Oncology Diagnostics Attracts Big Money

MORE SURPRISING DEVELOPMENTS for the anatomic pathology profession during the past three weeks! The impending $215 million acquisition of IMPATH, Inc. by Genzyme Corporation, announced on March 1, has the potential to send new ripples across the national market for oncology testing.

What makes the Genzyme–IMPATH combination particularly fascinating was the $1 billion Genzyme paid, just days before the IMPATH deal was disclosed, to acquire Ilex Oncology, Inc. As implied by its name, Ilex is developing therapeutic drugs for cancer. Its biggest product is CAMPATH® , approved for use in the United States for the treatment of B-cell chronic lymphocytic leukemia (B-CLL). It happens that leukemia and lymphoma make up a substantial portion of IMPATH’s mix of cancer cases.

Therein lies the intrigue. Is Genzyme preparing to attack the oncology testing market with a strategy of offering clinicians both diagnostic testing for cancer and the therapeutic drugs appropriate for treating cancer? Our editor says yes. He also points out that this is the type of competitive innovation which has the potential to change the needs and expectations of clinicians. As this happens, local pathology groups which compete for outreach specimens will find themselves at a competitive disadvantage, particularly if they remain fixed in old business habits.

For my part, I see Genzyme’s acquisition of IMPATH and Ilex as ominous portents. During the past five years, the scale of investment in laboratory companies has increased geometrically. The prices paid by
Quest Diagnostics Incorporated, Laboratory Corporation of America, and other acquirers of existing laboratories continue to surprise pathologists, especially those who sold their regional labs for proportionately less money more than a decade ago.

The ominous aspect to these acquisitions is that the “price to do business” in clinical lab testing and anatomic pathology is increasing. If this proves true, it will be tougher and tougher for local anatomic pathology groups to scrape together the investment capital needed to be fully competitive with a national laboratory. Should this occur during the coming years, it may result in the gradual decline of local pathology, the type of pathology most responsive to the needs of the particular healthcare community it serves.