Medical Device Link.

Originally Published IVD Technology September 2004

Global Diagnostics

Industry experts expected the sequencing of the human genome (completed in February, 2001) to put the IVD industry and diagnostic laboratory technology on track to dramatic change. The shift in technology has not been as rapid as initially anticipated. However, in some ways, this change has begun. 

Significant research in functional genomics has taken place over the past few years. Along with advances in bioinformatics, miniaturization, and microelectronics, this research has helped integrate clinical and traditional medical engineering with components derived from the information and computer sciences industries. The microarrays and biochip products born from these developments have accelerated medical research and drug discovery. Thus, laboratory medicine is experiencing the dawn of the era of molecular medicine, when tests based on protein and nucleic acid targets have been derived from pathogen and human genome research. This new era is opening new markets for IVD tests and devices. 

When the full realization of this molecular medicine era will come to pass has yet to be determined. Consumer demand for molecular tests such as those for inherited diseases, prenatal screening, and some pathogens is growing. Currently, large reference, academic, and hospital-based laboratories run most of their molecular tests for affiliated physicians or provide services for smaller hospitals. Few commercial kits are available for the majority of these tests, so established molecular testing labs rely on tests developed in-house to serve their clientele. Much of the potential of the market for molecular medicine lies in the ability of smaller labs and other facilities to perform these tests. 

Global Market for Molecular Tests

The business of providing genetic testing services is exceptionally lucrative. According to published price lists, simple single nucleotide polymorphism (SNP) panels sell for anywhere from $100 to $200 and full gene sequencing goes for $1600 to $2500. 

In 2003, U.S. molecular test service revenues were at least $1.7 billion and are increasing at approximately 15% per year.¹  The market for providing these testing services thrives. The reagents and consumables used to perform these tests cost only a fraction of their selling price. The pricing structure is based on the investment that labs have made in developing the tests. 

In the next several years, progress in molecular medicine will revitalize and energize the IVD industry (see Table I). Since the mid-1990s, IVD sales have lumbered along at a 3–5% annual growth rate.¹ Major segments such as clinical chemistry, immunoassay, and hematology have stalled at almost insignificant growth. Over the next five years the growth of this market will accelerate. 

The world market for diagnostics in 2003 was estimated at $28 billion. This market is expected to grow 7% annually to $39 billion by 2008.¹ This assessment includes all laboratory hospital-based products, over-the-counter (OTC) devices, and rapid tests performed at the point of care (POC). 

In 2003, North America, Japan, and Western Europe made up 85% of the total market for IVD reagents, with each possessing 43%, 31%, and 11% of that 85%, respectively (see Table II).¹ However, increased test usage in emerging countries is spurring the growth of the IVD market in these less-developed areas. Emerging economies in China, Latin America, India, and Eastern Europe will grow from 8% of the world market, which they held in 2003, to 10% in 2008.¹ 

Table I. Worldwide IVD sales by product market. Source: Kalorama Information (New York City) (click to enlarge).

The demand for technologically advanced health services by the growing middle class in China, India, and Latin America has created an enormous growth potential for the IVD markets in these areas. Between 2003 and 2008, emerging markets worldwide will experience 15–20% annual growth rate, while areas with already-developed IVD markets will see annual growth of 3–7%.¹ 

Thriving IVD Sectors

Three test segments offer the greatest contribution to the growth of the worldwide IVD market—OTC testing, flow cytometry, and molecular tests. General POC testing, both inside and outside the hospital, has not achieved the 15–20% market growth predicted in the late 1990s. However, in the OTC sector, the home glucose testing market continues to gallop, with an annual growth rate of 15%.¹  

OTC Testing. Inside the hospital, the increased use of rapid-test devices at the POC and in labs is driven by economics. Managed care has focused on reducing costs, thereby pushing hospitals to streamline care and reduce patient length of stay. The expansion of the test menu available on rapid-test devices has met this call for lower costs and has added growth to the POC testing market segment. The market for rapid cardiac marker tests is increasing the fastest within the POC testing segment, with an estimated annual growth of 15–20%.1 Critical-care analyte tests (e.g., blood gases, electrolytes, glucose, etc.) performed in intensive care units and the operating room have also contributed to the expansion of the POC testing market.

Flow Cytometry. Growth in the markets for flow cytometry and molecular tests is a direct result of technological advancements in medicine that took place after the sequencing of the human genome. Flow cytometry can be used for any test procedure that involves the counting and analysis of particles—from individual cells to synthetic microspheres. Flow cytometry is flexible and sensitive enough to rapidly process, quantitate, and analyze extremely large numbers of these particles. 

Traditionally, flow cytometry was used for white blood cell CD4 and CD8 counts to assess the immune status of AIDS patients as well as to diagnose and monitor blood-based cancers such as leukemias. Recently, flow cytometry has been applied to other types of testing. 

One of the most promising applications of flow cytometry is its use in rare- event cell counting, which allows the technology to detect one targeted event in a cell or microparticle in a background of as many as 100 million cells. This technique is being developed to select fetal cells in maternal peripheral blood for prenatal screening and to detect cancer cells in urine and blood. Once the potential of flow cytometry is fully harnessed, this technology will decrease the use of invasive techniques such as amniocentesis and tissue biopsy.

One notable example of the success of a flow cytometry–based product is xMAP bead array technology by Luminex Corp. (Austin, TX). This system uses a microscopic fluid stream and digital signal processing to perform high-speed tests in a miniaturized format. Molecular and immunoassay reactions take place on the surface of internally color-coded microspheres. The color code of each sphere identifies the target analyte, and the benchtop analyzer is capable of performing up to 100 assays simultaneously. 

The system was officially launched in 2000, and by December 31, 2003, the company had an installed base of more than 1900 systems and 19 strategic partners had either released commercialized products based on the platform or were distributing xMAP products. The technology has become a popular tool in life science and medical research and has been commercialized for multiplexed clinical human leukocyte antigen, antinuclear antibody, prenatal screening, and pharmacogenomic tests.

With the continued commercialization of various other bead-based array products by companies such as LaunchCyte LLC (Pittsburgh), Illumina (San Diego), Lynx Therapeutics Inc. (Hayward, CA), MiraiBio Inc. (Alameda, CA), One Lambda Inc. (Canoga Park, CA), ParAllele BioScience (South San Francisco, CA), and Tm Bioscience Corp. (Toronto), the market for flow cytometry–based tests is expected to increase 15% annually to reach $1.3 billion in 2008.

Table II. Worldwide IVD reagent sales by location. Source: Kalorama Information (New York City) (click to enlarge).

Molecular Testing. A more direct result of the sequencing of the human genome is the development of the genetic and pharmacogenomic segments of molecular testing. Approximately 30,000 genes make up the human genome. An estimated 5% of these have been assigned diagnostic significance. Thus, potentially 1500 gene-based tests—even more when testing for gene combinations is considered—could be commercialized. This market opportunity is set to revitalize the IVD industry. 

Currently, molecular testing is a hybrid industry of mature products and others that are in the introductory phase of the product life cycle. Mature molecular tests for infectious diseases and blood transfusion pathogen screening have paved the way for more-sophisticated molecular medicine. 

This test genre has made a valuable contribution to clinical diagnostics on many fronts. 

DNA-based tests for infectious disease provide rapid detection (i.e., hours versus days) of pathogenic bacteria and viruses and in some cases allow for the determination of antibiotic resistance. Molecular IVDs have also made blood transfusions safer due to their ability to detect lower concentrations of pathogens in donated blood.

DNA tests for mutations of known human genes used to diagnose common gene-based disorders, inherited diseases, and cancer are still in the early introductory phase of commercialization. These tests can indicate the prognosis of diseases, aid in treatment choices, and help monitor treatment efficacy. 

Pharmacogenomics, predisposition diagnostics, and other molecular diagnostic applications are expected to show 25–30% annual growth over the next 5 to 10 years. Cancer, diabetes, and cardiac diseases represent some of the diseases for which there is a tremendous unmet clinical need for improved diagnostics that may be met by molecular medicine. 

SNPs to a particular disease or medical outcome, the technology used to perform genetic testing and screening is advancing. SNP screening has enabled practitioners to determine whether their patients are carriers of mutations for cystic fibrosis and other inherited diseases. In addition, cytochrome P-450 (CYP450) enzyme panels provide valuable drug metabolism information for almost half of all classes of commercial drugs, including analgesics, antidepressants, antihistamines, heart and blood pressure medications, antidepressants, and antipsychotics.

The worldwide market for such molecular tests is expected to grow from $2.1 billion in 2003 to almost $5 billion in 2008.1 However, this optimistic market outlook is fraught with several critical stumbling blocks, one of which lies in the U.S. IVD regulatory system. 

The United States holds the largest single market for IVD products and has a great impact on how the global IVD industry develops. Although the molecular test market has large potential for growth, it faces a number of significant reimbursement and regulatory hurdles in the United States.

The commercialization of sophisticated new IVD devices and technologies comes as a double-edged sword—many of these new products will carry a high price tag and the reimbursement structure in the United States has not evolved to cover many new approaches to patient care. The result, as is often the case, is that technology is far ahead of healthcare regulations and reimbursement plans. The onus is therefore on manufacturers to prove that their new interventions are not only effective but also valuable additions to patient care.

Part of the value of new IVD technologies will be demonstrated through medical research. How best to use genetic factors to evaluate patients at risk for disease is still being determined. The link between genes and disease risk provides an ongoing market opportunity with great potential for IVD product development.

Another major stumbling block lies in the current state of the infrastructure available for genetic testing. Estimates of the U.S. molecular test market indicate that there are fewer than 200 dedicated molecular diagnostic laboratories in the United States, with very few additional test sites to come. Because of the complexity of running molecular tests, these tests are currently performed only in clinical labs associated with large healthcare and academic institutions. As a result, the penetration of molecular tests into the hospital lab market has stalled. Future growth of this market will come from the simplification of systems that can be placed in mid-sized and small hospitals. 

International Market Disparity

When compared with IVD products available in Europe, there are very few molecular test systems that meet the needs of smaller labs on the U.S. market. Invader technology by Third Wave Technologies (Madison, WI) is the market leader when compared with other molecular test technologies available in the U.S. market from manufacturers such as Luminex Corp., Nanogen (San Diego), Cepheid (Sunnyvale, CA), Sequenom (San Diego), Panomics (Redwood City, CA), and Tm Bioscience. By comparison, European labs have access to a broader selection of gene-array tests (see sidebar). 

Hurdles posed by the U.S. regulatory system are the primary causes of this disparity. Analyte specific reagents (ASRs) and ASR-like products are tests that are sold to labs as individual components. Laboratorians use ASRs in in-lab-developed test procedures. ASRs are not finished kits that include all reagents, calibrators, and controls required to perform a test. Nor do they include a test procedure. Most molecular labs use ASR-type tests. 

ASRs were initially introduced to improve the availability of immunohistochemical stains for which manufacturers had not sought FDA market clearance because the cost was too high for the revenues that would come from such products. The ASR regulatory path has become the chosen commercialization route for many molecular tests for similar cost-versus-revenue reasons. The minimal regulatory burden involved in releasing tests as ASRs allowed for a lucrative market, even in the earliest stages of this market sector. From 1998 to 1999, the global market for all molecular genetic and infectious disease tests was approximately $500 million. 

Under the ASR regulations, known as the ASR rule, test manufacturers are not required to seek FDA premarket approval for class 1 (i.e., low-risk) ASRs. Classes 2 and 3 ASRs are higher-risk tests, such as those used in blood banking for infectious-disease screening and in the diagnosis of highly contagious and life-threatening diseases such as HIV and tuberculosis. Manufacturers are required to apply for FDA premarket approval only for classes 2 and 3 ASRs.

Several companies have attempted to market complex microarrays and panels of tests as ASRs, because as ASRs these products would not require premarket approval from FDA. DNA array biochips have proven valuable in the diagnosis of leukemias, ovarian cancer, and (HPV) analysis. However, some manufacturers of these chips have learned that a biochip or panel of tests is not exempt from FDA scrutiny and cannot be considered an ASR. 

The market status of complex tests initially released as ASRs (e.g., the CYP450 Amplichip by Roche Diagnostics (Basel, Switzerland), the OvaCheck panel by Correlogic (Bethesda, MD), and the Inform HPV test by Ventana Medical Systems (Tucson, AZ) is still being determined via discussions between the companies and FDA.

As a result of such cases, whether genomic SNP and pharmacogenomic tests will be regulated as class 1, 2, or 3 IVDs has yet to be determined. Industry sources expect that in the short term—depending on how the product is packaged, labeled, and promoted—the class 1 designation will prevail. However, the proper classification of these products in the long run has yet to be decided and is the source of considerable uncertainty. 

Conclusion

While POC testing and flow cytometry will contribute to the growth of the IVD industry over the next five years, most of this anticipated growth will be due to increased molecular testing, particularly in the United States. However, many factors contribute to the uncertainty of the market for genetic tests in the United States, and this market may not achieve the growth that has been anticipated. 

The primary source of future growth in the market for clinical molecular tests is the commercialization of tests and platforms designed for use in smaller labs that currently purchase molecular lab services from larger labs. However, the regulatory climate in the United States may inhibit market expansion by preventing manufacturers from meeting the need for these products. 

Reference

1. The Worldwide Market for In Vitro Diagnostic Tests, 4th ed. (New York: Kalorama Information), in press.

Shara Rosen is the lead diagnostics analyst for Kalorama Information (New York City) and owns and operates StratCom (Montreal). She can be contacted at stratcom@pagebleu.com. 

Copyright ©2004 IVD Technology