Drivers in Diagnostics

Strategic planning and tactical execution should be driven by a deep understanding of market dynamics and needs. We summarize drivers, restraints and trends of the in vitro diagnostics industry.
 

2017 Global IVD Market: $60 billion

The global IVD market was ~$60 billion in 2017 and is projected to reach at $84.6 billion by 2023. (Projections based on EAC 2016) The central lab accounts for ~75% of IVD revenues. Immunoassay and clinical chemistry dominate the segment, with revenues approximately equal to all other categories of tests run in the central lab. Molecular diagnostics account for ~11% of the IVD market.
The U.S. accounts for 43% of worldwide revenues, followed by EMEA at 34%, APAC 12%, Japan 6% and Latin America 5%.
 

2017 Molecular Dx Market: $7 Billion

The global molecular diagnostics market size was $7 billion in 2015. It is expected to reach $12.5 billion growth by 2024. (Grandview Research 2016) The molecular diagnostics segment remains the fastest growing category within the in vitro diagnostics industry, driven by technology advancements, growth in point-of-care solutions, and personalized medicine initiatives.

IVD Industry Drivers and Restraints

Investment strategy, product portfolio decisions and commercial execution tactics should be driven by a deep understanding of market dynamics and buyers’ needs.

Demographics

  • The aging of the population has been an industry driver for decades. 

Standard of Care

  • Increasing incidence/prevalence of chronic diseases including heart disease, cancer and diabetes. 
  • Evidence-based medicine drives policy, care pathways and reimbursement. 
  • Patient-Centered Medical Home is a dominant practice model to coordinate care and reduce costs.

Regulatory and Payment Changes

  • Regulatory changes are emerging to cope with technology advances (next generation sequencing, multiplex assays) and new business models (Laboratory Developed Tests, direct-to-consumer).  
  • Reimbursement rates continue to decrease. Market-based pricing became effective January 1, 2018. Mandated by the Preserving Access to Medicare Act (PAMA), it has caused uncertainty across the diagnostics industry.  

Health System Structure

  • Decisions on product and technology adoption are cost-driven. Economic buyers demand evidence of cost-savings or cost-avoidance in addition to health outcomes data.  
  • Decision-making is becoming increasingly more centralized and complex. Committees associated with Integrated Delivery Networks (IDNs) and Accountable Care Organizations (ACOs) are the new buyers.  

Stakeholder Engagement

  • Promotion programs must target health system executives and physicians, not just laboratory personnel.
  • IVD manufactures must be more active in providing patient engagement and patient education. 

Advances in Molecular Diagnostics

  • Multiplex genomic and proteomic assays offer more complete information and better performance characteristics than historical single analyte tests.
  • Next Gen Sequencing has reduced costs of genomic testing and offers the potential for game-changing insights in oncology, infectious disease and beyond.
  • Big Data techniques and health information technology are enabling sophisticated decision support tools. 

Business Models for Molecular Diagnostics

Most molecular diagnostics assays follow traditional product development and regulatory review pathways and are sold through traditional channels. Manufacturers submit data packages to the FDA with analytical performance and clinical data via the 510(k) or PMA process. FDA review generally takes 4-6 months for a 510(k), or 9-18 months for a PMA. Upon IVD clearance or approval, the manufacturer may distribute instruments, software and reagent kits to laboratories.

LDT vs, IVD pathways

 In the LDT business model, the test developer must run the assay in their own CLIA-certified lab rather than distribute kits to reference labs and hospitals. The test developer is responsible for following design controls in the product development process, establishing performance characteristics, and following Quality System regulations. The advantage of the LDT model is that the innovator can commercialize a new multiplex tests quickly. However, the innovator needs to establish a supply chain for sample collection and shipping and they lose the labs’ marketing and sales channels.
 

Bringing it all together

  • Cost is the major driver for new product and technology adoption. IVD manufacturers must provide evidence of cost-savings or cost-avoidance in addition to health outcomes data.
  • Physician engagement and patient education must become part of the marketing mix. 
  • Multiplex advanced diagnostics offer improved performance over traditional assays. Actionable insights inform treatment decisions and offers hope for better health outcomes at lower cost.
  • The LDT business model enables a faster path to commercializing innovative assays. 

 About the Author 

Carrie Mulherin is CEO of Focus Marketing, offering consulting services in planning, market research, commercial execution and training to growing companies. www.FocusMktg.us, Carrie@FocusMktg.us

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