RECOGNIZING THAT SUPPLY CHAIN ISSUES are troublesome to some of its clinical laboratory customers, one national lab company has announced it would like to help solve those issues.
In September, Quest Diagnostics issued a press release describing a novel relationship in which it will act as a supply chain partner for one of its clinical laboratory customers.
The global market is riddled with supply chain difficulties. These stem from the COVID-19 pandemic (including continued lockdowns in China), staffing shortages across the industry, and the war in Ukraine. Within that environment, at least one commercial lab company sees an opportunity to add value for its customers.
Logistics Expertise Cited
In its press release, Quest announced it will partner with Fort Myers, Florida-based Lee Health. Quest will provide supply chain skills in laboratory equipment, supplies, and procurement processes for five hospitals owned by Lee and certain outpatient centers. Quest will continue to perform reference testing for Lee.
“The ability to leverage Quest’s purchasing power for equipment and supplies, and their expertise in supply chain logistics, allows us to continue to provide high-quality care to our patients,” Lawrence Antonucci, MD, President and CEO at Lee Health, said in the press release.
As this issue of The Dark Report hit deadline, there was little independent comment about this type of arrangement and what it might mean to the clinical laboratory industry at large.
One way to look at the Lee Health/Quest Diagnostics laboratory supply chain arrangement is that it is a public lab company leveraging its buying power and passing those benefits along to one of its lab clients. The other motive behind this unusual arrangement may be less about price and more about simple access to essential lab tests, reagents, and consumables that the Lee Health laboratories are unable to acquire on their own.
Traditionally, in vitro diagnostics (IVD) companies have supplied clinical laboratory customers with analyzers, test kits, reagents, and consumables. Will IVD companies accept arrangements where they sell their products to a national laboratory company, only to see those same lab products “resold” by that national lab company to one or more of its client laboratories?
If the health system was after a lower price for the lab products involved in this arrangement—and if more of these types of reseller agreements surface—IVD companies would have a motive to protect their own profit margins by challenging these arrangements in court, or by writing language into their contracts with the nation’s larger labs to restrict or prohibit such product resales to customer labs.
Meanwhile, during Quest’s Q3 2022 earnings call, CEO James Davis noted that the company had purchased more than $2 billion in pre-analytical and analytical lab supplies. Of that amount, about 80% is price-protected by contract, so Quest has some protection against price increases from inflation. Quest may see opportunity to pass along those “supply price locks” to some of its lab clients.