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Change Healthcare Cyberattack Disrupts Pharmacy Order Processing for Healthcare Providers Nationwide

Initially thought to be an attack by a nation-state, actual culprit turned out to be a known ransomware group and each day brings new revelations about the cyberattack

Fallout continues from cyberattack on Change Healthcare, the revenue cycle management (RCM) company that is a business unit of Optum, itself a division of UnitedHealth Group. Recent news accounts say providers are losing an estimated $100 million per day because they cannot submit claims to Change Healthcare nor receive reimbursement for these claims. 

The cyberattack took place on February 21. The following day, UnitedHealth Group filed a Material Cybersecurity Incidents report (form 8-K) with the US Securities and Exchange Commission (SEC) in which it stated it had “identified a suspected nation-state associated cybersecurity threat actor [that] had gained access to some of the Change Healthcare information technology systems.”

A few days later the real identity of the threat actor was revealed to be a ransomware group known as “BlackCat” or “ALPHV,” according to Reuters.

Change Healthcare of Nashville, Tenn., is “one of the largest commercial prescription processors in the US,” Healthcare Dive reported, adding that hospitals, pharmacies, and military facilities had difficulty transmitting prescriptions “as a result of the outage.”

 Change Healthcare handles about 15 billion payments each year.

According to a Change Healthcare statement, the company “became aware of the outside threat” and “took immediate action to disconnect Change Healthcare’s systems to prevent further impact.”

Change Healthcare has provided a website where parties that have been affected by the cyberattack can find assistance and updated information on Change’s response to the intrusion and theft of its data.

“The fallout is only starting to happen now. It will get worse for consumers,” Andrew Newman (above), founder and Chief Technology Officer, ReasonLabs, told FOX Business, adding, “We know that the likely destination for [the Change Healthcare] data is the Dark Web, where BlackCat will auction it all off to the highest bidder. From there, consumers could expect to suffer from things like identity theft, credit score downgrades, and more.” Clinical laboratories are also targets of cyberattacks due to the large amount of private patient data stored on their laboratory information systems. (Photo copyright: ReasonLabs.)

Millions of Records May be in Wrong Hands

Reuters reported that ALPHV/BlackCat admitted it “stole millions of sensitive records, including medical insurance and health data from the company.” 

The ransomware group has been focusing its attacks on healthcare with 70 incidents since December, according to federal agencies. 

“The healthcare sector has been the most commonly victimized. This is likely in response to the ALPHV BlackCat administrator’s post encouraging its affiliates to target hospitals after operational action against the group and its infrastructure in early December 2023,” noted a joint statement from the federal Cybersecurity and Infrastructure Security Agency (CISA), Federal Bureau of Investigation (FBI), and the Department of Health and Human Services (HHS).

AHA Urges Disrupted Hospitals to Disconnect from Optum

In an AHA Cybersecurity Advisory, the American Hospital Association recommended that affected providers “consider disconnection from Optum until it is independently deemed safe to reconnect to Optum.”

In a letter to HHS, AHA warned, “Change Healthcare’s downed systems will have an immediate adverse impact on hospital finances. … Their interrupted technology controls providers’ ability to process claims for payment, patient billing, and patient cost estimation services.”

“My understanding is Change/Optum touches almost every hospital in the US in one way or another,” John Riggi, AHA’s National Advisor for Cybersecurity and Risk, told Chief Healthcare Executive. “It has sector wide impact in potential risk. So, really, this is an attack on the entire sector.” Riggi spent nearly 30 years with the FBI.

Some physician practices may also have been impacted by the Change Healthcare cyberattack, according to the Medical Group Management Association (MGMA). In a letter to HHS, MGMA described negative changes in processes at doctors’ offices. They include delays in paper and electronic statements “for the duration of the outage.”

In addition, “prescriptions are being called into pharmacies instead of being electronically sent, so patients’ insurance information cannot be verified by pharmacies, and [the patients] are forced to self-pay or go without necessary medication.”

Here are “just a few of the consequences medical groups have felt” since the Change Healthcare cyberattack, according to the MGMA:

  • Substantial billing and cash flow disruptions, such as a lack of electronic claims processing. Both paper and electronic statements have been delayed. Some groups have been without any outgoing charges or incoming payments for the duration of the outage.
  • Limited or no electronic remittance advice from health plans. Groups are having to manually pull and post from payer portals.
  • Prior authorization submissions have been rejected or have not been transmittable at all. This further exacerbates what is routinely ranked the number one regulatory burden by medical groups and jeopardizes patient care.
  • Groups have been unable to perform eligibility checks for patients.
  • Many electronic prescriptions have not been transmitted, resulting in call-in prescriptions to pharmacies or paper prescriptions for patients. Subsequently, patients’ insurance information cannot be verified by pharmacies, and they are forced to self-pay or go without necessary medication.
  • Lack of connectivity to important data infrastructure needed for success in value-based care arrangements, and other health information technology disruptions.

Medical laboratory leaders and pathologists are advised to consult with their colleagues in IT and cybersecurity on how to best prevent ransomware attacks. Labs hold vast amount of private patient information. Recent incidents suggest more steps and strategies may be needed to protect laboratory information systems and patient data.

—Donna Marie Pocius

Related Information:

UnitedHealth Suspects “Nation-state” Behind Change Cyberattack

UnitedHealth Says ‘Blackcat’ Ransomware Group Behind Hack At Tech Unit

UnitedHealth Hackers Say They Stole ‘Millions’ of Records, then Delete Statement

US SEC Form 8-K

Change Healthcare Incident Status

Information on the Change Healthcare Cyber Response

UnitedHealth Confirms BlackCat Group Behind Recent Cybersecurity Attack

CISA Cybersecurity Advisory

Hackers Behind UnitedHealth Unit Cyberattack Reportedly Identified

Hospitals Affected by Cyberattack of UnitedHealth Subsidiary

UnitedHealth Group’s Change Healthcare Experiencing Cyberattack Could Impact Healthcare Providers

AHA Letter to HHS: Implications Change Healthcare Cyberattack

MGMA Letter to HHS

The Change Healthcare Cyberattack Is Still Impacting Pharmacies. It’s a Bigger Deal Than You Think

Survey Indicates Zoomers and Millennials Are Ready for Pharmacies to Play a Bigger Role in Their Primary Care

Demand for low cost, convenient access to doctors and drugs is driving transformation to decentralized medical care, and retail pharmacy chains see opportunity in offering primary care services

Retail pharmacies and pharmacists continue to play a growing role in healthcare as consumer demand for lower cost and convenience pushes the nation’s medical landscape away from centralized healthcare systems. Clinical laboratories have seen this in the increasing trend of consumers seeking vaccinations and home-health tests at their local drug stores.

Results of a pair of surveys dubbed “Pharmacy Next” conducted by Wolters Kluwer Health revealed that 58% of people are now willing to be treated for non-emergency healthcare conditions in non-traditional medical environments, such as retail pharmacies and clinics.

This is a finding that clinical laboratory managers and pathologists should incorporate into their labs’ strategic planning. It portends a shift in care away from the traditional primary care clinic—typically located in the campus around the community hospital—and toward retail pharmacies. Labs will want to capture the test referrals originating from the primary care clinics located in retail pharmacies.

This willingness to access medical care in non-traditional environments is especially true among people in Generation Y (Millennials) and Generation Z (Zoomers)—people born between 1981-1996 (Gen Y) and 1997-2012 (Gen Z), according to Journey Matters.

“As we saw in last year’s survey, primary care decentralization is continuing—the traditional one doctor-one patient, single point of coordination is vanishing, and this is especially evident in younger generations,” said Peter Bonis, MD, Wolters Kluwer’s Chief Medical Officer, in a press release

The online surveys of more than 2,000 US adults was weighted by age, gender, household income, and education to be representative of the entire population of the United States. 

“By preparing for this shift today, providers can work in concert across care sites to deliver the best care to patients,” said Peter Bonis, MD, Wolters Kluwer Health Chief Medical Officer, in a press release. “Likewise, newer care delivery models, like retail pharmacies and clinics, can ensure they’re ready to meet the expectations of healthcare consumers, who will increasingly be turning to them for a growing range of care needs.” Clinical laboratories may find new revenue opportunities working with the primary care clinics operating within local retail pharmacists and clinicians. (Photo copyright: Wolters Kluwer.)

Key Findings of the Wolters Kluwer Pharmacy Next Studies

Some key insights of the surveys include:

  • Care is rapidly decentralizing with 58% stating they are likely to visit a local pharmacy for non-emergency medical care.
  • Younger generations are signaling lasting change within the industry as they are more open to non-traditional styles of care.
  • 61% of respondents envision most primary care services being provided at pharmacies, retail clinics, or pharmacy clinics within the next five years. Of the respondents, 70% of Millennials, 66% of Gen Z, 65% of Gen X, and 43% of Baby Boomers believe this transition will occur.
  • Consumers are worried about prescription costs and availability.
  • 92% of respondents said physicians and pharmacists should inform patients of generic options.
  • 59% of surveyed consumers have concerns about drug tampering and theft when it involves mail order or subscription prescription services.
  • One in three respondents believe convenience is more important than credentials in non-emergency situations.

The survey indicates that healthcare consumers across multiple generations are open to a shift in some medical services from doctors to pharmacists. However, there were some notable differences between generations.

Respondents of the Baby Boomer (55%) and Gen X (57%) generations stated they would trust a physician assistant with medication prescriptions, while only 42% of Gen Z and 47% of Millennial respondents felt the same way. 

Additionally, Boomers (57%) and Gen X (67%) said they would feel comfortable with a nurse practitioner issuing their prescriptions, while only 44% of Gen Z and 53% of Millennials said they would. 

Increased Comfort with Genetic Testing at Pharmacies

The surveys also showed that younger generations are more open to the field of pharmacogenomics, which combines pharmacology and genomics to analyze how an individual’s genetic makeup (aka, heredity) affects the efficacy and reactions to certain drugs. This is a key component of precision medicine.

Overall, 68% of individuals polled believe their individual genomic data could guide prescription decisions, with Millennials (77%) and Gen Z (74%) being the primary believers. Additionally, 88% of respondents stated they see an incentive for health insurers to cover genomic testing, and 72% said they would be open to genetic testing for personalized medical care

But pharmacists and clinicians should be aware that advancing pharmacogenomics will require addressing privacy concerns. According to the Wolters Kluwer study, 57% of Gen Z and 53% of Millennials have apprehension surrounding genetic testing due to privacy risks, with 35% of Gen X and Boomers holding that same opinion.

Healthcare Staff Shortages, Drug Cost a Concern

Survey respondents are also concerned about pharmacy staff shortages and expenditures when seeking care at a pharmacy. Half of the participants are worried they will receive the wrong medication, half worry about getting the incorrect dosage, and almost half (47%) fear receiving the wrong directions due to overburdened pharmacy employees.

More people in Gen Z (59%) and Millennials (60%) had these concerns compared to Gen X (44%) and Boomers (38%).

Sadly, a distressing 44% of those surveyed admitted to not filling a prescription due to the costs. That number jumps to a staggering 56% among individuals with no health insurance, compared to 42% for insured patients.

“From hospitals to doctors’ offices, from pharmacies to pharma and beyond, healthcare must move to more affordable and accessible primary care models, adopt innovations that help deliver more personalized care, and address persistent safety and cost concerns that consumers have about their medications,” said Bonis in the press release.

Can Pharmacies Deliver Primary Care as Well as Doctor’s Offices?

Pharmacies may be logical setting for at least some non-emergency health services. According to the Centers for Disease Control and Prevention (CDC), approximately 90% of the US population live within five miles of a pharmacy and about 72% of visits to physician’s offices involve the prescribing and monitoring of medication therapies.

“Pharmacies did step up during the COVID-19 pandemic. The proof is there that pharmacies can do it,” noted Kevin Nicholson, JD, Vice President of Policy, Regulatory, and Legal Affairs for the National Association of Chain Drug Stores (NACDS), during this year’s Healthcare Information and Management Systems Society (HIMSS) in April,  HealthLeaders reported.

“We’re not talking about complicated services. We’re talking low-acuity, very basic care,” said Anita Patel, PharmD, Vice President of Pharmacy Services Development for Walgreens, at the HIMSS conference.

Pharmacies across the country continue to add more healthcare services to their available public offerings. This trend will likely persist into the future as healthcare becomes more expensive, wait times for physician appointments increases, and medical staff shortages rise. Thus, there may be opportunities for clinical laboratories to support pharmacists and doctors working in retail settings.

—JP Schlingman

Related Information:

What the Next Generation’s Expectations for Primary Care Mean for Pharmacists

US Survey Signals Big Shifts in Primary Care to Pharmacy and Clinic Settings as Consumers Seek Lower Medication and Healthcare Costs

Pharmacy Next: Safer, Affordable and Personalized

Pharmacy Next: Health Consumer Medication Trends

Pharmacy Next: Safety, Service, and Spending

Pharmacy Next: Consumer Trends and Industry Transformation

Wolters Kluwer’s Pharmacy Next Survey Shows 58% of Americans Likely to First Seek Non-emergency Healthcare at Pharmacies

The 7 Generations: What do we know about them?

Should a Pharmacist Be Allowed to Deliver Primary Care Services?

Community Pharmacists’ Contributions to Disease Management during the COVID-19 Pandemic

Walgreens Launches Clinical Trial Business with Goal of Leveraging Consumer Data, Technology, and Nationwide Reach to Increase Racial and Ethnic Diversity in Drug Research

By partnering with drug manufacturers to connect customers with clinical trials, the retail pharmacy chain believes this new venture will be the company’s “next growth engine.”

Walgreens is launching a business to connect customers with clinical drug trials, a venture that adds another offering to the retail pharmacy giants’ growing menu of healthcare services. This new venture might also mean additional test orders for clinical laboratories and pathology groups in areas that serve Walgreens customers.

In “By 2027, Walgreens Wants 1,000 Primary Care Clinics,” Dark Daily’s sister publication, The Dark Report, reported on Walgreens’ goal of building 1,000 primary care clinics at its retail pharmacies by 2027, a move which mimics the rollout of CVS Pharmacy MinuteClinic and Walmart Health primary care clinics in their retail locations.

Now, Walgreens is attempting to further redefine the patient experience by partnering with pharmaceutical companies to find participants for clinical trials, a business that could result in more Americans from underrepresented racial and ethnic populations enrolling in drug-development trials. With 9,021 retail pharmacies in all 50 states, it is well-positioned to know which of its customers would be candidates for different clinical trials.

“Walgreens’ trusted community presence across the nation, combined with our enterprise-wide data and health capabilities, enables us to pioneer a comprehensive solution that makes health options, including clinical trials, more accessible, convenient and equitable,” said Ramita Tandon, Walgreens’ Chief Clinical Trials Officer, in a press release.

Ramita Tandon, Walgreens’ Chief Clinical Trials Officer

Ramita Tandon, Walgreens’ Chief Clinical Trials Officer, believes Walgreens can play a role in solving the issues of diversity and declining enrollment in clinical trials. “Through the launch of our clinical trials services, we can provide another offering for patients with complex or chronic conditions in their care journey, while helping sponsors advance treatment options for the diverse communities we serve,” she said in a press release. (Photo copyright: Walgreens.)

Serving the Socially Vulnerable

In an interview with Fierce Healthcare, Tandon described the clinical trials business as Walgreens’ “next growth engine” of consumer-centric healthcare solutions.

According to the company press release, “Walgreens is addressing access barriers through a compliant, validated and secure decentralized clinical trial platform built on a rigorous compliance and regulatory framework to ensure patient privacy and security. This approach leverages owned and partner digital and physical assets, including select Health Corner and Village Medical at Walgreens locations, to directly engage patients at home, virtually or in-person.”

Walgreens notes that more than half of its roughly 9,000 U.S.-based stores are in “socially vulnerable areas.”

According to the Washington Examiner, a US Food and Drug Administration (FDA) study revealed that 75% of patients who participate in clinical trials are white, while just 11% are Hispanic and fewer than 10% are Asian or black. In addition, participation in clinical trials has been declining, with 80% of trials failing to attract enough participants on time.

Tandon maintains that making the process of participating in clinical trials easier is another key to increasing diversity and participation in clinical trials.

“During the clinical trial journey, we know it’s a burden for patients to visit sites. We also know that 78% of patient-consumers in the US live within five miles of a Walgreens,” she told PharmaVoice. “If a patient can complete much of the up-front clinical trial requirements at a local Walgreens, or conduct some of the visits digitally, it would make the whole clinical trial experience that much more positive and, maybe, encourage the patient to participate in new clinical trials going forward.”

Walgreens also plans to use its treasure-trove of customer data to find potential patients for its trials business.

“Understanding this detail of customer preference and segmentation can be quite useful particularly in clinical trials, for example, to create better protocols,” Tandon told PharmaVoice. “We are sitting on so much information, but we can, and need to, do a better job of using these insights in a real-world setting, which can be translated to pharma R/D or brand management organizations. We’re all about patient-centric drug development.”

FDA Seeks Diversity in Clinical Trails

Walgreens is in discussions with several drug manufacturers as it looks to launch this new venture.

“We are working very closely with them to understand their business needs and create the solution that’s going to be sort of bespoke to their specific trial needs,” Tandon told Fierce Healthcare. “Our goal is to move that needle and start to see a larger number of US patients participating and highly diverse participants that are coming into clinical trials.”

In April, an FDA press release announced new draft guidance aimed at “developing plans to enroll more participants from underrepresented racial and ethnic populations in the US into clinical trials.”

“Despite having a disproportionate burden for certain diseases, racial and ethnic minorities are frequently underrepresented in biomedical research,” the FDA stated. “Clinical trials provide a crucial base of evidence for evaluating whether a medical product is safe and effective; therefore, enrollment in clinical trials should reflect the diversity of the population that is ultimately going to use the treatment.”

Disintermediation of Retail Pharmacies

“Walgreens has a significant opportunity to create an interconnected healthcare ecosystem where we can use the physical assets of Walgreens and connect with patients and consumers at a local level to better support healthcare and healthcare equality,” Tandon said in PharmaVoice.

This is the latest example of a billion-dollar retail pharmacy chain diversifying away from simply filling prescriptions. Two types of competitors are driving the disintermediation of retail pharmacies because they end up directing patients away from the pharmacy:

  • Amazon.com acquired PillPack and now sends, via mail, prescriptions to patients’ homes.
  • Pharmacy benefit management (PBM) companies with a business model that encourage patients to get 90 days of prescriptions at once, mailed to their home.

In both cases, retail pharmacies lose access to patients. This is what is motivating several national pharmacy chains to offer primary care within their retail pharmacies (where following an office visit with a general practitioner, the patient simply crosses the store to the pharmacy to fill his/her prescription), as well as the clinical trial matching business.

As retail pharmacy chains become an increasingly disruptive force in healthcare, clinical laboratory managers and pathologists should be preparing new strategies to meet the testing needs of a changing primary care delivery model, which likely will include lab testing being offered in nontraditional medical locations.  

Andrea Downing Peck

Related Information:

Walgreens Launches Clinical Trial Business to Address Industrywide Access and Diversity Challenges and Redefine Patient Experience

Pharmacy Retail Giant Walgreens Looks to Disrupt Clinical Trials Business

By 2027, Walgreens Wants 1,000 Primary Care Clinics

FDA Takes Important Steps to Increase Racial and Ethnic Diversity in Clinical Trials

Walgreens Opens First Clinical Trial Business to Achieve ‘Equitable’ Health Options

With Its Wealth of Patient Data, Walgreens Is Looking to Disrupt the Clinical Trial Space

After Winning Conviction of Theranos Founder Elizabeth Holmes, Prosecutors Follow Similar Script at Ex-COO Ramesh Balwani’s Fraud Trial

Defense attorneys attempted to describe Balwani as simply an investor in Theranos, but prosecutors used the defendant’s own text messages to debunk that claim

Clinical laboratory directors and pathologists following the criminal fraud trial of ex-Theranos President and COO Ramesh “Sunny” Balwani may be experiencing a case of déjà vu as the former executive of the now-defunct blood-testing company has his day in court.

Even as Balwani’s defense team attempted to distance their client from the company’s day-to-day decision-making activities, prosecutors followed an almost identical script from the previous fraud trial of Theranos founder Elizabeth Holmes conducted earlier this year. That trial led to her conviction on four counts of defrauding investors.

As was the case in the Holmes trial, text messages between the two Theranos top executives (Balwani and Holmes) are again center stage in the San Jose, Calif., courtroom of U.S. District Judge Edward Davila.

Balwani Texts Reveal an ‘Unhappy’ Man Under Pressure

Balwani, 56, worked alongside Holmes at Theranos from 2009 to 2016. He purchased $5 million in stock in the company and helped finance the startup by underwriting a $13 million loan. Like Holmes, Balwani faces a dozen counts of fraud and conspiracy to commit wire fraud.

Jurors in the Balwani trial were shown a collection of private text messages between Balwani and Holmes—who also was his girlfriend at the time—that shed light on their business and personal relationships.

“I am responsible for everything at Theranos,” Balwani wrote in a text exchange with Holmes, NBC Bay Area reported. “I worked six years day and night to help you … sad about where we are,” he wrote.

“I am very unhappy because my work sucks,” Balwani told Holmes in another text. NBC Bay Area also reported on other text messages that discussed meeting new investors, meeting revenue goals, and potentially buying a corporate plane.

Ramesh “Sunny” Balwani
Just like former Theranos CEO/founder Elizabeth Holmes, former Theranos president/COO Ramesh “Sunny” Balwani (above) faces a dozen counts of fraud and conspiracy to commit wire fraud. Clinical laboratory directors will be particularly interested in the outcome of these trails since the responsibility of CLIA-laboratory directors to report anomalies in medical laboratory testing played a key part in defense testimony. (Photo copyright: The Guardian.)

Defense Counterattacks with Expert Testimony

Balwani’s defense team launched a counterattack the following day when witness Constance Cullen, PhD, a former immunologist at Schering-Plough, stated on cross examination that she dealt only with Holmes and never met Balwani or other Theranos executives, NBC Bay Area reported.

During Holmes’ trial, Cullen testified that Holmes had used the Schering-Plough logo without authorization on studies presented to potential investors which aimed to validate Theranos’ blood-testing technology.

Balwani’s defense team previously described him as a Theranos “shareholder” in an effort to distance him from executive decisions that allegedly misled Theranos investors about the startup’s revenues and accuracy of the company’s “revolutionary” Edison blood-testing device, which Theranos claimed could perform hundreds of clinical laboratory tests using a finger-prick of blood.

According to additional NBC Bay Area coverage of the trial, a former Walgreens executive testified he worked closely with Balwani during the drugstore chain’s failed multiyear partnership with Theranos, which included a $50 million investment to bring in-store medical laboratory testing to its pharmacies.

“As a person who was an investor and essentially serving as the chief operations officer, Sunny Balwani absolutely was intimately involved in the Walgreens relationship and all the relationships Theranos had,” chief legal analyst for Esquire Digital and editor of Today’s Esquire, Aron Solomon, JD, told NBC Bay Area in a video interview.

NBC Bay Area reported that prosecutors introduced text messages between Balwani and Holmes in which Balwani admitted he did not inform Walgreens that third-party equipment—not the Theranos Edison device—was being used for much of the actual clinical laboratory testing done in Walgreens stores.

In “Theranos Loses Its Biggest Revenue Source as Walgreens Ends Partnership and Shuts Down Blood-Collections for Clinical Laboratory Tests,” Dark Daily reported on Walgreens’ decision to sever its relationship with Theranos after federal regulators cited serious deficiencies at the Theranos lab in Newark, Calif., which led to the blood company voiding or revising thousands of blood test results delivered by its Edison device over a two-year period.

Prosecutors Claim Balwani, Holmes Worked ‘Together’ to Defraud Investors

Earlier in April, government lawyers responded to claims from Holmes’ defense team that Judge Davila should set aside the convictions in Holmes’ fraud case because evidence at trial did not support a guilty verdict, Fortune reported.

The prosecutors countered in a court filing that the “overwhelming weight of the evidence admitted at trial supports the jury’s conviction” of conspiracy to commit wire fraud and fraud on Theranos investors.

Prosecutors maintained the Holmes trial was “replete with examples” of Holmes and Balwani “working together and conspiring to effectuate a scheme to defraud investors.” The two “were constantly in communication via email, text message, and in-person meetings” about the company’s laboratories, financials, patient blood-testing, and relationships with Walgreens, investors, and visits by regulators, the Fortune article noted.

Holmes was convicted on January 3, 2022, on three counts of wire fraud and one count of conspiracy to commit wire fraud. Her sentencing date is September 26. She faces up to 20 years in prison but remains free on bond while awaiting sentencing. Balwani’s trial is ongoing.

Clinical laboratory managers and pathologists following the Theranos saga with interest should expect more revelations in the weeks to come. Balwani’s trial, which began in March, is expected to last at least three months.

Andrea Downing Peck

Related Information:

Texts Between Theranos Founder Elizabeth Holmes and Ex-COO Sunny Balwani Show Their Dynamic in a New Light

Prosecutors Highlight Theranos Machines in Trial Against Sunny Balwani

Jurors See New Text Messages Between Sunny Balwani and Elizabeth Holmes

Testimony Continues in Balwani-Theranos Fraud Trial

What the Elizabeth Holmes Verdict Means for the Future of Startup Culture

Leader or Follower? Defense Team Tries to Distance Former COO from Theranos

Elizabeth Holmes Prosecutors Push Back on Her Bid for New Trial

Video: Prosecutors Highlight Theranos Machines in Trial Against Sunny Balwani

Testimony Continues in Balwani-Theranos Fraud Trial

Theranos Loses Its Biggest Revenue Source as Walgreens Ends Partnership and Shuts Down Blood-Collections for Clinical Laboratory Tests

Private Labs in South Africa Voluntarily Agree to Lower Prices for COVID-19 PCR Tests following Investigation by Country’s Competition Commission

In an out-of-court settlement, two commercial clinical laboratory companies also agreed to reduce their prices for rapid antigen tests as well

How clinical laboratory companies were pricing their COVID-19 tests caught the attention of government authorities in South Africa. Government agencies in that country are establishing what they view as fair clinical laboratory pricing for private COVID-19 PCR (polymerase chain reaction) and rapid antigen tests without turning to litigation or fines.

The Competition Commission (Commission) is an organization charged with reviewing and acting on business practices in South Africa. In a December 11, 2021, news release, the Commission said it had reached a “ground-breaking agreement” with two private laboratories—Ampath and Lancet—to reduce their COVID-19 PCR test prices from 850 South African rand (R850) to R500 (from US$54.43 to US$31.97).

As of December 12, a third private laboratory company that also had been investigated, PathCare, had not agreed to the court settlement, Daily Maverick reported.

Also effective are lower prices for rapid antigen tests, the Commission said in a separate December 23 news release.

COVID Test Prices ‘Unfairly Inflated’

The changes in PCR test prices in South Africa followed a formal complaint by the Council for Medical Schemes which alleged the private pathology labs [the term for clinical laboratories in South Africa] were “supplying” COVID-19 PCR tests at “unfairly inflated, exorbitant, and/or unjustifiable” prices, Daily Maverick reported.

Tembinkosi Bonakele

The clinical laboratory companies “exploited consumers by earning excessive profits on essential products or services,” Tembinkosi Bonakele (above), Commissioner of the South Africa Competition Commission, told the Daily Maverick. “It is always encouraging for companies to voluntarily consider reducing prices, especially where the public is detrimentally affected by the prices, as to avoid protracted litigation,” he added. (Photo copyright: Sowetan Live.)

According to the Daily Maverick, as part of the investigation, which began in October 2021, the Commission asked the private clinical laboratory companies for financial statements and costs of COVID-19 testing.

“We did, then, further interrogation in order to strip out what we saw was potentially padding the costing and unrelated costs. And on the basis of that, we came to the figure of R500,” James Hodge, told the Daily Maverick. Hodge is Chief Economist, Economic Research Bureau, and Acting Deputy Commissioner at the Competition Commission South Africa.

 For its part, Lancet, Johannesburg, said in a statement that it “Appreciates the spirit of constructive engagement with the Commission which has resulted in an outcome that best serves the people of South Africa as they confront the fourth COVID wave. We are sensitive to the plight of the public and agree that reducing the COVID-19 PCR price is in best national interest.”

Clinical Laboratory Test Prices: Market Dynamics

So, were the prices too high? In the US, clinical laboratories are reimbursed considerably more by Medicare for COVID-19 testing (about $100), as compared to the South Africa private clinical lab prices.

Also, the Centers for Medicare and Medicaid Services (CMS) said in a statement that effective January 2021 it included in that rate an incentive of $25 to labs that provide results within 48 hours.

Medical laboratories are reimbursed $75 for a high throughput COVID-19 test when results are reported beyond 48 hours, CMS added.

Antigen Tests Prices Also Reduced

The Commission said that during its review of COVID-19 PCR test pricing it received a Department of Health Republic of South Africa complaint about prices for rapid antigen test pricing as well.

After another Commission review, PathCare, Lancet, and Ampath agreed to reduce prices for rapid antigen tests to a maximum of R150 or $9.74 (from a range of R250 to R350 or $16.28 to $22.79), a news release noted.

By comparison, Abbott’s BinaxNOW COVID-19 Antigen Self Test is priced at $23.99, on Abbott’s website as well as online at Walgreens.

“The reduction of COVID-19 rapid antigen test prices will help alleviate the plight of consumers and widen accessibility and affordability of COVID-19 rapid antigen testing, which is a critical part of the initiatives to avoid escalation of the pandemic,” said Bonakele in the news release, which also stated that the Commission would receive financial statements from the three labs every few months.

The Commission also is reviewing a “large retail pharmacy chain’s” rapid antigen prices, which “follows a complaint lodged by the Department of Health (DOH), on December 14 2021, against service providers delivering COVID-19 Rapid Antigen tests in South Africa to consumers,” Cape Town Etc reported. The specific pharmacy chain was not identified.

Data Show COVID Plight in South Africa

More than 21.6 million COVID-19 tests have been offered by healthcare providers in South Africa, and 3.5 million cases were detected, according to the Department of Health, Republic of South Africa.

In January, The New York Times reported:

  • 28% of South Africans are fully vaccinated.
  • 33% of residents have had one vaccine dose.
  • One in 17 people was diagnosed with COVID-19.
  • One in 632 had died from the infection.
  • COVID-19 deaths total 92,830.

Considering those data, one wonders if the South African government acted fast enough on test pricing.

For medical laboratory leaders, it’s important to recognize that not only are lab services in the spotlight during the COVID-19 pandemic, business practices and prices also are being monitored by officials in this country.

Donna Marie Pocius

Related Information:

Urgent Media Briefing on the Announcement of a Ground-Breaking Agreement on PCR Test Prices

PathCare Also Agrees to an Immediate Price Reduction of COVID-19 PCR Tests

Big Three Private Pathology Groups Agree to Another Price Reduction

Major Pathology Labs Agree to Lower Price of COVID-19 PCR Tests to R500

Lancet Laboratories Agreement with Competition Commission of South Africa

CMS Changes Medicare Payment to Support Faster COVID-19 Diagnostic Testing

Private Pathology Groups to Reduce COVID-19 Rapid Antigen Test Price to No More than R150

Tracking Coronavirus in South Africa: Latest Case Count

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