Lab Industry Briefs

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MONOLAYER PAP SMEAR TEST

In travels to laboratories around the United States, THE DARK REPORT is getting interesting, but anecdotal, feedback about Cytyc Corp.’s ThinPrep® monolayer Pap smear test. Pathologists and laboratory directors are noticing two perceived benefits to using the ThinPrep process. One, their cytologists are able to report a higher percentage of Pap smears as positive or negative, without qualifi- cation. Two, because the cytologists are more definitive with their diagnosis of the Pap smear, fewer slides go to the pathologist for review.

The added cost of the ThinPrep Pap smear is an issue with laboratories. Despite that fact, laboratories using ThinPrep seem genuinely enthusiastic about the perceived benefits they are discovering. A new clinical study of the ThinPrep process was just published in the August issue of Obstetrics & Gynecology. It involved more than 7,000 patients. Lead author was Kenneth R. Lee, M.D. of Brigham & Women’s Hospital, Harvard Medical School. Laboratory executives considering automated Pap smear technology will find some interesting conclusions in this new study.

NEW SHOTS FIRED IN PAP SMEAR WARS

Clients of THE DARK REPORT are aware that numerous lawsuits now plague the first three automated cytology companies to begin selling their products. Competition has already moved from the laboratory marketplace into the courtroom. Now it appears that the Food and Drug Administration’s regulatory process will be used as a competitive tool. According to Cytyc president and CEO Patrick Sullivan, the FDA recently received petitions requesting administrative review of the pre-market approval application for Cytyc’s ThinPrep system. Some of the petitions were filed by, or at the request of, Cytyc’s competitors. Cytyc says that one of the petitions was filed by Carl Genberg, a director of Neuromedical Systems, Inc. and president of Cytology West, Inc.

CALIFORNIA BRACES FOR NEW LAWS AFFECTING MANAGED CARE

Laboratory executives should carefully watch developments in California over the next year. As the consequences of an advanced managed care environment become clear to consumers, legislators and providers, changes and reforms are expected.

Look for the state legislature to be the main battleground. Throughout the United States, over 1,000 managed care bills have been introduced since January 1997. In California, the senate has 50 healthcare bills to consider which were passed by the assembly. Meanwhile, the assembly has 30 healthcare bills to consider which passed the senate.

Because big dollars are involved, the fights will be intense. On one side, a coalition of labor unions, the American Association of Retired Persons and Consumers Union seek an 11-point “patient bill of rights.” On the other side, the California Medical Association is backing laws to make it more difficult for HMOs to drop physicians from their networks. Opposing all of this is the California Association of Health Plans, the managed care industry trade group.

The environment for clinical laboratories in California is already financially stressful. Managed care “reforms” passed by the legislature during the next 12 to 18 months could make it more difficult for laboratories to provide services and stay in business.

LABCORP TO USE AFFYMETRIX’S HIV ASSAY

One of the more interesting diagnostic technology companies is Affymetrix, Inc. of California. Affymetrix is striving to develop a variety of diagnostic testing chips which would perform laboratory tests in micro wells using minute quantities of reagents and specimens.

Although this technology is still under research, the company offers a number of diagnostic assays. Laboratory Corporation of America announced on August 5 that it will use Affymetrix’s GeneChip® DNA probe arrays and PCR (polymerase chain reaction) based assays for HIV genotyping.

Although not a major agreement in terms of money or test volume, it is a way for LabCorp to develop a working relationship with Affymetrix. Should Affymetrix eventually succeed in developing its “micro testing chip” to be a high- quality, low-cost product, then LabCorp may have positioned itself to participate in clinical trials. It might also be the first to offer the resulting technology on a commercial basis. THE DARK REPORT expects to see all three of the national laboratories develop such relationships with diagnostic research companies.

LABONE, INC. POSTS STRONG EARNINGS

LabOne, Inc. performed well during the second quarter of 1997. The Lenexa, Kansas-based laboratory reported growth in each market segment of diagnostic testing it offers. Life insurance testing volume increased 24% over the previous year. Life insurance companies lowered the threshold for testing because of the reduced cost of using Epitope’s OraSure® HIV saliva test. Clinical testing increased 124%. Substance abuse testing increased 123%.

Of particular interest is LabOne’s LabCard® program. Covered lives now exceed 1.3 million. Contracts covering another 450,000 lives await implementation. After three years of marketing, this program is beginning to take off.

LabOne is a good example of an independent laboratory which diversified its primary revenue base (life insurance testing) by developing specialized testing products for specific markets. Total revenues for second quarter increased from $14.8 million to $20.3 million over the same quarter last year. That growth rate is unmatched by most public laboratories during the same time period.

LABORATORY SPECIALISTS OF AMERICA GROWING

Another speciality laboratory which is performing well is Laboratory Specialists of America. This laboratory offers drugs of abuse testing and did several modest acquisitions during the last two years. Headquartered in Oklahoma City, the laboratory reported revenue growth of 42%, to $3.4 million during the first six months of this year. Net income increased 82%, to $622,000 in the same period.

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