“September 28, 1998 Intelligence: Late Breaking Lab News”

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Just days ago, Bayer AG announced one of the largest drug-discovery alliances ever created. Bayer will pay Millennium Pharmaceuticals, Inc. $465 million. In return, over a six-year period, Millennium will use genomics techniques to identify cures for various diseases. Millennium must deliver 225 drug “targets” or proteins that may be useful in designing drugs.

This deal is based on the emerging branch of science called “pharmacogenomics.” Bayer is placing a huge bet that Millennium can identify blockbuster drugs. Even though the emphasis is on new drugs, expect this alliance’s work to result in new diagnostic assays.

The U.S.Labor Department’s Producer Price Index reported that wholesale prices for acute care hospital services rose .01% for August and .07% for the 12-month period ending in August. It demonstrates that hospital cost increases are not driving HMO premium increases.

MORE HMOS exiting Medicare Risk Business

First it was Aetna/U.S. Healthcare. On September 1 the company announced it would launch a major scale-back of of its Medicare HMO operations in six states, affecting 58,000 seniors. Aetna will continue to provide coverage to 469,000 seniors in its remaining Medicare HMO plans.

Next was United Healthcare Corp., base in Minnetonka, Wisconsin. Just last week the managed care giant revealed its intent to withdraw from 86 of the 206 counties where it operates Medicare health plans. The move affects 59,000 of the company’s 440,000 Medicare beneficiaries.

Expect a coming clash between HCFA and the managed care industry on Medicare risk plan reimbursement levels. Managed care companies will withdraw from counties where the prospective Medicare reimbursement is deemed inadequate to provide proper coverage. This battle affects clinical labs, because the growth of Medicare risk plans will diminish the amount of Medicare lab testing which is reimbursed under fee-for-service schedules.

PharmChem Laboratories, Inc. of Menlo Park, California just snagged a big drug testing contract. Starting October 1, it will provide drug testing services to the National Institute of Justice’s (NIJ) Research Program called “Arrestee Drug Abuse Monitoring” (ADAM). It is a one-year contract with a three-year renewal option. PharmChem President and CEO Joe Halligen said the contract has a projected maximum potential of $8 million over its four-year life.

Look for an official announcement soon that one of the nation’s largest managed care companies has signed an exclusive national laboratory testing contract with one of the three blood brothers.


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