CEO SUMMARY: One by one, new business models for clinical laboratory testing are popping up. Each is a response to healthcare’s rapid evolution, the ongoing decline in lab test reimbursement, and the growing role for molecular diagnostics and genetic testing. In Cambridge, Massachusetts, Claritas Genomics, formerly the molecular lab at Boston Children’s Hospital, is one such example. It seeks to leverage its next-generation gene sequencing expertise in multiple ways.
NEW BUSINESS MODELS in clinical laboratory testing are starting to emerge. These are lab companies organized to offer a different menu of laboratory testing services.
One such company is Claritas Genomics of Cambridge, Massachusetts. For 15 years, it operated as the Genetic Diagnostic Lab at 396-bed Boston Children’s Hospital (BCH).
“As one of the hospital’s CLIA-certified laboratories, it provided the advanced molecular diagnostic testing services used by the hospital,” stated Patrice M. Milos, Ph.D., CEO of Claritas Genomics. “However, BCH was challenged to provide the capital and resources needed for the molecular lab to grow.
“This was due to the rapid pace of genetic discovery, ongoing advances in gene sequencing technologies, and the difficult financial environment in healthcare,” recalled Milos. “Thus, to make it easier for the lab to grow, the hospital spun out the lab and created Claritas Genomics in February 2013.”
As an independent lab company, Claritas moved quickly to seize opportunities created by healthcare’s evolution toward personalized medicine and integrated clinical care. One of its first successes was to win a role in the Million Veteran Program (MVP).
Million Veterans’ Project
In October 2013, Claritas Genomics disclosed that it would participate in a $9 million deal with the U.S. Department of Veterans Affairs (VA). Claritas is doing exome sequencing of samples from veterans, including those from the Million Veteran Program. This project is one of the largest sequencing initiatives ever undertaken in the United States.
“Because of this partnership with the VA, Claritas is performing exome sequencing for research use at a very large scale,” commented Milos. “This project supports the growth of our infrastructure and will enable us to scale up on the clinical side as well.”
The point here is that Claritas benefits in multiple ways from this relationship with the VA. First, it gains cash flow. Second, it can use this cash to acquire the gene sequencing system and staff expertise in next-generation sequencing technologies. Third, it is developing the informatics infrastructure needed to collect, store, and analyze large volumes of genetic data.
Just last month, Claritas entered into another non-traditional business relation- ship. This time it involved one of the nation’s largest health informatics companies. On December 5, 2013, Claritas and Cerner Corporation of Kansas City, Missouri, jointly announced their partnership.
The two companies said they seek to advance personalized medicine by building tools and connectivity systems to integrate next-generation sequence (NGS)-based diagnostic testing into health care practice more efficiently than health systems can do now. Specifically, the two companies said they would collaborate to develop a system “for molecular diagnostics that is tailored to NGS workflows, which are more complex and generate much more data than traditional molecular diagnostic tests.”
Investment for Growth
Among the keys to this partnership are the following:
- Cerner invested in Claritas and took an ownership interest in the lab firm.
- Clay Patterson, head of Cerner Ventures, joined Claritas’ board of directors.
- Claritas will implement the Cerner Millennium Helix system, which is software for managing specimen and workflow tracking in labs.
- The two companies will jointly develop a laboratory information management system (LIMS) specifically for clinical labs primarily focused on next-generation sequencing.
- Claritas will join Cerner’s Reference Lab Network, an electronic hub that enables lab test orders and results reporting among participating hospitals and physicians.
“In terms of this collaboration, one barrier to the use of genomics in medicine is the challenge of integrating the complex information derived from large-scale genomic measurements into a patient’s medical record and clinical practice,” explained Milos. “Our mutual goal is to develop the informatics tools that support clinical use of genetic data.”
Business Strategy
For its part, Claritas has another non-traditional business strategy. “Our lab company is working with pediatric institutions specifically to advance clinical knowledge in a number of ways,” she said. “For example, we are facilitating a research network by connecting patients with experts who can provide care and by licensing assays from the hospitals where the discoveries that lead to diagnostic tests are made.
“Also, in this business model, we can receive investment from outside sources such as we have from two of our Series A investors, Life Technologies and Cerner,” added Milos. “Claritas also has additional partnerships from other hospitals. These include Cincinnati Children’s Hospital, which is another Series A investor.
“All of these investments allow us to address the testing needs at BCH and at other hospitals as well,” emphasized Milos. “In this way, we see Claritas as a relevant laboratory business model for other hospitals to join, as Cincinnati Children’s has done. It is a way that the pediatric community can work together to address the complexities of genomics in medicine, instead of spending precious resources dupliNcating both effort and infrastructure.”
Leveraging Core Competency
What distinguishes the business strategy at Claritas is how it is leveraging its core competencies to serve a network of children’s hospitals and other pediatric organizations in a value-based approach.
