Business Strategies for

Molecular Diagnostics

in the Clinical Laboratory, 2nd Edition

Executive Summary

Business Strategies for Molecular Diagnostics in the Lab, 2nd Edition

Report Summary

Business Strategies for Molecular

Diagnostics in the Clinical
Laboratory, 2nd Edition
Business Strategies for Molecular Diagnostics in the Lab, is part of G2 Intelligences
comprehensive analysis of the molecular diagnostics market. Once reserved for academic
medical centers, molecular diagnostic testing has emerged as a transformational force
in clinical laboratories of all types and sizes. New tests that use molecular methods can
move from the bench and pages of peer-reviewed journals to central hospital laboratory test menus, and even decentralized testing, at unprecedented speed. The following
summary provides some high level findings on this $6.2 billionand growingindustry
from within the coverage provided. Detailed findings can be found in the complete report.
While still performed by a minority of labs nationwide, molecular diagnostic testing is
gaining traction, and the market opportunity is significant.
If your lab is already committed to molecular diagnostic testing, this report gives you
detailed data and analysis and expert insight that will help you identify and seize new
opportunities, give you the inside story on how leading molecular labs are expanding,
and guide you in your strategic planning in the coming years.
And if youre still considering molecular diagnostic testing, youll get the basics of
how to make the molecular diagnostic test decision, and how to set up and run a molecular diagnostics lab.

Key Market Trends

Research shows that a constellation of factors is driving the molecular diagnostic
market, including the growth of key molecular tests, the technological superiority (i.e.,
better sensitivity and specificity) of molecular tests, and favorable demographics (i.e.,
an aging population that will continue to demand more laboratory testing). Secondary
growth drivers include the establishment of new laboratories that perform molecular
diagnostic testing and expanded efforts to educate providers, payers, and the public
about the value of molecular test results.
Furthermore, since repeat testing is often necessary to diagnose, monitor, and determine the success of therapies for such diseases as cancer and HIV, the demand for
high-margin molecular tests requiring advanced reagents, sophisticated instruments,
and well-trained technicians is escalating quickly and increasing profit margins within
the segment. Several areas of testing are growing particularly rapidly, including testing for antimicrobial susceptibility, nosocomial infections, sepsis, respiratory disease,
and HPV. Interestingly, many of these tests are used as adjuncts to more conventional
laboratory tests.

Featuring critical
insights and
analysis from
world-class
molecular experts:
Stephanie Murg,
Managing Director,
G2 Intelligence
Bryan Moore, Ph.D.,
MBA, Marketing
Manager, Roche
Diagnostics
Mark Lovell, M.D.,
Associate Professor of
Pathology, University
of Colorado Denver;
Chair, Department of
Pediatric Pathology,
and Medical Director,
Molecular Diagnostic
Laboratory, The
Childrens Hospital in
Auora, CO
Rina Wolf,
Vice President of
Commercialization
Strategies, Consulting
and Industry Affairs,
XIFIN
Bassem A. Bejjani,
M.D., FACMG, Chief
Medical Officer,
Signature Genomics
Alan H.B. Wu, Ph.D.,
Chief, Clinical
Chemistry Laboratory,
San Francisco General
Hospital & Trauma
Center
Steven Keiles, Ambry
Genetics and National
Society of Genetic
Counselors

Healthcare reform legislation will surely boost overall lab testing volumes, as 32
million Americans join the insurance rolls over the next 10 years. The Affordable
Care Act was also studded with immediate and long-term opportunities for labs
performing molecular diagnostic testing. Most notable among them is the
requirement that insurers offer preventive services to consumers as part of the
insurance policy at no additional out-of-pocket charge.
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without the prior written permission of Kennedy Information, LLC, a BNA business, Peterborough, NH USA.

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Business Strategies for Molecular Diagnostics in the Lab, 2nd Edition

The new edition of Business Strategies for Molecular Diagnostics in the Clinical Laboratory details these and other influences driving the molecular diagnostic market, and
further examines global MDx testing numbers by patient age and five key segments:
Infectious Disease
Blood Screening
Genetic Testing
Cancer
Other
The new 2nd edition also brings you the expert advice of 6 top molecular
diagnostics experts, and covers:
The size, structure and outlook for the molecular diagnostics market
Integrating molecular diagnostics into your lab
Expanding an existing molecular diagnostics program
Selecting and optimizing a molecular diagnostics platform and test menu
Developing a budget and financial priorities for your molecular diagnostics
program
Regulations, pricing and reimbursement
And much more

Business Strategies for Molecular Diagnostics in the

Clinical Laboratory, 2nd Edition is organized as follows:
Section 1

Business and Financial Strategies for Molecular Diagnostics discusses key factors
to consider when bringing molecular diagnostics in-house or expanding an existing
molecular diagnostics program, including developing a budget and financial priorities
for your molecular diagnostics program, and determining a strategy for selecting and
optimizing a molecular diagnostics platform and test menu that makes financial sense
for each laboratory.

Section 2

Optimizing Your Molecular Test Menu offers insights into best practices for building and developing a menu of molecular diagnostic tests, and creating a test menu
that promises larger volumes and greater clinical utility versus offering a portfolio of
esoteric tests that add prestige and reduce send-out costs. This chapter also identifies
pitfalls to avoid when bringing molecular diagnostics into your laboratory.

Section 3

Reimbursement for Molecular Diagnostics provides an overview of how medical

and laboratory procedures are reimbursed, discusses ways in which reimbursement
for molecular testing differs from that for routine laboratory testing, and reviews some
of the issues encountered in reimbursement for molecular testing.

Section 4

Case Study: Making the Most of Molecular Data at Signature Genomics examines
the molecular diagnostics data glut in the new era of genomic medicine, discusses
how Signature Genomics has built its database of molecular diagnostic data and how
it mines the accumulated data to extract useful information, and provides strategies
for transforming data generated through molecular testing into valuable information
and useful knowledge.
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without the prior written permission of Kennedy Information, LLC, a BNA business, Peterborough, NH USA.

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Business Strategies for Molecular Diagnostics in the Lab, 2nd Edition

Section 5

Pharmacogenomics in the Clinical Lab outlines the key tests that labs need to know
about and possibly plan on offering in the near future, explores considerations unique
to pharmacogenomicsincluding results reporting, staff expertise, and technology
that labs should keep in mind when considering bringing on these tests, reviews
current regulatory issues affecting this area of testing, and offers an outlook regarding
pharmacogenomic testing in the clinical lab.

Section 6

Genetic Counseling and the Clinical Laboratory provides an overview of how genetic counselors work with clinicians and laboratory professionals to provide information and support to patients and families who have members with genetic disorders and those who may be at risk for inherited conditionsand offers strategies for
integrating genetic counseling into molecular diagnostic testing programs at academic
medical centers, hospital laboratories, and reference laboratories.
Order now to receive your copy for just $895 and your states sales tax by visiting
www.G2Intelligence.com.
Or, to place your order by phone, please contact G2 Customer Service at
800-401-5937 ext. 2 or via email customerservice@g2intelligence.com and
ask for report 4220W.

I challenge you to
think about your
specific goalwhat you
want to accomplish
in your molecular
diagnostics laboratory
and the steps you are
going to take to get
there. If you are not in
molecular diagnostics
today, get in it. You will
hear about the future of
biomarkers and these
great new generation
technologies, but you
are not going to be
ready unless you are
doing the fundamentals
today, which is
primarily infectious
disease testing that
will pay for the lower
volume but critical
molecular diagnostic
tests coming down the
pipeline.
Bryan Moore, Ph.D.,
MBA, Group Marketing
Manager, Roche
Diagnostics

If you wish to receive a pdf file of this report which can distributed to others
within your organization or posted to an intranet for firm-wide use, please
contact our Licensing & Permissions director, Jonathan Wentworth-Ping at
jping@g2intelligence.com or by phone at 973-718-4703.

About G2 Intelligence
Advancing the Business of Diagnostic Medicine
G2 Intelligence provides timely, accurate, and trusted analysis of
industry and market trends, legal and regulatory developments, and
technology and innovation that directly affect the operations, financial
performance, and competitive position of diagnostic testing laboratories and related
medical services providers.
Formerly known as Washington G-2 Reports, the company has covered and
reported on the diagnostic industry for over 30 years. G2 Intelligence delivers topical
and analytical periodicals, proprietary research studies, and custom advisory services,
and through live and virtual events, facilitates industry meetings and information
exchanges.
Our mission is to deliver relevant, meaningful, and actionable findings on diagnostic
industry markets, related regulatory changes, and lab operations. The organization
strives to exceed client expectations and develop mutually beneficial relationships
with industry leaders and influencers.
More information is available for you at www.G2Intelligence.com.
INM029
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without the prior written permission of Kennedy Information, LLC, a BNA business, Peterborough, NH USA.

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Business Strategies for Molecular Diagnostics in the Lab, 2nd Edition

Table Of Contents
Table of Contents
CHAPTER 1: Introduction
CHAPTER 2: Business and Financial Strategies for Molecular Diagnostics

7
13

Part I: Terrain Assessment: The State of Affairs and the Future................................13

Part II: A Framework to Assess Costs and Build Your Case......................................17
Assessing Profitability: Components of a Budget...................................................19
Improve Your Financials with Lean.........................................................................24
Develop Your Strategy............................................................................................25
CHAPTER 3: Optimizing Your Molecular Test Menu

27

12 Lessons to Share.............................................................................................27
In Summary..........................................................................................................31
CHAPTER 4: Reimbursement for Molecular Diagnostics

33

Setting the Stage..................................................................................................33

The Role of Reimbursement...................................................................................34
Questions for Successful Commercialization..........................................................36
Current Coding and Payment Strategies.................................................................37
Payment Modalities...............................................................................................40
The Long and Winding Road to Coverage...............................................................40
Coverage Goals.....................................................................................................41
About Contracting.................................................................................................41
AMA Proposal for Coding Changes........................................................................41
CHAPTER 5: Case Study: Making the Most of Molecular Data at
Signature Genomics

43

The Challenge.......................................................................................................43
The Era of Molecular Diagnostics .........................................................................43
About Signature Genomics . .................................................................................46
The Move to Technology .......................................................................................47
The Phenotype Iceberg .........................................................................................50
The Big Picture .....................................................................................................51
CHAPTER 6: Pharmacogenomics in the Clinical Lab

53

About PGx.............................................................................................................53
How PGx Works.....................................................................................................53
The Future of PGx..................................................................................................68
CHAPTER 7: Genetic Counseling and the Clinical Laboratory

69

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without the prior written permission of Kennedy Information, LLC, a BNA business, Peterborough, NH USA.

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Business Strategies for Molecular Diagnostics in the Lab, 2nd Edition

About the Profession.............................................................................................69

Practice-based Competencies...............................................................................69
Scope of Practice..................................................................................................70
Credentialing.........................................................................................................70
Client Services in Work Settings.............................................................................70
Writing and Reviewing Reports..............................................................................73
Other Areas of Work...............................................................................................73
A Genetic Counselors Contribution........................................................................75
In Summary..........................................................................................................76
CHAPTER 8: About the Analysts

77

CHAPTER 9: About G2 Intelligence

81

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Business Strategies for Molecular Diagnostics in the Lab, 2nd Edition

Table of Figures
Lifecycle of a Molecular Test....................................................................................7
Molecular Diagnostic Testing Market Size and Projected Growth ($B).......................8
Global MDx Testing by Segment...............................................................................8
Relative Number of Lab Tests per Year......................................................................9
MDx: Market Drivers................................................................................................9
MDx: Market Challenges........................................................................................10
Risk-based Classification......................................................................................11
G2 Molecular Diagnostics Survey..........................................................................11
Venture Capital Financing Medical Device Deals....................................................15
Venture Capital Dollars Invested in Medical Devices..............................................15
Where is the MDx Demand Today and Growth Potential?........................................18
US Molecular Clinical Diagnostic Market, Approximate 2010 Average
Reimbursement Rates...........................................................................................18
Discrepancies May Exist Between Medicare and Private Payer Reimbursements.....19
Instrument Financing, Bundled and Unbundled Options........................................20
Calculating Labor Costs for a Quantitative PCR Assay............................................22
Determining True Costs of a Molecular Method......................................................23
Determining True Costs of a Molecular Method......................................................24
GeneTest: Growth of Laboratory Tests.....................................................................33
Molecular Diagnostics: Savings per Test.................................................................34
Case for NOC........................................................................................................39
The Molecular Era - FISH.......................................................................................44
Conventional Cytogenetics and FISH Have Limitations...........................................44
The Molecular Era - Array CGH...............................................................................45
Traditional CGH/Array CGH....................................................................................45
Background/Samples Graph.................................................................................47
GCX Genome Browser...........................................................................................48
Genoglyphix Genome Browser and GCAD..............................................................49
16p11.2p12.2 Microdeletions..............................................................................50
Cytochrome P450.................................................................................................54
UCSF PGX Menu....................................................................................................54
FDA Re-labeling Initiative.......................................................................................55
FDA Re-labeling Initiative.......................................................................................55
Why Relabel Warfarin?...........................................................................................56
Warfarin Dosing Difficulties....................................................................................56
Pharmacokinetics and Pharmacodynamics............................................................57
CYP2C9 & VKORC1 Polymorphism for Warfarin......................................................58
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Business Strategies for Molecular Diagnostics in the Lab, 2nd Edition

Ethnic Variation for VKORC1: UCSF Data................................................................58

Metabolism of Tamoxifen.......................................................................................59
CYD2D6 Allele Frequencies...................................................................................60
Tamoxifen Therapy and 2D6 *4.............................................................................60
Tamoxifen Therapy and 2D6 *10...........................................................................61
Effect of 2D6 Inhibitors on TAM.............................................................................61
Tamoxifen Pharmacogenetics.................................................................................62
Statin Intensity and CHD Event Reduction.............................................................63
Genetic Studies of KIF6 710Arg............................................................................63
LDL-C Lowering by Statin Therapy..........................................................................64
CRP Lowering by Statin Therapy.............................................................................64
Pharmacogenomic and Pharmacodynamic Effects for Plavix..................................65
PGx of Clopidogrel.................................................................................................66
Genetic Association Between HLA and Drug Hypersensitivity..................................66
Prospective Clinical Trial of HLA-B*5701...............................................................67
Primary Work Setting 2008 PP..............................................................................71

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