By Nicholas Borgert
Expanded tests, new approaches to marketing, and more consolidation increased revenues in many US clinical reference laboratories during the past fiscal year. Here, several reference laboratories and suppliers provide a look back at 2003 and a glimpse into the future.
Focus Technologies
Focus Technologies, long a specialist in infectious disease tests and services, grew significantly in 2003. Much of the increase resulted from higher demand for its lab services from the industry’s hospital segment. Another reason: greater global use of Focus West Nile virus and HerpeSelect tests and more demand from pharmaceutical companies for anti-infective services.
Mary Kay Mosch, Focus’s vice president of marketing, says double-digit revenue growth in 2003 helped her company achieve its revenue goal of about $60 million. More double-digit growth is expected this year, she says.
In recent months, Focus has enlarged its reference laboratory and diagnostic product sales organization to enhance service to the hospital and commercial laboratory market.
“Our customers are very interested in doing business with us because of our innovative product and service menu and because of the personal approach we deliver every day,” Mosch says.
The MediTape system is used by thousands of busy medical professionals nationwide for every kind of documentation.
Focus was the first to offer human metapneumovirus testing and the first commercial lab to test for SARS. It is the also the only company with both IgM and IgG FDA-cleared products on the market for West Nile virus. According to Mosch, the company’s pipeline is full of new and innovative products and services for 2004 and beyond.
“We’re seeing growth from every sector of our business and we have very positive expectations for the future,” Mosch says.
Wako Diagnostics
Wako Diagnostics, founded in Japan, has been involved in the in vitro diagnostic (IVD) testing market for about 75 years. Its US affiliate, Wako Diagnostics, in Richmond, Va, has been a supplier of diagnostic products to reference and specialty laboratories since 1984, says sales manager Mike Ciucci.
Wako Diagnostics has supplied reference and specialty laboratories since 1984.
Wako found 2003 challenging, Ciucci says. His department worked hard to achieve a slight increase in sales compared to the year before. The Wako line includes both general chemistry reagents as well as esoteric testing not found on all platforms.
“We utilize the strength of our parent company in Osaka, Japan to develop some of the best and unique assays on the market today,” Ciucci says. “Our products are used primarily in the reference lab market and in research settings.”
The Wako portfolio includes the Autokit CH50, an automated total complement immunoassay, an Lp(a) lipoprotein test, direct HDL and direct LDL tests and the new Autokit Micro Albumin that requires much less antibody. “We also offer many other assays that are used in both the clinical market and the research market for phospholipids, CETP, free fatty acids, and CRP,” Ciucci says.
Creating new and better test products remains the formula for success in growing IVD sector sales. “In today’s market, it is crucial to develop new and innovative products the instrument manufacturers do not currently provide,” says Ciucci.
Because the contracts instituted by the instrument manufacturers are becoming more and more binding, reagent suppliers must develop new products that can be added to the current testing menu, Ciucci says.
Ciucci believes diagnostic instrument manufacturers are making their instrumentation more difficult for customers to run user-defined assays. In addition, laboratories continue to consolidate and move to standardize their testing platforms. Since its target customers are being reduced, Wako is focusing on maximizing sales to these prospects.
Ciucci says Wako sees microchip technology and demand for more point-of-care tests as promising areas his company will emphasize over the short term.
Data Management Inc
Another supplier to reference and specialty labs, Data Management Inc (DMI) produces two-part color-coded labels called MediTape Reports. The stick-on labels attach to patient charts and permanent records. They’re formatted to meet standards adopted by CLIA, COLA, JCAHO, state agencies, and many quality assurance programs. The label system is used for urinalysis, hematology, and chemistry in the lab, and sample meds, prescriptions, and telephone messages in the front office.
DMI revenues jumped 25% the last fiscal year as the MediTape line continued to attract users and the company offered new products, says Andy Jones, DMI vice president of marketing.
Self-adhesive MediTape Reports update charts easily and permanently.
The company’s biggest challenge was communicating how easily MediTape Reports can be integrated by new customers, Jones says. “Though typically a considered purchase, MediTape requires a much less drastic change to a facility’s operation than assumed,” Jones says. Meeting the computerization needs of customers and complying with changing regulations are among other challenges DMI routinely faces.
During the year, Jones said, his company devoted substantial resources to its new product development group to cover staffing and advertising support for product launches. DMI’s biggest project is the creation of eMediTape, a digital version of the company’s label system. According to Jones, eMediTape has been in development for 9 months and is now in beta testing. Formal launch of the product is expected this spring.
“We believe that eMediTape will meet the patient record keeping needs of physician offices by delivering the best of both worlds,” Jones says. “Like MediTape Reports, eMediTape produces a self-adhesive label, combining the ease, simplicity, and familiarity of paper charts with the power of digital information. The product is positioned to address the convergence of paper and technology, not the replacement of paper charts.”
Specialty Laboratories
For Santa Monica, Calif-based Specialty Laboratories, business growth has proven to be a significant challenge since 2001. First, the company settled a regulatory issue with the state in 2002 that cost it revenues. Then in 2003, Specialty lost its largest customer when Unilab took its esoteric testing business to its new partner, Quest Diagnostics. The Unilab departure helped reduce Specialty’s testing volume 13%, from 2.9 million the year before to 2.5 million in 2003.
There are encouraging signs, however. Company officials point out that adjusting for the loss of the Unilab business, Specialty’s revenues grew about 11% from fourth-quarter 2002 to fourth-quarter 2003. Fourth-quarter 2003 yielded a 2% growth in ordered tests. That, company officials believe, is a harbinger for a return to profitability and modest gains this year. Specialty expects revenues in the $130 million to $136 million range for 2004.
Greg Mann, the company’s director of investor relations, says the pending move to new facilities will yield major benefits for clients. The new 200,000-square-foot headquarters facility in Valencia, Calif—twice the size of the Santa Monica facility—will consolidate the company’s multiple divisions in one building and improve efficiency.
The company also plans continued investments in its core strengths of R&D and IT. Mann anticipates more consolidations and mergers, especially among midsize labs, such as Specialty, seeking to acquire small, private operations. The company is examining opportunities to complement its organic growth by partnerships, licensing and acquisition.
“Our active R&D program will keep us on the leading edge,” Mann says. “As an industry, we need to continue our concerted effort to educate payors of the exceptional value and contributions that lab testing plays in patient care.”
Laboratory Corp of America
Revenues at LabCorp surpassed $2.9 billion for 2003, up more than 17% compared to 2002. Based on requests from doctors, testing volume at LabCorp increased nearly 12% for the year. Price per requisition also increased 5.5% from a year earlier.
Portable MediTape Reports are ideal for documenting patient information at the point of care.
Company officials credit acquisition of Dynacare and Dianon for enhancing its scientific capabilities and geographic reach. Continued growth of new tests also played an important role, says Pam Sherry, LabCorp senior vice president, Investor Relations.
In August 2003, LabCorp introduced its PreGen-Plus colon cancer screening test. The noninvasive test makes use of DNA technology and is geared to patients aged 50 years and older who are at average risk of developing colorectal cancer. Detecting colorectal cancer at an early stage could save as many as 30,000 lives a year, statistics show.
This year, LabCorp will introduce the OvaCheck blood-screening test for ovarian cancer. This test is initially targeted to patients in the early stages of ovarian cancer when the disease is most treatable, says Sherry. Also, LabCorp is planning a 2004 launch for the first noninvasive blood test for evaluating fibrosis of the liver called FibroSure. The new test can be used as an alternative to painful liver biopsy, and will be of special interest to infectious disease physicians in the diagnosis of hepatitis C.
“Our focus continues to be on genomic and esoteric testing and the introduction of new tests for the detection of cancer,” Sherry says.
Quest Diagnostics
At Quest Diagnostics, the largest US provider of diagnostic tests, 2003 was a strong year. Revenues for the year increased to $4.7 billion—a 15.3% increase over a year earlier. Playing a prominent role in the increase was Quest’s completion of its purchase of Unilab and the addition of its esoteric testing business.
Gary Samuels, vice president of external communications, says Quest has continued efforts to enhance and encourage more patient access to common diagnostic tests. After opening QuesTest centers in 20 CVS Drug stores around the United States, Quest expanded the test centers into some of its own patient service centers. In mid-2003, the test centers opened in Connecticut Stop & Shop supermarkets. Still, the centers represent only a small portion of the company’s business.
Most of Quest’s added revenues resulted from acquisitions, but significant revenue came from shifts in testing, as physicians ordered more higher value, higher complexity tests, such as gene-based testing. Revenue from gene-based testing increased more than 20% to over $500 million in 2003. The fastest-growing tests: those for cystic fibrosis, human papillomavirus (HPV) DNA, amplified chlamydia, and gonorrhea.
While more industry consolidation is ahead, the reality is that there are fewer large acquisition candidates now compared to years past, Samuels says. “Acquisitions will always be a component of growth but the emphasis is certainly shifting to growth the old-fashioned way—differentiating ourselves in the marketplace through the quality of service we provide and the quality of our medical science and technology,” he says.
Quest sees its niche as the ability to quickly bring new and important tests to the market and offer health care information technology solutions that customers demand.
Last fall, Quest began performing the new InSure colorectal cancer screening test. Besides the test’s advantages compared to earlier fecal occult blood tests, InSure is easier to use and much less invasive, according to Samuels. There are no dietary restrictions for the test and no handling of fecal matter. Instead a brush-based collection system in which patients swirl the brush around toilet water. “Doctors like it and the American Cancer Society thinks it is more patient friendly and will drive up adherence, which will save lives,” says Samuels.
Doctors continue to head online to improve patient care. In response, Quest invested heavily to develop health care information technology solutions that let doctors spend less time on administrative tasks and more time with patients. In fact, the rate of orders and results delivered online through Quest doubled in the past year.
“By the end of the year we were receiving 25% of all test orders via the Internet and distributing 35% of all test results to doctors via our secure Web site,” Samuels says.
Next up is a Quest proprietary physician portal that enables doctors to prescribe pharmaceuticals and order lab tests, get results, and share clinical information with other doctors in a HIPAA-compliant way.
Nicholas Borgert is a contributing writer for Clinical Lab Products.
