses• Molecular pathology fellowships• Community hospitals forming anatomic
pathology divisions
MDx: Market Challenges• Reimbursement issues• Lack of standardization across platforms• Limited quality control • High expectations for accuracy (once-in-a-
lifetime genetic tests) • Inability to fully interpret test data• Clinical utility• Increasing cost-management pressures
– Lead to greater scrutiny of tests– Show me the data!
Molecular Diagnostics / Challenges• Personnel and Expertise
– Shortage of laboratory personnel estimated to reach 100,000 by 2012 (U.S. Bureau of Labor Statistics)
– Steady decline in number of entrants into medical genetics training programs in the U.S.
• Need for technologies that make MDx easier to automate and less expensive
• Smaller markets• More complex targets
Global MDx Testing By Segment
Infectious Disease
Blood Screening
Genetic Testing
Cancer
Other
G-2 Molecular Diagnostics Survey• Key test menu decision criteria:
– Send-out data– Potential clinical impact– Cost data (e.g., cost per reportable result in-
house vs. sendout)– Medicare/insurance reimbursement rate– Time and resources required to develop test– FDA status of test– Whether competitor offers test– Prospective payer mix for test– Turnaround time for test
Decision Points Stop/Go Comments
Initial considerations
Clinical application
Volume
Assay format
Financials
Equipment
Cost per patient result
Reimbursement
Resources
Expertise
Staffing
Space
Molecular Diagnostics Decision Matrix
Source: Jane Rachel / Saint Luke’s Health System
Make or Buy?: CT/NGDecision Points Stop/Go Comments
Initial considerations
Clinical application GO Slight inc sensitivity
Volume GO High
Assay format GO Various amp methods
Financials
Equipment GO PCR in house
Cost per patient result GO
Reimbursement GO
Resources
Expertise GO
Staffing GO
Space GO
Make or Buy?: CMV quantitativeDecision Points Stop/Go Comments
Initial considerations
Clinical application GO Transplants, HIV
Volume STOP Low
Assay format GO
Financials
Equipment GO PCR in house
Cost per patient result STOP
Reimbursement GO
Resources
Expertise GO
Staffing GO
Space GO
Make or Buy?: CMV quantitative (a year later)
Decision Points Stop/Go Comments
Initial considerations
Clinical application GO Transplants, HIV
Volume GO Moderate
Assay format GO
Financials
Equipment GO PCR in house
Cost per patient result STOP
Reimbursement GO
Resources
Expertise GO
Staffing GO
Space GO
Why MDx? And Why Not?• Clinical impact
– Effect on patient management
– Sensitivity, specificity, and speed (better results)
• Practice guideline changes and regulatory decisions
• Potential savings– Decreased TAT– Decreased hosp. time
• Demand– Increasingly consumer-
driven• Ease of use
– Lab in a box systems– Less invasive sample
procurement
• Expensive• Difficult to demonstrate
potential savings• Reimbursement
– Lack of designated CPT codes
– Royalty and licensure fees• Staffing/Training• Standardization
– Quality control standards• Market Education
– Clinical utility– Applications– Availability
• Increased regulatory oversight imminent
Attitudes toward expanding esoteric testing menus continue to evolve
Financial Analysis
• MDx paradigm shift: more than just another test• One sample, potential for many tests
– Versatile: sample type, size• Examples of cost savings
– Decrease hospital stay– Establish duration of therapy – Discontinue ineffective therapy– Ability to identify high-risk patients
• What’s Now
– Lab industry background
– Molecular diagnostics (MDx) market overview
• What’s Next
– MDx market trends
– Shifting regulatory environment
– Sequencing in the clinical lab
Seizing opportunities presented by healthcare reform
• Under new law, insurers must offer preventive services to consumers as part of the insurance policy at no additional out-of-pocket charge– New: smaller employers, individual health plans– Medicare: starting next year, all enrollees will be
entitled to free annual checkup, screenings– Services rated A or B by U.S. Preventive Services
Task Force (http://www.ahrq.gov/clinic/prevenix.htm)
Reform Provisions to Watch
• Requires HHS to convene a public meeting on how to determine payment levels for new lab tests under Medicare, including a discussion of payment reform for such tests
• HHS will submit a report to Congress on the meeting and include recommendations for legislative or regulatory action
• Impose a 2.9% fee on the first sale for use of Class II and III medical devices starting in 2013 based on prior year’s sales but exempt firms with revenues less than $5M
Complex Molecular Diagnostics Test Demonstration
• Mandates a two-year, $100M demo project for tests that analyze gene protein expression, topographic genotyping, or cancer chemotherapy sensitivity assays or that are billed using a HCPCS code that is other than a “not otherwise classified” code
• Also applies to assays for which there is no alternative tests with equivalent performance characteristics
• HHS is to determine appropriate payment rates for the specified tests
• HHS must report to Congress within two years after completion of the demo on the impact on access, quality, health outcomes and expenditures
Therapeutic Research Grants forLife Science Companies
• Choice between an income tax credit or cash grant up to 50% of a firm’s costs paid or incurred in 2009 and 2010
• Research must relate to a “qualifying therapeutic discovery project” (QTDP)
• Applies only to small or mid-sized companies having no more than 250 employees
• Acceptable projects must be designed to achieve any of the following three objectives:
Therapeutic Grant Program1. Treat or prevent diseases or conditions by
conducting pre-clinical activities, clinical trials, and clinical studies or carrying out research protocols, so as to gain approval of a product by the FDA or PHS
2. Develop a product, process, or technology to further the delivery or administration of therapeutics
3. Diagnose diseases or conditions related to diseases/conditions by developing molecular diagnostics to guide therapeutic decisions
Health Care Reform Impact on Laboratory Industry
• Greater testing volume with up to 32 million newly insured over the next 10 years
• More preventive and wellness testing via 2011 requirement that Medicare waive cost-sharing for preventive tests and give beneficiaries access to a comprehensive risk assessment
• New downward pressure on reimbursement rates as Medicare implements new payment provisions in 2011 and Independent Payment Advisory Board has authority to begin adjusting payment rates beginning in 2015
Increased focus on filling the data/measurement void
• What is the evidence?• How can the information be clinically applied?• Addressing managed care data needs
– Implications for coverage policies, coding utilization management/claims systems
– Encourage dynamic approach to MDx• Addressing provider data needs
– Physician education, test interpretation• Connecting tests to outcomes• Push for cost/benefit analysis• Standards for storage and presentation of
dense MDx data
Increased focus on filling the data/measurement void
Increased focus on filling the data/measurement void
“How do we create a system in which there’s continued learning and interaction based on the patient’s biology, the patient’s preferences, and the knowledge base that surrounds the test itself?”
-Gregory J. Downing, Ph.D.Director, HHS Initiative on Personalized Health Care
Molecular Diagnostic Tests, Clinical Practice, and EHRs
• Clinicians not prepared to integrate genetic information into routine clinical practice– Collection, documentation, and interpretation
of family history for risk assessment– Recommendation of risk-specific interventions– Knowing when to offer genetic tests
JAMA . 2008; 299 (11): 1320-1334.
Genomic/Genetic Data Can Inform…
• Determination of disease risk• Appropriate dosing to avoid
adverse events• Selection of effective treatment
• Broad access• Appropriate privacy and security
measures• Data storage/transmission
capabilities to connect patient, lab, clinician, researcher
…But Will Require:
American Health Information Community Personalized Health Care Workgroup
• Developing core dataset, including:– Demographic information
• Name, unique identifier, race/ethnicity, occupation– Personal health information
• History of specific disorders, relevant non-genetic lab test and pathology data, other clinical data (e.g., radiology), environmental exposure data, prior treatment for specific disorders
– Family history information• Disorders of family members, ages of condition onset
and/or death of various family members, environment exposure, relevant social data, pedigree in structure form
AHIC PHC Workgroup: What Data?
– Personal genetic/genomic data• Prior genetic/genomic laboratory test
results, prior genetic status for specific disease, full genome scan
– Family genetic/genomic information• Genetic/genomic data of family members,
pedigree in structured form where appropriate, history of cosanguinity, consent/access allowance information
Molecular Diagnostics and EHRsWhat’s Ahead
• Clinical decision support (CDS) as central part of care delivery
• Software tools that integrate multiple variables (e.g., test results, medical/medication history, patient preferences, family history)
• Genetic test reporting standards• Integrating lab assays with informatics tools
Personal Genomics Gets Serious*
• More consumer-directed services and marketing• Price of DNA sequencing falling fast (~$3,000)• Interpretation challenges• How will FDA regulate sequencing tech?
Genomics for Fun and ProfitDietrich Stephan (CSO, Navigenics): “Every human disease has a genetic component. By identifying that component and by delivering actionable information we could alter the history of the disease...”
deCODEme: “is not a clinical service to be used as the basis for making medical decisions.”
23andMe: “What we do not and will not do is provide medical advice to our customers.”
Personal Genomics / Challenges• Regulatory oversight at all levels
– State licensing issues (CA, NY)• Quality assurance in testing• Validity of medical correlations with genomic
data– Janssens, A.C. et al. American Journal of Human
Genetics 82, 593–599 (2008)– Predictive value? Clinical utility?
• Willingness of medical professionals and insurers to accept such tests
Personal Genomics / ChallengesGAO report (July 22, 2010)
One "undercover consumer" participating in a recent Government Accountability Office (GAO) investigation was told by four companies providing direct-to-consumer genetic tests that he had only an average or below-average risk for developing atrialfibrillation…
…even though he has lived for 13 years with a pacemaker to treat the condition.
Personal Genomics / Here to Stay• Science will improve as:
– Efforts like the Personal Genome Project amass huge samples
– Costs continue to drop– Knowledge of gene function and variation
grows– New sequencing technologies come on-line
• Allowing detection of rare variants and large structural information (copy-number variants)
– Early adopters explore how new information can best be used to manage health
Faster! Better! Cheaper! More!
• MDx in a post-PCR world• Broader commercialization of extant assays
– Will decrease costs• Faster turnaround time• High sensitivity at small concentrations• Broader menus on single platform• Move to develop technologies that can be easily
adapted to low-complexity settings• Point-of-care MDx?
• What’s Now
– Lab industry background
– Molecular diagnostics (MDx) market overview
• What’s Next
– MDx market trends
– Shifting regulatory environment
– Sequencing in the clinical lab
FDA Moving to Regulate Laboratory-Developed Tests
• Re-assessment of bifurcated regulatory strategy– LDTs and traditional commercially distributed IVDs
• Today, logical basis of bifurcation has faded• LDTs have evolved to be more like commercial IVDs
– Unlevel playing field• Stifle high-quality innovation?• Introduce unreasonable risk?
– Uncontrolled design/manufacture– Unsupported claims– Unreported malfunctions, failures
FDA Considerations• Assuring that LDTs are safe and
effective…• …while facilitating innovation• Avoiding duplication with CLIA• Utilizing CLIA or deemed inspectors• Avoiding disruption of testing
FDA CMS (CLIA)
Registration/Listing
Registration of establishment
Publicly available listing of marketed tests
Registration and certification of Lab
Lists of tests maintained by CMS (not currently publicly accessible)
Analytical validationPremarket review of analytical data for Class II and Class III tests
Sampling after marketing during periodic laboratory inspections
Clinical validation
Premarket review of clinical claims for Class II and Class III tests; Postmarket surveillance of clinical claims for Class I tests
Not required
Quality SystemGMPs, QS Regulations
Assessed by inspection
Laboratory Quality system
Assessed by inspection
Design ControlsRequired for Class II and Class III tests and all other devices with software
Not required.
Software not addressed by CLIA.
Adverse Event Reporting Yes No
Postmarket surveillance Yes No
Recalls Yes No
Risk-based ClassificationHow would an undetected false result affect a patient?
Serious injury or death, difficult to detect false result, high public health risk• Incorrect and harmful clinical management, invasive procedure, failure to follow up
– Companion diagnostics, cancer diagnosis, tests that direct or very strongly influence patient management of serious diease, tests for serious/fatal communicable diseases
Non-serious injury, relatively easy to detect false result, adjunctive test• Delayed test results, uncertain clinical management, continued testing, psychosocial
issues– Tests where phenotype is already known, tests where multiple findings used to
direct clinical management, tests to monitor already-detected disease
Little potential for injury, easy to detect false result, highly adjunctive test• Unlikely to directly affect clinical management, knowledge only without change in
management, evaluation without directed management– Tests that identify one among many defining characteristics of a tissue or cell,
tests that have little clinical impact, certain instruments and equipment
• What’s Now
– Lab industry background
– Molecular diagnostics (MDx) market overview
• What’s Next
– MDx market trends
– Shifting regulatory environment
– Sequencing in the clinical lab
“Direct DNA sequencing will be a routine procedure in specialized clinical laboratories within 10 years. The pace of discovery for disease-causing genes is accelerating, and a number of autosomal genes, such as major ones associated with familial breast cancer, cumulatively affect large numbers of individuals in the general population.”
Jeffrey A. Kant, M.D., Ph.D.Clinical ChemistryVol. 41, No. 10, 1995
The Personal Genome in Clinical Practice
• Rapidly changing views– “This will be a court of last resort to try and identify
causes of disease.” –Richard Lifton, 2009– “As sequencing capacity increases globally and the
data quality improves, we will move beyond the current goal of one genome per person to sequencing multiple genomes per person from sources including sperm and egg cells, blastocysts, stem cells, pre-tumor cells and cancer cells.” –J. Craig Venter, 2010
The Personal Genome in Clinical Practice
• What’s Now
– Lab industry background
– Molecular diagnostics (MDx) market overview
• What’s Next
– Top five MDx market trends
– Shifting regulatory environment
– Sequencing in the clinical lab