Esoterix, Johnson & Johnson, Medtronic, California Hospitals, Myriad Genetics

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WEB-ACCESSED LAB TEST REPORTING is now available at Esoterix, Inc., based in Austin, Texas.

The accomplishment represents a major milestone for the lab company. It now has a common lab test reporting capability that draws data from all its specialty testing divisions. Esoterix was formed several years ago when seven specialty lab companies agreed to merge into a single corporate entity.

Esoterix used Stonebridge Technologies, Inc. to develop the software code necessary to support a common, Web-accessed platform for lab test results reporting. The system is called MedtraX. It allows lab test reports to be viewed on-line and printed. If the lab customer prefers, results can also be delivered by fax, remote printer, special courier, or regular mail. Because the product was developed within the past 12 months, it was designed to be compliant with HIPAA regulations.

Esoterix hopes to go public in the near future. Enhanced lab information management capabilities are essential to its success because its individual testing laboratories are scattered across the United States. Last year Esoterix spent $4.5 million on its information technology department. With annual revenues of $60 million, it demonstrates Esoterix’s commitment to enhanced lab information services.


ESTIMATES ARE THAT as many as 40% of American adults may have diabetes. That is a huge market and makes the disease a high profile target for many healthcare companies.

During the last two weeks, major acquisitions have roiled the market for diabetes testing. Johnson & Johnson struck first. On May 23, the venerable healthcare giant announced the $1.3 billion acquisition of the diabetes care products of Inverness Medical Technology.

Inverness already supplies Johnson &Johnson with blood sugar testing devices that J&J markets through its Lifescan division, located in Milpitas, California.

One competitor responded swiftly. Eight days later, on May 31, Medtronic Inc. disclosed that it would purchase MiniMed, Inc. and Medical Research Group, Inc. for a total of $3.7 billion.

MiniMed sells an insulin pump and glucose monitor. Both are worn on a patient’s belt and are used to treat Type I diabetes. Medical Research Group is developing an implantable insulin pump and an implantable glucose monitor. Its goal is to mimic the pancreas.

These major acquisitions reflect the increased potential of new technologies for glucose monitoring. With the incidence of diabetes growing steadily, it is a lucrative market. Expect to see further competitive moves among the companies offering diabetes testing products.


BETWEEN 1995 and 2000, 23 hospitals in California closed their doors, an average of one every three months. Predictions are for more hospital closings later this year.

The closings represented only 3.3% of the total licensed beds in California. As one would expect, 11 of the closed hospitals had less than 100 beds and only five had more than 200 beds. The largest hospital that closed was 278-bed Long Beach Community Medical Center.

These numbers come from a recently-released study by the Nicholas C. Petris Center at the University of California at Berkeley. However, there was no consensus on whether these closings were good or bad for the California health system.

Clients and regular readers of THE DARK REPORT know that hospital utilization rates in California are probably the lowest in the nation. The study’s authors concluded that most closures related to poor finances, the cost of seismic retrofitting, and the continuing shift of inpatient procedures to outpatient settings.

Officials at the Healthcare Association of Southern California (HASC) showed concern about the hospital closings. HASC believes that inpatient capacity will be reduced by 26% during the next decade. “We can’t afford to lose any more infrastructure,” observed Jim Lott, HASC’s Executive Vice President. Lott noted that hospitals in Los Angeles typically run at more than 75% capacity.

Authors of the study believe that continuing poor finances will account for many of the impending hospital failures, but seismic retrofits will con- tribute. Estimates are that California’s remaining 475 acute care hospitals will need to spend as much as $24 billion to meet new state earthquake standards.


ONE BELLWETHER COMPANY to watch in the field of genomic and proteomic testing is Myriad Genetics Inc., of Salt Lake City, Utah.

Myriad Genetics just announced that it has located a gene linked to high cholesterol levels and early-onset heart disease. It calls the gene CHD2, for coronary heart disease. However, it disclosed little data to support this claim.

One of the interesting business lines at Myriad Genetics is its BRCA1 test, used as a genetic screening test for breast cancer. Gregory Critchfield, M.D., president of Myriad Diagnostics, told lab executives at the Executive War College’s Lab CEO SUMMIT that Myriad has performed more than 10,000 genetic breast cancer screens.

Candidates for the test first undergo assessment for family factors and other factors which would indicate they are likely to be at high risk for the disease. If they meet this criteria, they are given the option to take the test.

Cost of the test is about $2,800. However, sensitivity and specificity levels of the test are at a high enough level that health insurers have not balked at reimbursing for this test, so long as the woman fits the profile of a high-risk individual.

Initial studies by payers indicate that the cost of genetic screening is at least offset by the reduced costs that result when early detection in those woman at highest risk for breast cancer allows effective medical intervention. Myriad Diagnostics says that any woman with the known genetic mutations has a 95% chance of having ovarian or breast cancer during her lifetime.

Myriad’s experience with genetic breast screening reveals two important insights. First, consumers are willing to undergo a genetic screen—if they believe it is accurate and can help them achieve early detection of their potential disease. Second, health insurers are willing to pay for expensive genetic screening tests, if the downstream cost of care and improved outcomes support such testing.


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