Medical Device Link.

Originally Published IVD Technology September 2004

Diagnostic Executive Profile

Successful companies in every industry have executives who have not only a vision of the direction in which their companies should be going but also ideas on ways to get there. The IVD industry is no exception. But probably more so in the IVD industry, companies need executives with good ideas, considering the highly competitive nature of this industry. 

The IVD industry has gone through some difficult times during the past few years. For example, the industry has endured tough economic conditions and the consequent decrease in venture capital funding; increasing consolidation through various mergers and acquisitions; and changes in regulatory requirements. 

As companies continue to pursue success in the IVD industry, it takes executives with determination, inspiration, and clear goals to steer through the many challenges the market presents. The IVD industry is a high-stakes sector, requiring significant capital investment, compliance with strict regulatory requirements, and an eye toward cost savings and reimbursement issues. Add to that the race to keep up with technological advances, and the mettle of even the most experienced executives can get tested. In this article, executives from three IVD companies offer their thoughts on the industry’s challenges, and their strategies for coming out on top. 

Ed Fiorentino, president, Abbott Diabetes Care

In the rapidly advancing IVD industry, challenges can include taking advantage of increasing growth opportunities, and serving the ever-broadening customer base that such opportunities create. To this end, Abbott Laboratories (Abbott Park, IL) recently reorganized its medical products group. 

Abbott restructured its traditional diagnostics business into four divisions, each of which operates autonomously. These divisions include: diagnostics, which is devoted to immunoassays, clinical chemistry, and hematology; diabetes care, which is focused on monitoring systems for patients and healthcare professionals; molecular diagnostics, which is devoted to developing tests for cancer, infectious diseases, and genetic disorders; and point-of-care.

“The new structure provides more focus on and more accountability for the segments of the market where we see the most potential,” says Ed Fiorentino, president of Abbott Diabetes Care (Alameda, CA). “The customer base for each segment is quite different, and the expertise needed to be successful in them is different.” 

For example, the diagnostics division is focused on large-instrument systems, and the primary points of contact are in laboratories and hospitals. Diabetes care is more consumer oriented, and the key commercial target audiences include physicians, diabetes educators, pharmacists, and patients.

Abbott created its diabetes care division, Abbott Diabetes Care, by merging its MediSense business with TheraSense Inc., which it acquired in April. “We’re very excited about the merger of the two companies, which provides the potential for Abbott to be the best-in-class diabetes care organization in the marketplace,” says Fiorentino. 

The merger brings together the TheraSense FreeStyle and MediSense Precision product lines. According to Fiorentino, this merger will offer Abbott an opportunity to gain a larger slice of the diabetes market. “There is a lot of excitement about our current lineup of products, which provides a real opportunity to drive market share,” he says.

Second-quarter figures showed that the restructuring strategy, which was adopted earlier this year, was paying off with positive results all around. Revenues from Abbott Diabetes Care grew more than 50% during the second quarter, compared with the second quarter of last year. The division launched several new products during the second quarter, including the FreeStyle Mini and the Precision Xtra blood glucose test strip. A partnership with Smith’s Medical also resulted in appending the FreeStyle meter to Smith’s insulin pump. 

Fiorentino says the merger of TheraSense and MediSense has gone well, despite the fact that MediSense was headquartered in Massachusetts, and TheraSense in California. “That’s probably been the biggest challenge that we’ve faced,” he says. Because Abbott also markets its diabetes products overseas, Fiorentino has had to manage integrating not only the domestic business over long distances, but also the global operations of the two companies, including sales forces and distributor relationships.

Fortunately, this is the third merger Fiorentino has been involved with at Abbott. The diabetes division benefited from his experience, as well as his familiarity with the TheraSense staff and business, from the outset. In addition, he says the company adopted an “individualized approach toward employees” by creating a strong vision, treating people openly and fairly, and motivating them to be part of the new organization. 

Such an approach was helpful in retaining key talent and building a management team that was drawn equally from both MediSense and TheraSense. Even the move of the MediSense headquarters to California, with the attendant uprooting of northeastern staff and the increased cost of living, did not get in the way. And because the combined Abbott Diabetes Care staff has what Fiorentino calls “a real passion for this business,” product launches went smoothly in the midst of it all. “We haven’t missed a beat,” he says. “The outlook here is very strong.”

Abbott Diabetes Care is now looking forward to the possible launch of its FreeStyle Navigator continuous blood glucose monitor in 2005. The company submitted a premarket application for its glucose monitor to FDA in November 2003. The device gives patients results as frequently as every 60 seconds without the need for repeated blood tests, and indicates whether glucose levels are rising, falling, or stable. In addition, an alarm sounds if a patient’s glucose hits a dangerous level requiring immediate action.

Fiorentino says the Navigator has the potential to change the diabetes care market. The device should save the healthcare system money over the long term by reducing emergency room visits and hospitalizations among diabetes patients. “Navigator provides a new paradigm for better managing diabetes,” he says. “It can really make a difference because it should help people spend less time outside the normal range.” 

Fiorentino’s goals for the next 12 months include completing the merger of MediSense and TheraSense, which is about 75% finished, focusing on customer needs by aggressively introducing new products, and growing Abbott’s overall market share in the diabetes market. “The diabetes care sector should continue to grow rapidly,” he says.

At the same time, Fiorentino adds that reimbursement is a major challenge facing the glucose-monitoring sector and the IVD industry as a whole. 

Martin Madaus, president and chief executive officer, Roche Diagnostics

According to Martin Madaus, president and chief executive officer of Roche Diagnostics (Indianapolis), a major challenge the IVD industry faces is that the continual development of advanced technologies drives the stakes in the market even higher. Consequently, “significant long-term investments are required to be a major player,” he says, especially with a large percentage of tests nowadays priced at commodity levels. 

Roche has been making such investments—for example, in 2003 when it acquired Igen International Inc. (Gaithersburg, MD). This acquisition allowed Roche to maintain access to Igen’s electrochemiluminescence technology and continue “full speed ahead with product development,” says Madaus. 

The acquisition represents a long-term commitment by Roche to the field of immunochemistry, and the integration of chemistry and immunochemistry in labs. Madaus says that following the acquisition, the company’s sales grew 50% in the United States and 25% worldwide during the first quarter. Roche has also seen the integrated concept accepted by labs. “We are satisfied that our original strategy was correct,” he says. In addition, the company has been investing in and making advances in molecular diagnostics and diabetes care.

With the continued growth and rapid development of advanced technologies in the IVD industry, many companies are left with valuable intellectual properties that need to be protected. This is becoming, in most fields, more important than ever, says Madaus. Roche has an advantage because of its strong in-house research and development capabilities. “Most of our products still come from our own research and development,” he says. “We invest more than any of our competitors, and we also take some calculated risks with some of our developments.” The payoff is that the company’s intellectual property created in-house is easier to protect. 

For example, in May, Roche defeated a lawsuit filed by Promega Corp. (Madison, WI) that challenged Roche’s patents on its Nobel Prize–winning portfolio of DNA replication technologies. Although the court did find Roche’s patent on the Taq enzyme unenforceable, Madaus is confident the issue will eventually be resolved in the company’s favor. “We have pretty broad coverage with our polymerase chain reaction patents,” he says. “We have withstood those kinds of attacks in European courts before.”

Another challenge IVD companies must overcome is the often lengthy regulatory process that new tests undergo to be approved and put on the market. Roche faced such a regulatory hurdle when the Office of In Vitro Diagnostic Device Evaluation and Safety concluded that its AmpliChip CYP450 could not be classified as an analyte specific reagent (ASR) and therefore could not be sold until it received regulatory approval. 

Madaus contends that Roche originally released the AmpliChip as an ASR to a limited number of clinical labs that wanted to use the device for pharmacogenomics testing. The company interpreted the ASR rule as being applicable to chip-type products. However, FDA informed Roche that in developing the ASR rule, the agency never considered that there could be multiple analytes in a single ASR. After voluntarily removing the AmpliChip from the market, the company began meeting with FDA to pursue gaining approval for the device. 

Meanwhile, Roche has been working with AdvaMed (Washington, DC) to revise a 1999 AdvaMed guidance document that would better define and standardize ASRs. Nonetheless, Madaus and many others in the IVD industry believe that the ASR regulation is not effective in meeting its original intent, which was to standardize home-brew tests. Madaus says that only a small percentage of home brews are currently regulated by FDA or even make use of ASRs. “I think our work with AdvaMed will help, but it will not solve the issue,” he says.

In an effort to balance FDA’s need for oversight with IVD manufacturers’ need to get their tests to market more quickly, Roche and other companies have proposed a new regulatory category called in vitro analytical tests (IVAT). Madaus calls it “an attempt to seek a dialogue” on the issue with FDA. 

According to the proposal, IVATs would be submitted for 510(k) clearance as analytical tools, and would have to conform with good manufacturing practices and other quality guidelines. However, clinical utility would not have to be established before the IVATs could be used in labs. Instead, clinical data would be gathered while the test is being used. Such data could then be submitted when the test seeks full FDA approval. 

Madaus says that if it is accepted, the IVAT proposal could shorten the time it takes to bring tests to market from three years to one and a half. The proposal would also encourage further investment in new testing technologies by bringing returns on investment more quickly.

Madaus adds that for such areas as molecular diagnostics, improving the time-to-market for such tests could contribute positively toward changing the practice of medicine by expanding the use of innovative tests and the benefits they offer. For example, in the future, new molecular diagnostics technologies may reduce the time it takes to obtain a definite diagnosis of leukemia from several days to less than one day. 
At this point, however, there has been no response from FDA regarding the IVAT proposal. “I’ve heard everything from ‘great idea’ to ‘this will certainly be rejected,’” Madaus says.

Donald Pogorzelski, president, Genzyme Diagnostics

As IVD companies strive to overcome the many hurdles they face in developing their products and getting them to market, Donald Pogorzelski, president of Genzyme Diagnostics (Cambridge, MA), sees an even bigger challenge to the industry. The IVD industry, he says, is “grossly undervalued,” both from a financial standpoint and in terms of the value patients and physicians place on the information that diagnostics provide.

During the past few years, investment growth in the IVD industry has remained flat even though Medicare spending has increased, says Pogorzelski. Although the healthcare sector accounts for 11% of the U.S. GDP, and 22% of that sector consists of healthcare products, only 4% of those products are IVDs, he explains. “That’s something we need to work on pretty aggressively to address over time: better use of better diagnostic tests resulting in more targeted treatments, better patient care, and reduced costs to the healthcare continuum,” he says. 

The goal, says Pogorzelski, is to promote the IVD industry. “We really must expand the visibility and understanding of what the diagnostics industry offers, because our value is understated,” he says. “The industry as a whole needs to stand up and be counted. People need to understand who we are, what value we bring, how we bring this value, and the key role diagnostics will have in the future of healthcare.”

The information that IVDs provide can have a dramatic effect on patient care management. However, Pogorzelski does not believe the public has the same perception. People with money who have an interest in healthcare, he says, tend to prefer to invest in physician training, general healthcare education, and drug development. Meanwhile, “diagnostics is last on everyone’s list,” he says, because the general public does not yet understand the impact that IVD tests can have on the cost equation of healthcare. “I don’t think people understand what IVDs are,” he adds. 

Point-of-care testing (POCT) is one exception in which the patient population can directly see IVDs in action. 

With the immediate response that POCT offers, the demographics of the baby boom generation suggest that there will be increasing demand for this type of testing, says Pogorzelski. Genzyme has been following this trend since 1995, which demonstrates that POCT is the way the diagnostics market is going. “We believe that the future of the IVD industry hinges on developing point-of-care decentralized laboratory testing,” Pogorzelski says.

Though this strategy has been paying off well so far for Genzyme (the company will launch six new POC tests this year, including four in the United States), the POCT market presents its own challenges. POCT technologies, says Pogorzelski, still need to improve to the point that their performance is comparable to central-lab test results. Until now, the objection to POCT by hospital labs has been difficult to overcome, he says. However, Genzyme has been working to improve POCT technologies so that the performance issues can be resolved. “We have miles to go before we can sleep. We need the healthcare system to embrace POCT,” he says. 

As the baby boom generation ages without improving their dietary and exercise habits, and without taking optimal care of their health in general, another area that could show promising growth is the cardiology market. “I believe that cardiology is a very key area for diagnostics on a go-forward basis,” Pogorzelski says. Along with diabetes and infectious diseases, cardiology is one of the three primary niches in which Genzyme will continue to focus its development efforts.

Genzyme Diagnostics’ targeting of more-common conditions contrasts with the strategy of its sister company, Genzyme Pharmaceuticals, which focuses on rare conditions. According to Pogorzelski, Genzyme chairman Henri Termeer allows the various Genzyme business units to focus independently on areas as they see fit, as long as they have the patients’ welfare in mind. As a result, common overlapping points among the various divisions are beginning to evolve, based on technologies that have become available. Pogorzelski says one such common point, theranostics, could represent the future of diagnostics. A combination of diagnostics and therapeutics, theranostics involves testing a sample at DNA levels and identifying the specific therapy and the correct dose of that therapy needed to appropriately treat individual patients.

In such areas as cancer treatment, an emerging sector in Genzyme’s genetics and therapeutics divisions, new theranostics products developed with the diagnostics division could eliminate the need for hit-and-miss therapy regimens. Someday, Pogorzelski says, theranostics will result in a patient being diagnosed in a single office visit, and treated properly with the right dose of the right medication. This will save time and money for the healthcare system. Focusing on theranostics, both internally and in conjunction with the other divisions, is a goal of Genzyme Diagnostics, he says, because it offers “a real opportunity to favorably affect healthcare.” 

Christina Elston is a freelance writer in Altadena, CA.

Copyright ©2004 IVD Technology