News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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FDA Looks to Clamp Down on Laboratory-Developed Tests and Put an End to ‘Wild West of Medicine’: Might CLIA Problems at Theranos Support FDA’s Position?

The Wall Street Journal examines the FDA’s position on LDTs and looks at the pros and cons of LDT regulation by the federal agency

National news coverage over the deficiencies uncovered by Clinical Laboratory Improvement Amendments (CLIA) inspections of the clinical laboratory operated by Theranos in Newark, Calif., may have an interesting consequence that affects all medical laboratories and pathology groups.

Over the past 30 months, Theranos has regularly asserted that its laboratory-developed tests (LDTs) were under review by the Food and Drug Administration (FDA). For example, in an interview published in the December 14, 2014, issue of The New Yorker, Theranos Founder and CEO Elizabeth Holmes stated, “We believe that to realize our vision we must operate at the highest levels of excellence… And the FDA’s stamp of approval is seen as an indicator of the quality of a product.”

Thus, it would be ironic if the problems in the quality of clinical laboratory tests uncovered by federal CLIA inspectors at the Theranos lab facility in Newark was used by the FDA to justify their intent to regulate LDTs. The FDA has already released a report to the public that identified instances where laboratories running LDTs were alleged to have reported inaccurate lab test results to patients and their physicians. (more…)

LabCorp Spends $5.6 Billion to Acquire Covance, Challenging Quest Diagnostics for Position as Largest U.S. Diagnostics Company

With clinical laboratory acquisition candidates dwindling in number, Laboratory Corporation of America Holdings (LabCorp) (NYSE: LH) looked outside the medical laboratory industry and agreed to acquire Covance, Inc. (NYSE: CVD), a major player in clinical trials testing, for approximately $6.1 billion in cash and stock.

By taking this action, LabCorp will have bragging rights as the world’s largest laboratory testing company. Upon completion of this transaction, financial analysts point out that the two companies have combined annual revenue of $8.4 billion as of the period ending September 30, 2014. By comparison, annual revenue at Quest Diagnostics Incorporated (NYSE: DGX) was $7.1 billion for year ending 2013.

Covance Involved in Clinical Trials

Covance is a contract research company in Princeton, New Jersey, with annual revenues of $2.5 billion and 12,500 employees in more than 60 countries. In February of this year, Covance sold its Covance Genomics lab in Seattle, Washington, to LabCorp, per the company’s press release. Terms of this transaction were not announced. (more…)

LabCorp to Acquire Genzyme’s Genetics Pathology Laboratory Testing Business for $925 Million

Price of 2.5 times revenue makes this a high price for a clinical laboratory

Monday, Laboratory Corporation of America (NYSE: LH) agreed to purchase Genzyme Genetics Corp’s. (NASDAQ: GENZ) fetal genetics and oncology testing division for $925 million in cash. Genzyme has shopped its neo-natal genetic testing business since last year.

LabCorp is paying a purchase price that is 2.5 times Genzyme’s $371 million in annual revenue. This is one of the highest prices paid for a clinical pathology laboratory company since Quest Diagnostics Incorporated (NYSE: DGX), paid about 2.5 times revenue for Ameripath, Inc. in March 2007. In that transaction, Quest Diagnostics paid about $2 billion for Ameripath, which had annual revenues approaching $800 million at the time of sale.


LabCorp Pays $106.7 Million for Monogram Biosciences in Personalized Medicine Play

Acquisition adds more companion diagnostics to LabCorp’s molecular test menu

Here’s another validation of the prediction that companion diagnostics will be a cornerstone of personalized medicine. Laboratory Corporation of America Holdings (NYSE: LH) of Burlington, North Carolina, said Tuesday (June 23) it would acquire Monogram Biosciences, Inc. (NASDAQ: MGRM) of South San Francisco, California. In an all cash deal totaling $106.7 million, LabCorp will pay $4.55 per share.

“Monogram Biosciences, Inc., has an excellent clinical reputation, a market leading infectious disease test, a market leading companion diagnostic, an exciting technology platform for oncology, and offers LabCorp a substantial growth opportunity,” said David P. King, LabCorp’s Chairman and Chief Executive Officer.


LabCorp Ousted from Aetnas National Contract

In the heavyweight championship fight taking place between the two blood brothers, Quest Diagnostics Incorporated  has just won the next round. Earlier today, Laboratory Corporation of America issued a terse press release titled: “LabCorp Notified by Aetna of Contract Termination.”

LabCorp acknowledged that “it will no longer be a contracted laboratory provider for Aetna Inc. (NYSE:AET), effective July 1, 2007.” LabCorp further disclosed that it expects the loss of its contract relationship with Aetna to be the primary reason why it expects earnings per share in 2007 will decline from a projected $0.16 to $0.12 in 2007. That’s a 25% reduction.

This breaking development is not a total surprise. Quest Diagnostics found itself excluded from almost all UnitedHealth contracts last October (United Health Disrupts the National Contract Status Quo Between the Two Blood Brothers) and from New Jersey-based Horizon Blue Cross Blue Shield in January. In both cases, LabCorp had negotiated an exclusive relationship.

Now it’s tit for tat. Quest Diagnostics is likely to announce that it has an exclusive national contract with Aetna, effectively denying LabCorp access to Aetna’s 16 million members. Aetna is one of the five largest health insurance companies in the United States.

Each of these national managed care contracts has implications for clinical laboratory management. That’s because both of the blood brothers want to negotiate a national contract with insurer that include terms designed to exclude regional independent laboratories and hospital laboratory outreach programs. To help lab directors and pathologists stay on top of this emerging trend, this year’s Executive War College on Laboratory and Pathology Management has several sessions devoted exclusively to the latest developments in managed care contracting.

In particular, LabCorp’s new CEO, David P. King, will be discussing how managed care companies are altering their strategies for contracting laboratory testing services. This will be a unique opportunity to hear, first hand, what is likely to unfold in the next 24 months. That’s particularly important, since the developments of the past five months are pointing to a managed care contracting environment which is increasingly excludes independent lab companies and hospital laboratory outreach program in favor of the national laboratories.

Stay tuned to Dark Daily for more updates on both this story and this rapidly unfolding trend. Once LabCorp used its exclusive pact with UnitedHealth to break the managed carecontracting status quo between it and Quest Diagnostics, it set in motion forces which are already propelling the laboratory industry into uncharted territory.

PS: To get the latest news and effective strategies dealing with new trends, join us in Miami on May 10-11, 2007 for the 12th Annual Executive War College. You can access the full details using the links below. Take action today to reserve your place.

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