CEO SUMMARY: Technology to enhance and improve conventional Pap smear screening was introduced into the clinical marketplace almost five years ago. But the clinical laboratory industry has yet to embrace these various technologies in any meaningful way. Like the introduction of liquid preparation methods for Pap smear testing, these various technologies to enhance and automate Pap smear screening have faced an uphill battle from the beginning. Our guest writer believes that management miscues were among the factors contributing to the business setbacks of the companies offering these technologies.
PART TWO OF A SERIES
BY JOSEPH PLANDOWSKI
EDITOR’S NOTE: This is part two of our three-part series on new Pap smear technology. Guest writer Joseph Plandowski’s look at liquid preparation methods for Pap smear testing in his first story gained wide attention and plenty of comments; most were positive.
In this installment, Mr. Plandowski takes a critical look at the first companies to introduce technologies for enhancing or automating aspects of Pap smear screening. His conclusion is that inappropriate business strategies and management missteps have played just as important a role in retarding the acceptance of these technologies as the performance of the products themselves.
TECHNOLOGY TO ENHANCE and automate aspects of conventional Pap smear screening has struggled mightily to find widespread acceptance in the healthcare marketplace. Providers and payers have yet to enthusiastically
embrace these new products.
In part one of this series, I presented many of the less-publicized issues involving liquid preparation products for Pap smear testing. It is interesting that the recent surge in clinical usage of such products comes despite the absence of an undisputed and compelling equation matching clinical gains against the increased cost of a Pap smear slide prepared with thin layer technology.
This sets up an interesting question. If the added cost of a thin layer Pap smear slide is not offset by compelling and clinically-agreed upon performance benefits, then why is usage of thin layer Pap smear preparation kits increasing, while technology to automate and improve conventional Pap smear testing languishes?
This is precisely the question which stimulates so much heated debate among knowledgeable professionals representing the gynecology profession, the health insurance industry, government health programs, clinical laboratories, and pathologists. If cost-benefit equations were compelling, there would be a much higher degree of consensus among all the parties with a vested interest in Pap smear screening.
Several things must occur for new diagnostic technology to replace and supplant tried and true clinical procedures. First, in today’s managed healthcare environment, there must be clear and compelling clinical evidence that the new technology does improve healthcare and patient outcomes. Payers and government health programs refuse to reimburse for “maybe” technology.
Second, there must be an economic justification for using new technology in clinical applications. Can the added cost of new technology be justified when compared to its clinical benefits? This is the specific argument that generates the most passion whenever the topic of thin layer Pap smear preparation is discussed.
Critical To Success
Third, the ability of a company’s management to competently develop and introduce a new lab test technology into the marketplace is as critical to success as the technology’s ratio of clinical benefit versus economic cost.
These three critical success factors apply to any type of new cervical cancer screening technology. To date, four companies have made serious efforts to automate some aspect of conventional Pap smear screening.
In 1995, Neuromedical Systems, Inc., (PapNet® System) and NeoPath, Inc. (AutoPap® System) were first to gain FDA approval to bring their cervical cancer screening products to market. AutoCyte, Inc. (SCREEN®) and MorphoMetrix, Inc. (Cymet™) have had cervical cancer screening products in either the development phase or pending FDA approval.
Since 1995, all four of these companies have met unexpected obstacles. One company filed bankruptcy and ceased operations. Two of these companies merged. The fourth has decided to apply its technology in areas of diagnostics other than Pap smear screening.
Let’s begin with Neuromedical Sys- tems, Inc. (NSI), which filed Chapter 7 bankruptcy in February 1999 and ceased operations. A variety of factors contributed to the collapse of NSI. (See TDR, April 5, 1999.)
Its PapNet system had been approved by the FDA as an adjunctive test in 1995. Basically, this meant that every woman needed to have the conventional Pap smear test performed. If she wanted, she could pay extra, out of pocket, to have the PapNet procedure. The FDA approval limited the way NSI could market the test to clinical laboratories, physicians, payers, and patients.
Another element of NSI’s PapNet system was the way the technology operated. Once a conventional Pap smear slide was prepared, the PapNet system would scan the slide and run the data through a neural network software system. This software would select 128 cells that it considered to be the most suspect. Even if a particular Pap smear was normal, PapNet would still select 128 cells for review. This was a function of the way the neural net software processed the data.
The workflow process to perform an adjunctive PapNet procedure was cumbersome and time consuming for clinical laboratories. After screening the conventional Pap smear slide in the normal manner, participating laboratories would need to forward that slide, via overnight delivery, to NSI’s PapNet screening center in Suffern, New York.
At NSI’s lab, the slide would be scanned and the data processed by the PapNet system. The slide and a diskette with the data were returned, via overnight delivery, to the originating laboratory. Next, a cytotech would review the PapNet selection of 128 suspect cells on a $9,000 reviewing station that had to be purchased from NSI.
NSI suggested that labs charge women $35 to $40 for the adjunctive Pap smear procedure. NSI charged labs about $18 to scan the slide on PapNet. Most labs also had to pay for packing materials and shipping charges. It generally took in excess of a week to get the slide to NSI and back to the originating lab, during which time the final diagnostic report was delayed.
This was a complex workflow process. Clinical studies of PapNet yielded mixed results. Any benefits from increased sensitivity were outweighed by the economics of the PapNet process, including having a cytotech review 128 cells for every slide that was normal.
Since 1995,all four of these companies have met unexpected obstacles
One clinical trial, reported in ACTA Cytologica (1998:42:265-270) and noted in the December 1998 issue of CAP Today, seeded 195 abnormal slides into 20,000 normal slides. All the slides were screened on PapNet. Only 44% of the seeded slides were recognized as abnormal.
Co-author of the study, Gabriele Medley, M.D., Director of the Victoria Cytology Service, Victoria, Australia said “The bottom line is that this particular technology, at the time we tested it, did offer something additional, but it was not a guarantee.” In response, Laurie Mango, M.D., Chief Medical Officer at NSI stated “These results were not disappointing to us (my italics). We only claim increased sensitivity. Nobody has a system that finds the majority of false negative cases.”
Most laboratorians are also aware of NSI’s ill-fated marketing effort. The company ran a high profile, direct-to-consumer ad campaign in publications like Newsweek, Time, Glamour, Good Housekeeping, etc. that informed women about the deficiencies of conventional Pap smear screening. The ads directed them to demand a PapNet test when they visited their doctor. This ad campaign aggravated many physicians, who found themselves having to defend the clinical effectiveness of conventional Pap smears with their upset patients.
Neuromedical Systems’ strategic business plan was a loser from the start. It took the company only four years to run through the $135 million it raised in its 1995 IPO. Annual sales never exceeded $10 million per year worldwide.
When NSI went bankrupt earlier this year, AutoCyte snapped up the intellectual property and patent estate. AutoCyte paid the bankruptcy court about $14 million in cash and stock. That seems to be the end of the PapNet system. AutoCyte has shown no interest in continuing to support the product.
FDA Clears AutoPap
NeoPath, Inc. of Redmond, Washington entered the clinical marketplace about the the same time as NSI. NeoPath’s AutoPap 300 QC received FDA clearance in September 1995 and was limited to quality control screening of Pap smears.
From the start, NeoPath’s business strategy was to meet the needs of labs doing high volumes of conventional Pap smears. As a QC test, the improved accuracy of AutoPap was expected to cut malpractice-related costs enough to justify using it. Additionally, the AutoPap received approval from HCFA to replace the mandated practice of manual QC under CLIA requirements.
NeoPath then expected that, based on actual clinical performance, the FDA would approve AutoPap as a primary screening device. This occurred in May 1998, when the AutoPap System received FDA clear- ance for primary screening. This should have been the “Holy Grail”—a way for cytology labs to automate one of the last frontiers in the laboratory! So why hasn’t this technology been universally adopted?
NeoPath’s initial two products were automated screening systems that integrate proprietary high-speed image processing computers, video imaging technology, and sophisticated image interpretation software to capture and analyze thousands of microscopic images from a Pap smear.
The AutoPap 300 QC product is a quality control device for Pap smears screened by cytotechnologists and diagnosed as “Within Normal Limits (WNL).”
As currently approved by the FDA, the AutoPap Primary Screening System product is a primary screener that allows as many as 25% of the slides processed by the product to be diagnosed as WNL without any further review by cytotechnologists. The remaining 75% must be manually screened. The AutoPap System contains upgraded software features allowing it to also perform primary screening. It has replaced the AutoPap 300 QC.
Five Important Issues
Five issues are important to note with these products. First, both products are restricted to the use of glass coverslips, not plastic coverslips that many laboratories use. Second, the products cannot be used to replace a laboratory’s current practice regarding the rescreening of Pap smears from “risk” patients. Patients flagged on Pap test requisitions as “risk” patients must be manually screened.
Cannot Use Liquid Prep
Third, the products are restricted to conventionally prepared Pap smears. As yet, they cannot be used with liquid based preparation technologies, such as Cytyc’s ThinPrep or TriPath’s PREP. Fourth, neither product is supplied with software to interface with any laboratory information system (LIS), such as SunQuest or Antrim. Fifth, 15% of the slides put through the AutoPap System must be rescreened manually for QC purposes versus only 10% of slides manually screened.
NeoPath’s revenues and losses present a dismal picture. Revenues grew from $3.1 million in 1996 to $12.1 million in 1998. Net losses throughout these years were huge. In 1996, the net loss was $17.7 million. The loss grew to $23.6 million in 1997 followed by a loss of $26.2 million in 1998.
A significant portion of NeoPath’s sales were concentrated among a relatively small number of customers. To that point, at the end of 1998, SmithKline Beecham Clinical Laboratories (SBCL) and Unilab, Inc. had about two-thirds of all the units NeoPath placed.
In the second quarter of 1997, Cytyc entered an agreement with Quest Diagnostics Incorporated to provide the ThinPrep System for PAP testing. This was an exclusive agreement whereby Quest Diagnostics would not provide other liquid-based thinlayer sample preparation technologies unless FDA claims for such products exceeded claims for the ThinPrep System.
Further, and very importantly as outlined in the agreement, Quest Diagnostics would only provide computer aided rescreening upon customer initiated request! This meant Quest Diagnostic would not promote NeoPath’s automated screening of Paps.
That limitation became more than an interesting fact when Quest Diagnostics acquired SBCL in August 1999. SBCL was committed to actively promoting NeoPath’s AutoPap System but not Cytyc’s ThinPrep System. Previously, client-ordered ThinPrep Paps were sent outside the SBCL network.
As with NSI, weep for NeoPath shareholders. A $100 investment in NeoPath on the initial public offering (IPO) date in January 1995 was worth about $36 in mid-June 1999.
Like NSI, NeoPath raised a considerable amount of money. More than $103 million was raised from investors and others between 1995 and 1998. Like NSI, it took NPTH only four years to spend most of that investment.
AutoCyte’s Business Plan
This brings us to the AutoCyte, Inc., based in Burlington, North Carolina. AutoCyte was organized around the goal of developing an integrated system of instruments for automating Pap smear screening and other cytology procedures. Its PREP system for liquid preparation of Pap smears gained FDA approval in 1999. Its SCREEN system would have competed with NeoPath’s AutoPap Primary Screen System.
However, negative cash flow at AutoCyte, Inc. was a major factor in its merger with NeoPath, Inc. to form TriPath Imaging, Inc. in October, 1999.
This merger revised the business plans of both companies. As a merged company, TriPath could pool the patents and technologies for imaging and processing Pap smear slides from Neopath, Neuromedical Systems, and AutoCyte. It later bought patents from B-D’s Cell Analysis Systems.
The new goal has been to marry TriPath’s PREP system with the Auto-Pap primary screening system, then gain FDA approval to sell them either individually or as an integrated system. However, in the year since the merger, TriPath has not provided an estimated date as to when its combined automated slide preparation and screening module would obtain FDA approval and be ready for market.
Another firm was committed to developing an automated screening instrument for Pap smear testing. It is MorphoMetrix, Inc. of Toronto, Canada. MorphoMetrix, probably after watching the experience of NSI, NeoPath, and AutoCyte, has redirected its research into other clinical areas.
The efforts to automate various aspects of Pap smear testing by Neuromedical Systems, NeoPath, AutoCyte, MorphoMetrix, and AccuMed have yet to find widespread acceptance in the clinical marketplace. This fact demonstrates the gap be- tween clinical effectiveness and added cost of the new technologies.
At this stage in the market evolution, only TriPath Imaging has an approved automated screening system available in the United States and internationally. Its AutoPap system has a sizable, happy customer in Unilab. It had another major customer in SmithKline Beecham Clinical Laboratories, until Quest Diagnostics acquired the company.
Recently Laboratory Corporation of America announced a contract to install AutoPap systems throughout its national network of regional labs. As these AutoPaps become operational, they may help TriPath gain additional revenues from other laboratories.
Effectiveness Versus Cost
The experience of these companies since 1995 demonstrates that, although technology may be capable of improving specific aspects of conventional Pap smear testing, there must be a clear, measurable cost-versus-benefit gain to the healthcare system for automated Pap smear screening products to catch on.
Automated Microscope Workstations Prove a Bust
THERE WERE ALSO EFFORTS to automate microscope workstations for cytotechnologists. NeoPath offered a product called Pathfinder. Accumed International,Inc. had a product called AcCell 2000.
The primary feature of both products was a computerized motor on the microscope stage which would move the slide and present 100% of the cells to the cytotechnologist. This was to ensure that the cytotechnologist viewed all the cells on every Pap smear slide. The AcCell product attached a computer to the microscope which could offer a variety of features, including marking cell locations and tracking the productivity of individual cytotechnologists.
Neither product made any dent in the clinical marketplace. Essentially, these automated microscope stages forced cytotechs to alter their preferred method for reading a Pap smear. They also showed the weaknesses in how individual cytotechs processed their daily flow of Pap smear slides.
NeoPath terminated Pathfinder sales and wrote off the program. AccuMed exited the business completely in 1999.