IVDT_In Vitro Diagnostics Technology

IVD Technology, Fall 2013

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OUTSOURCING Optimizing IVD Disposables Manufacturing An informed outsourcing strategy can help IVD manufacturers adapt to increasing worldwide pressure on product margins. BY DONNA HOCHBERG, KATE MCLAUGHLIN, AND JEREMIAH O'CONNOR n vitro diagnostics (IVD) companies face a growing array of global pressures. Many clinical lab customers currently are challenged to perform a higher volume of tests with fat or declining budgets, leading to difculties in managing throughput, staf time, and expenses (Figure 1). Austerity measures in the European Union have led to dramatic reductions in overall public health expenditure, late payments, and reimbursement cuts for specifc tests such as blood glucose and HbA1c. Together, these measures have resulted in a slowing of growth for the European IVD market, with 2.7% lower revenues for the frst three quarters of 2012 compared with 2011; some countries, such as Greece, Poland, and Portugal are experiencing double-digit drops in IVD revenues. In the United States, acrossthe-board cuts to Medicare (Figure 2) are creating an environment in which the most efcient labs thrive while smaller labs struggle to stay afoat. Tis has driven ongoing consolidation between hospital-based labs, as seen by recent large acquisitions among US reference labs and European mergers in response to recent government mandates to meet new performance standards. Tese trends provide the largest players with greater purchasing power, further driving down diagnostics pricing. In addition to these pressures on key clinical customers, diagnostics companies are faced with new chal- I Top challenges facing clinical labs Health Advances US survey Shortage of qualifed staff Productivity and work load Budget constraints Challenge Declining reimbursement Controlling costs IT and connectivity issues Managing test volume Keeping pace with new technologies Regulatory issues Turn-around time 0 20 40 60 80 100 120 140 Survey responses Figure 1. Clinical labs are facing a shortage of qualifed staff. lenges to demonstrate the cost efectiveness and clinical utility of their products to gain reimbursement. Both the United Kingdom and Germany have established processes to review the clinical merit of diagnostics and incorporate this assessment in a reimbursement decision. Prior to review of companion diagnostics by the UK National Institute for Health and Care Excellence (NICE) starting in 2010, these tests were paid for by the pharmaceutical sponsors rather than the NHS. Following NICE evaluation and determination of clinical merit, tests for Her2, KRAS, and EGFR as companion diagnostics for oncology drugs are now reimbursed by the NHS. In other EU markets, local decisions on coverage and reimburse- ment rates for diagnostics make it difcult for companies to capture the value of tests even with a signifcant clinical impact. Both CMS and private payers in the United States are taking a closer look at the clinical utility and cost of diagnostic tests. West coast Medicare carrier Palmetto has taken the lead on evaluating molecular IVDs, and has established a process to review coverage and determine reimbursement for all molecular diagnostics using evidence-based assessments. CMS and other private payers are also incorporating clinical data in the coverage process. Payers in leading diagnostics markets essentially are asking companies to invest more in product development and clinical evidence to sup- 28 IVD TEC HNOL O G Y | FA L L 2013 magenta cyan yellow black ES320937_IV1309_028.pgs 09.19.2013 05:44 UBM

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