Sudden Shutdown of Claritas Genomics After Five Years as A Leading Source of Pediatric Genetic Testing Surprises Clinical Laboratory Industry
Operations ended last week after reports suggested the end came as a result of misalignment of goals among investors in a lab company many considered to be successful
One contributing factor the surprise announcement that the owners of Claritas Genomics were closing the clinical laboratory company may have been the struggle to get payers to reimburse its genetics test claims. If true, it is the latest market sign of how health insurers are making it difficult for labs to get paid for proprietary molecular diagnostic assays and genetic tests.
With no official announcement, Claritas Genomics quietly ended operations effective on Friday, Jan. 19. That evening, a spokeswoman for Claritas Genomics’ majority owner, Boston Children’s Hospital (BCH), confirmed for Dark Daily that the lab was closed and said no reason was given for the closing. More details may be forthcoming this week, she added.
As of the close of business on Tuesday, there was still no word from the genetics testing company founded in 2013. GenomeWeb was the first to report that Claritas Genomic’s diagnostic laboratories no longer do any testing. According to GenomeWeb, Brian Quirbach, former Clinical Testing Coordinator at Claritas Genomics, and part of the lab’s client services team, confirmed that the last day of business was Friday, Jan. 19. The BCH spokeswoman said the GenomeWeb article was accurate.
Asked if there had been a precipitating event at Claritas, if the company had experienced any serious business trouble, if it had struggled to get paid, or if payers were slow in paying, the spokeswoman declined to comment. Instead, she referred to the GenomeWeb article, saying it was mostly accurate.
Claritas Genomics a Casualty of Clinical Laboratory Price Wars
According GenomeWeb, Claritas was like other genetic testing laboratories that have long struggled to get health insurers to pay for rare disease tests. Also, Claritas and other genetic and molecular testing labs suffer financially as a direct result of the ongoing price wars among competing genetic testing lab companies.
“As a small company, it also wasn’t able to offer testing that did not come with potential patient payment obligations, which larger laboratories with better resources or payer contracts can do,” the GenomeWeb article noted.
According to GenomeWeb’s sources, Claritas had a reputation for delivering highly-accurate test results. The reason for this level of performance, the article noted, was Claritas’ use of two sequencing platforms, which lowered false-positive rates. The testing lab combined low false-positive rates with interpretations from WuXi NextCode. The clinical expertise available at BCH gave Claritas the best diagnostic exome in the industry in terms of technical quality and diagnostic power, one source told GenomeWeb.
The decision to close the company, the source noted, was a result of misalignment between investors at WuXi NextCode and BCH. Other sources speculated that Claritas and WuXi NextCode were considering a merger, which did not happen, GenomeWeb reported.
Ultimately, the source stated, BCH held the controlling interest and made the business decision to close the clinical laboratory company. And that the decision was unrelated to the lab’s quality.
Claritas’ clients were told, according to GenomeWeb, to download all test results and data by Thursday, Jan. 18, and that the lab’s operations manager would be available for a few weeks to answer customers’ questions.
Genetic Tests Developer for Pediatrics and Hereditary Disorders
Claritas, which was headquartered in Cambridge, Mass., had about 30 employees. When it was founded as a partnership between BCH and Life Technologies, its goal was to develop genetic and genomics-based diagnostic tests, primarily for pediatric patients with hereditary disorders.
By the middle of 2014, the company had grown to about 60 employees, moved into a new building with a CLIA-certified laboratory in Cambridge, Mass., and launched the ClariView Exome for Pediatric Neurology, GenomeWeb reported. Four months later, Thermo Fisher Scientific acquired Life Technologies.
In 2014, Dark Daily’s sister print publication The Dark Report (TDR) reported on the development of Claritas Genomics as an in-hospital lab that became independent. For 15 years, the lab operated as the genetic diagnostic laboratory at 396-bed BCH, we reported. (See The Dark Report, “Claritas Is Example of New Lab Business Model,” June 13, 2014.)
“As one of the hospital’s CLIA-certified laboratories, it provided the advanced molecular diagnostic testing services used by the hospital,” said Patrice M. Milos, PhD, who was Claritas Genomic’s CEO at the time.
At the 2014 Executive War College in New Orleans, Patrice Milos, PhD, then President and CEO, Claritas Genomics, spoke with Adam Slone, CEO, Slone Partners, about her path to becoming CEO of Claritas Genomics, how to foster a strong company culture, and what traits she looks for in a leadership team. Click on the photo above to watch the video interview. (Video copyright: Sloan Partners.)
In the early days of Claritas Genomics, BCH was challenged to provide the capital and resources needed for the molecular lab to grow, Milos said. “This was due to the rapid pace of genetic discovery, ongoing advances in gene sequencing technologies, and the difficult financial environment in healthcare,” she recalled. “Thus, to make it easier for the lab to grow, the hospital spun out the lab and created Claritas Genomics in February 2013.”
Informatics Tools to Support Clinical Use of Genetic Data
As an independent lab, Claritas had early success winning a role to do testing for the Million Veteran Program (MVP), a $9-million project of the US Department of Veterans Affairs. In October 2013, the lab company reported that it would do exome sequencing of samples from veterans. At the time, it was one of the largest sequencing initiatives in the nation. (The VA has since reported in 2016 that the program was the largest genomic database in the world.)
Further, this MVP was significant because Claritas benefited by generating cash flow, which it could use to acquire the gene sequencing system and staff expertise in next-generation sequencing (NGS) technologies. And, it developed the informatics infrastructure needed to collect, store, and analyze large volumes of genetic data, TDR reported.
Two months later, in December 2013, Claritas entered into a partnership with Cerner Corp. of Kansas City, Mo., to build the tools and connectivity systems needed to integrate NGS-based diagnostic testing into healthcare data systems. Specifically, the companies said they would develop a system “for molecular diagnostics that is tailored to NGS workflows, which are more complex and generate much more data than traditional molecular diagnostic tests.”
At the time, Milos explained the role that Claritas would play in this partnership. “In terms of this collaboration, one barrier to the use of genomics in medicine is the challenge of integrating the complex information derived from large-scale genomic measurements into a patient’s medical record and clinical practice,” he said. “Our mutual goal is to develop the informatics tools that support clinical use of genetic data.”
Claritas also was working with other pediatric institutions, such as Cincinnati Children’s Hospital, to advance clinical knowledge in a number of ways. “For example, we are facilitating a research network by connecting patients with experts who can provide care and by licensing assays from the hospitals where the discoveries that lead to diagnostic tests are made,” Milos said. “Also, in this business model, we can receive investment from outside sources, such as we have from two of our Series A investors, Life Technologies and Cerner.”
The abrupt closure of Claritas Genomics makes this clinical laboratory company the latest to disappear from the marketplace. The mystery factor in this case is why a company viewed by many as establishing a credible reputation for itself came to such a sudden end.