"Back-Door” Tactics May Transform IVD Industry

A potentially groundbreaking trend is occurring in the diagnostic industry. According to a new report, in vitro diagnostic companies are no longer limiting themselves to selling testing kits to laboratories, but they are now performing the tests and selling the service.

In vitro diagnostic (IVD) companies have established current good manufacturing practices- (cGMP)- and Clinical Laboratory Improvement Amendments- (CLIA)-registered labs by which they offer their proprietary tests to physicians, hospitals, and reference labs. A new analysis, from Kalorama Information (New York, NY, USA), a leading publisher of IVD industry market research, reported on the emergence, or rather the reemergence of these company labs, increasing a US$4.8 billion segment of the diagnostics market that is expected to grow 15% each year for the next five years. "Test services are making a comeback,” noted Shara Rosen, Kalorama Information's senior diagnostics analyst. "Many of these tests are outside the oversight of traditional FDA [U.S. Food and Drug Administration] and CE Mark test commercialization and so may seem to be coming to the market by the back door.”

According to the report, profit instead of regulation avoidance is fueling test services. One of the fastest growth rates in diagnostics is in esoteric testing. Esoteric test service revenues reached approximately $4.8 billion in 2007, representing approximately 12% of the U.S. lab service market. IVD companies with CLIA-registered company labs will compete for this growing business with reference labs and tertiary hospital labs offering test services.

However, diagnostic companies should consider their "back door” approach carefully. Kalorama analysts noted a number of factors that are important to effectively commercialize test services. A test should be unique, fulfill a significant perceived need, be reimbursed by public and private payers, improve upon an inefficient incumbent test, use a technology that falls within the realm of current medical practice, and be written up in a peer-reviewed medical journal.

"Success in this new test commercialization model may appear like serendipity--being in the right place at the right time,” Ms. Rosen said. "But it's more a question of successful product development.”

Kalorama Information supplies the latest in independent market research in the life sciences, as well as a full range of custom research services. Kalorama routinely assists the media with healthcare topics, and can provide experts to speak about markets in the life sciences industry.

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