Payer Perspectives on Patient Preference Information

Expert Profile

Section 1: COVID-19 Influence

1.1. How would you describe the IVD industry pre-COVID?

I think the industry as a whole struggled a bit compared to the amount of attention and investment that we observed in pharma and other types of medical devices. The laboratories that are running COVID testing and the manufacturers and developers of tools for COVID diagnostics, were viewed as tools; a means to an end, and not necessarily as a primary focus.

They’re not typically perceived as really exciting or that necessarily generate enticing investments. I think if you compare the investment, at least in the United States, between 2019 and the first half of 2020, we’ve seen a big jump in that on the diagnostic side. Venture investment has gone up around 50% in the first six months of 2020. Unfortunately, we have had to have such an enormous public health crisis to highlight the utility of diagnostics as a whole. However, I suppose it has been a positive side effect of COVID when you look at the before and after investment figures.

What we have seen is that a lot of companies that were otherwise developing diagnostic tools – not necessarily targeted for COVID, but any number of other things – has experienced a big boom. Where these entities may have been struggling, COVID has represented a bit of a shot in the arm that has enabled them to continue their growth. This has been possible because the technologies they work on are typically somewhat agnostic to the analytes or whatever you are looking to diagnose, which has allowed them to repurpose the target for COVID, which has been great.

The same applies to commercial laboratories in the US. As you may know, healthcare is under an unusual and opaque system of payments in the US, which means that the incentives are not necessarily aligned with provision of healthcare in a rapid manner or in a way that makes good financial sense for the country or the health system as a whole. Therefore, I believe COVID has brought some additional attention to that aspect. In the short term, it’s injected quite a bit of capital into commercial laboratories because there is such a shortage of testing and we haven’t had good systems for delivery. I think everyone’s aware of a mismatch between supply and demand here.

1.2. How has COVID-19 impacted IVD processes? How has it changed from the behaviours of the world pre-COVID?

From a health and safety standpoint of the individuals performing the testing, there’s no difference from pre-COVID. This is because COVID is classified as the same level of risk as any other respiratory pathogen. The standard precautions for handling it are the same. What we have seen, though, has related to the sheer number of samples that laboratories are receiving and the pace at which they have had to respond. Indeed, almost every laboratory has had to evaluate different automation solutions.

Typically, the front end of the process is in receiving the materials. The most difficult step is in receiving the individual patient samples and then consolidating those into a format that can be tested efficiently. That continues to be a struggle for pretty much everyone, including large reference laboratories.

1.3. What diseases, other than COVID, have seen a rise in IVD given the pandemic? Have there been drops in IVD for other diseases?

A couple of things come to mind, although they don’t necessarily have much to do with the laboratory but rather related to an individual’s responses. People have been somewhat reluctant, as you can imagine, to go see a physician. Consequently, there is a concern that people are ignoring other things that are still making them sick including diabetes, heart attacks, things of that nature. In general, the laboratories have seen their orders for other types of tests go down significantly and that is a concern for the health system going forward. Of course, what laboratories are always trying to do is anticipate what they need to plan for from an operational standpoint because they’re essentially working as factories and being asked to produce a widget. In this case, the widget is a particular diagnostic test.

What’s being anticipated now – which I think is a reasonable expectation – is that we will likely see a significant increase as we enter the fall flu season for a multianalyte respiratory panel. This will mean physicians will be ordering tests not just for COVID, but for seasonal flu. Therefore, laboratories are essentially working on pan flu, pan respiratory types of diagnostics that they can offer in conjunction with COVID testing. We don’t think, at least in the US, that we’ll see an increase in this testing. We’re anticipating continued volume and potentially an increase in COVID testing through the end of 2020.

1.4 What have been the major challenges and success stories in IVD since the pandemic? Why have these occurred?

In some cases, I think the challenges have led to some rapid innovations, which I would classify as successes; however, the challenges remain. The interoperability of data and electronic medical records continues to be an issue, as well as the integration of individual laboratories with larger health systems and other types of electronic data systems. Being able to transmit information efficiently remains problematic at a lot of levels. I don’t know how that’s going to proceed. We haven’t seen a lot of people necessarily tackling that problem and it’s been by brute force.

The supply chain challenges in the laboratory side are getting incrementally better. I think the strategy we’ll see moving forward will focus on a greater diversity of types of testing. I think we will see more diversification on the supply chain side, which will be quite good of course because this should spread out the bottlenecks we currently experience on that side.

I think on the success story side we have seen that people are having more discussions now about whether or not it’s the role of the commercial laboratories to address a health crisis of this size, or whether it is something that the government itself should be tackling. For the political administration in the United States, who’s to say? But within the scientific community, these are the types of problems that public science should address because they are potentially not profitable whenever you talk about needing testing at scale. The cost of that testing has essentially a very little financial incentive to be developed. It needs to be at a dollar per unit, which may not be viable in a commercial environment.

I think another success story lies in the coordination that has grown out of this challenge. New York, for example, was a very high-profile issue for a long time and I think they have done a good job with their public health system is trying to coordinate communications. They are one of the few entities, in the state of New York, to reach out directly to laboratories and solicit weekly input about what their testing capacity is if they’re struggling with anything. The New York Department of Health directly asked laboratories if there was anything that they could do to help them overcome supply chain issues and/or to help coordinate supplies. I think that’s a great model for how communications might be handled at a higher level, i.e. not to necessarily be funneled through manufacturers and fragmented entities. The long-term results and impact are still to be determined but it was great to see that somebody recognized this as a real need. I would say that it has worked out well at least for New York.

Some of the other things I believe are also success stories are other technologies that we typically have not thought of as applying to diagnostics, and which are now being looked at in a different light. Jennifer Doudna is a good example of the mentor of CRISPR CAS-9. She decided to use one of her laboratories in Berkeley to offer very high throughput COVID testing and is now looking at ways that they might utilize portions of CRISPR CAS-9 technology as a diagnostic tool. That type of innovation almost certainly would not have happened, had it not been for COVID.

1.5 What are the main logistic and supply chain issues that the IVD industry has faced?

Lack of raw materials, outdated equipment, and sample backlogs would all fall into the category of supply chain challenges. If we just go through the process in general as the supply chain was very well publicized in the US, we note that the collection devices themselves were in short supply for a while. They’re very simple devices but we simply didn’t have enough, which meant we saw people doing 3D printing and those sorts of things to bring this to market at the scale required to meet the demand.

Beyond that, it gets back into the idea of diversification. We needed to be allowed to perform testing on types of samples other than nasopharyngeal swabs. The FDA is quite conservative in its approach to the regulation of devices, which has certainly been a struggle in the past. I think it will continue to be a struggle in response to this particular pandemic. They’ve been more responsive and more willing to work with laboratories on innovations than they have in the past and to try to approve them to do that testing, which has been good. Supply chains affect everything at every stage of the process, because as the FDA may require that one type of asset is run, then it puts pressure on the supply chain for whatever that type of asset might be.

In terms of instrumentation, laboratories when they build their business have a pretty good idea about what their market size is going to be and from where they’re going to get these samples and what the steady state is. Normally that’s somewhat accurate within maybe a factor of 2x, in the plus or minus side. Therefore, it was shocking, I think to everyone, whenever they were receiving 10x, 20x, 30x the number of samples within a week of what they normally had. It’s presented staffing problems, discussing instrumentation and supply in terms of cash flow just to be able to purchase the materials to perform the testing.

These companies don’t understand credit. What this means is that if you don’t have the cash to be able to ramp up, then it’s very hard to do so. Consequently, the pressures all came quite suddenly, resulting in everyone clamoring for the same things. I think the manufacturers were in the dream position because they were able to sell every unit of every single thing they had. Moreover, they were likely able to do so at the list price. This continues to be a bit of a problem, largely with what we call the lab-developed tests, which are the diagnostics where we have some leeway in the way that the laboratory can design and perform them.

Laboratories are getting pretty creative in trying to come up with solutions to avoid difficult supply chain situations. They are looking at other vendors, trying to validate multiple types of solutions, multiple chemistries, and multiple platforms, to ensure they have some backup if any given vendor experiences an issue. They want to be able, at a moment’s notice, to quickly shift over. Those challenges by no means are gone. On the side of FDA cleared tests, when thinking of something like Abbott’s system, where you test one patient at a time, which takes about 15 minutes, we have seen companies struggle in the same way to meet a lot of demand right away. They have had to make decisions at the C-suite level regarding where those devices will be best allocated to make the most sense from a public health standpoint as they ramped up production.

Section 2: Future of IVD Industry

2.1. What does the short-term future (3-5 years) of the IVD industry look like? Will COVID have a lasting impact on this industry?

I do think it’s going to have a lasting impact as a side effect of the amount of attention and financing that’s being put into devices by manufacturers and people developing the technologies to be able to accelerate companies. That trajectory has been universally a good thing; my company has seen that directly as well. Ours is a service-driven company, although I would that for any type of SME, whenever you have a little bit of capital injected, it can help tremendously. Those gains are sustainable for long periods and can enable you to reach places that would otherwise have been unreachable without the windfall of capital. That’s been good because we’ve had much more business and diagnostics for laboratories as a whole.

We have had a lot of discussions with different commercial laboratories about other projects that they would like to take on. They have started to revisit more expensive CapEx projects that they were simply not in a good enough position to be able to finance or we’re uncomfortable with taking on pre-COVID. Now, however, they have amassed quite a bit of money from all of this testing that’s come through providing them a cash cushion that just did not exist before. I think we are seeing some of the more complex diagnostics that I think will hopefully benefit patient care tremendously in terms of cell-free DNA, circulating tumor DNA, other types of genetic newborn diagnostics, and the development of different types of antibody testing. I think from that perspective, it has been most decidedly positive.

2.2. Will innovation in IVD increase post-COVID? If so, which areas are most likely to see investment?

I think we will continue to see a lot of innovation. However, I would stress again that I think it’s just starting. I think we’ll see some things come into the markets and some will pan out and some won’t. This is true for rapid diagnostics, sensitive diagnostics, surveillance, as well as for early detection solutions.

I think the situation is going to develop as we transition into an environment of sending kids back to school, having professional sports teams monitored on an ongoing and daily basis. Now we are just testing people that are sick but looking forward it will center around testing on an ongoing basis for surveillance and recurrence, but also considering risk-based monitoring of otherwise asymptomatic individuals or the healthy population at large.

I think it’s reasonable to expect a lot of investment interest in very low-cost diagnostic solutions that could be rapidly produced and deployed in third-world countries where challenges of distribution, temperature storage, and the number of skilled personnel continue to exist. I think everyone is also thinking about the potential of therapeutics, which I think is going to require a lot of investment as we move forward. I think we are going to see a lot of capital that was previously earmarked for interventions once a particular condition is presently being siphoned into diagnostics aimed at surveillance and prevention.

2.3 What methods will IVD companies adopt to better manage future disaster planning?

I think every business is thinking about that. It’s probably not going to have as much of an impact on diagnostics companies compared with software companies who are thinking about a real and maybe permanent transition to remote work and how they can be nimble in those sorts of situations. After all, diagnostic companies are accustomed to dealing with infectious materials in a lab environment anyway, which means that transitioning that into the development side is easier. We’ve seen that testing and production have not been adversely impacted in the same way that the business operations of other businesses have been. My company uses a contract manufacturer and they immediately notified us that everything has remained business as usual; in fact, they are ramping up production. Of course, different disasters require different responses, but in this type of global public disease, I think diagnostic-focused entities are particularly well-positioned as an industry given their normal working environments to be resilient to the kinds of challenges posed by COVID.

2.4. Post-COVID, do you expect further consolidation to occur in the IVD industry?

Potentially. That being said, I think consolidation here could be seen in a positive light. This is because people will look at companies that have performed well and have shown the ability to be able to rapidly scale or that have maintained and/or developed very good operational practices. They will continue to be the focus because they have performed so well. Of course, some players will fall away, but as I mentioned, there has been so much capital injected into these commercial labs and on the diagnostics side more generally that I think everyone, even if they were struggling before, has been afforded a bit more of a runway.

On the diagnostic development side, I do think we’re going to see some continued consolidation in terms of the acquisition, but again, it’s probably going to be in a positive sense. I don’t think that they’re going to be hostile. I think it’s going to be an opportunity for people who maybe were interested in selling IP or licensing things to be able to finally do that and take advantage of people with deep pockets.

2.5 What are the opportunities for new stakeholders?

I think the one that’s been always in the background, but we haven’t seen a lot of active presence from, would be companies like Apple and Google in particular and I think we’ll see more from them. Moreover, we will see more from other companies that have AI or predictive technologies. There’s a non-profit, I believe called the Global Viral that is focused on mathematical risk modeling for diseases typically focused on the African continent. Large insurance companies may be more interested in this sort of thing looking forward, together with broader risk modeling. I think on the IT the tech side, we’re going to see some unusual entrants not just from a pure technology standpoint, but some commercial entities who will have a true financial interest in trying to get ahead in terms of diagnostics from a modeling standpoint.