Positive Diagnosis

29 March 2009 (Last Updated March 29th, 2009 18:30)

The European IVD testing market is benefiting from an ageing population and associated diseases. Early diagnosis can save more lives and cut costs, making it a true recession beater, says Frost & Sullivan's Gayathry Ramachandran.

Positive Diagnosis

In vitro diagnostics (IVD) tests refer to the tests conducted in a test tube or in a controlled environment outside the living organism. IVD tests are beneficial for the clinical diagnosis of a disease. Their importance and clinical relevance have made them popular amongst physicians and patients, driving market growth.

One of the key trends driving the IVD market is Europe's ageing population. There is an increased incidence of diseases such as respiratory infections and urinary tract infections. The adoption of point-of-care testing (POCT) has increased turnaround times of results and therefore contributed to early diagnosis and treatment. IVD manufacturers are responding to major trends such as consolidation of laboratories by improving pre- and post-analytical automation, which reduces workflow management.

The need for faster detection of infectious agents is forcing laboratories to move away from the routine culture-based microbiological methods towards molecular techniques that provide rapid and accurate results.

Central laboratory testing remains one of the key areas in hospitals, while methods such as glucose testing, cardiac testing and coagulation tests have become decentralised. They therefore find more usage in ICUs, physicians' offices and nursing stations. The growth sectors within the IVD market are molecular assays specifically aimed at cancer testing, cardiac marker testing and blood glucose measurement.

In spite of the challenges posed by regulatory authorities and compulsive CE marking, the IVD market is set to grow further. The introduction of new markers, improvised technologies, high sensitivity and increased specificity of tests will continue to increase the uptake of IVDs. Personalised healthcare, where patients play a major role in the diagnostic process, will drive the market in the future.

Key challenges

Although the IVD market is lucrative, it faces challenges in terms of reimbursement and regulatory hurdles. The complex reimbursement procedure is a challenge faced by the commercial laboratory industry. Labs need to select reimbursement codes from a list that may not include technologically advanced tests. This means that payments made for a particular test may not cover the technological cost involved.

This kind of reimbursement structure affects the commercialisation of developing segments of IVD, like molecular testing. As the cost involved in the development of novel molecular markers increases, manufacturers worry that the coding and payments for molecular tests will prevent them from recovering the R&D expenditure. Proving the clinical significance of a test is a deciding factor for reimbursement. The IVD manufacturer must prove that the test has regulatory approval and is applicable to a large geographical region.

The IVD market is highly competitive and manufacturers must remain technologically advanced to maintain an edge. The dearth in the number of skilled professionals available to perform lab tests is driving laboratories to adopt automated solutions that simplify their workflow at lower costs.

Future focus

Frost & Sullivan believes that infectious disease testing, molecular testing and POCT will be key segments to watch out for by 2014. Sectors such as clinical chemistry, immunoassay, haematology and coagulation will continue to grow at a steady rate with the help of automation, which will enable better adoption rates.

Roche Diagnostics, a leading IVD market participant, is continuing to focus on collateral business segments such as immunohistochemistry with the acquisition of Ventana Medical Systems. This is a key step towards companion diagnostics. The future direction of the industry will be in the development of early disease detection technologies. Merging in-vitro and in-vivo technologies will continue to pave the way for molecular medicine and personalised healthcare.

"Although the IVD market is lucrative, it faces challenges in terms of reimbursement and regulatory hurdles."

This trend has been observed by leading diagnostic manufacturers such as Siemens Medical Solutions, which has gained momentum in the market with the acquisition of DPC, Bayer Diagnostics and Dade Behring. This enables the focus on in-vitro and in-vivo together to provide integrated care for patients. Recent technological advancements are towards areas such as the discovery of new biomarkers, expanding test menus, improving assay sensitivity and better connectivity. The growth potential for this market lies in miniaturisation, information technology, automation and genomics/proteomics.

Offering connectivity solutions and automated solutions have been the technologies that have found broad application in the European IVD industry. Consolidation of workstations has encouraged manufacturers to develop integrated analysers for complete laboratory automation. The adoption rate of these technologies will remain high over the next five years.

End users for diagnostic products, such as central laboratories, decentralised testing centres and self-testing patients, have varying needs in the market. Although customer service and easy-to-use technologies are of prime importance to all these users, features such as miniaturisation are needed at facilities outside core laboratories. Central laboratories, on the other hand, also look for modular instruments with high throughput capabilities.

Personalised research

One of the hot areas of research is biomarker discovery, which will revolutionise the diagnostic industry. However, it currently faces challenges such as the high investment required to prove clinical validity. This challenge can be overcome to some extent with the help of partnerships between pharma companies and diagnostic companies. This is referred to as companion diagnostics.

For instance, tremendous research is taking place in the field of cancer diagnostics. The importance of molecular tests has been elucidated by the success of the human genome project. The identification of mutated genes, which drive oncogenesis, has been the key aim of cancer research. This has allowed rapid proliferation of specific NAT for the detection of tumour markers and holds strong potential for the growth of the market.

The human genome project has opened up space for immense research in the field of cancer diagnostics, especially for early detection and prevention studies. Feedback suggests that biomarker detection and drug discovery processes must happen simultaneously to produce specific drugs for a cancer cure.

Personalised healthcare is essential for cancer treatment. However, major challenges remain for identifying the right biomarker, which will be crucial for the commercial success of the test. To popularise companion diagnostics, access to the tests is very important and therefore the clinical validity of the test must be proved.

As companion diagnostics aid in reducing the time for clinical trials, this will encourage pharmaceutical companies to liaise with the diagnostics companies to develop strategies for biomarker identification. This will also support the diagnostic industry and enable it to become an integral part of healthcare delivery.

Global economic effect

The diagnostics industry is definitely positioning itself on the right track – towards personalised healthcare. However, as with all other industries, it faces the challenge of the global economic downturn.

"The ageing population and the incidence of disease will continue to increase, but companies will have to introduce innovative technologies that will help to save money."

The impact of the slowdown on the diagnostics market appears minimal in the short term. Profit margins of suppliers have been affected, especially in the case of imports of reagents from countries such as the US, due to varying exchange rates. The long-term implications may be more severe. Although the ageing population and the incidence of disease will continue to increase, suggesting that diagnostic tests will still be in demand, companies will have to introduce innovative technologies that will help consumers to save money.

If the recession continues to deepen, this will also affect the cash flows for technology development, which in turn will affect the projects undertaken for diagnostic innovation. Companies that are known for technological developments may well focus on selling what they already have and reduce investment on research.

To handle the global slowdown and make the long-term impact as minimal as possible, IVD manufacturers will be forced to adopt varied business models to remain profitable. A common strategy will be through mergers and acquisitions (M&A). This will happen primarily due to less funding being available from venture capitalists. This reduced funding will have a high impact on smaller companies. M&A between the leading players and new market participants will therefore be a win-win situation, as it will provide innovative intellectual property to larger companies and provide the smaller ones with a better platform on which to launch their products.

A growing preference for refurbished diagnostic instruments can also be expected in the long term as a result of the biting economy. A few laboratories already prefer refurbished instruments due to having a better rapport with the suppliers. This enables them to procure the instruments that best fit their requirements. In the wake of competition from refurbished instrument suppliers, manufacturers are setting up their own refurbished instrument units. This will enable them to gain better profits and help the laboratories to save money in the time of recession.

Anticipating the impact of the downturn, manufacturers will now feel the need to develop early detection technologies, which will help to reduce overall cost. Hospitals will also concentrate on improving existing technologies and liaise with healthcare professionals to create awareness about the importance of the existing panel of tests.

The healthcare industry appreciates the importance of early diagnosis and the role of diagnosis in developing patient-friendly therapy. This will continue to fuel the growth of the IVD market in Europe and other parts of the world. The impact of the global recession will be felt long term in terms of a reduction in the volume of testing. The prescription of special tests will also be delayed due to lack of insurance. But Frost & Sullivan expects the impact to be minimal compared to other industries, due to the indispensable nature of the products.