Industry / Business
Diagnostic chemicals become big business Fast growing market for diagnostic reagents for lab tests now accounts for about $500 million in annual sales Rebecca L. Rawls C&EN, New York One of the most obvious changes in the past 10 years in the way medicine is practiced in the U.S. has been the rapid increase in the use of clinical laboratory tests to establish or confirm the diagnosis of a patient's illness. A decade ago, only the major medical research centers had the capability of doing extensive analysis of blood or other biological components. Now, even in fairly remote areas, laboratory testing facilities are available and widely used by both hospitals and private physicians. Clinical laboratory service has become an important business in the U.S. with estimated sales last year of $8.2 billion. This year about 13,000 private and hospital-affiliated clinical laboratories will perform about 4 billion tests. These laboratories provide one of the fastest growing markets today for fine chemicals. During the past five years, sales of diagnostic reagents for labora-
Reagents fastest growing part of clinical m a r k e t . . . 1000
$ Millions*
800
600 /
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400
200
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C&EN June 30, 1975
1974
tory tests have grown 21% per year. Last year such reagents accounted for $490 million in drug and chemical sales. An additional $370 million of instruments and nonreagent consumables such as test tubes and pipets also were sold to this market last year, much of these from the same chemical, drug, and instrument companies that supplied the reagents. The market for all these clinical diagnostic products has been growing at a compound annual rate of about 16% since 1969, and is expected to continue to grow at a greater than 12% annual rate through 1980. Since the late 1960's more and more major drug and chemical makers have been offering products to the clinical laboratory diagnostics market. The extremely high sales growth of the period may be the primary incentive behind these companies' entry into this market, but other factors also make it an attractive outlet for large drug and chemical firms. Along with other health care industries, it should be relatively recession resistant. It is a market that appreciates high technology, making it particularly attractive to companies that have large R&D and quality control efforts. Also making this market attractive to large chemical and drug companies are recent moves on the part of the Food & Drug Administration to encourage high standards of reagent quality within the industry. Such moves are seen by some observers as the first steps toward establishing close government regulation of this industry, perhaps paralleling that found over the prescription drug industry. If the drug industry's experience with federal regulation is repeated for diagnostic reagents, increased government regulation will benefit large companies by making compliance with the regulations so expensive that smaller companies will have difficulty marketing products. Early suppliers to the diagnostic laboratory usually concentrated either on reagents or instrumentation. But many of the large new companies in the field today offer a complete system of instruments, premeasured reagents, technical backup, and frequently computer processing capability. The package is intended to allow a laboratory to provide data on diagnostic questions with a minimum of highly trained, and expensive, technical personnel. Beckman Instruments, for example, places strong emphasis on what it calls a "total answer machine," including instruments, reagents, and technical
backups. It has been marketing such a system for the past nine months. "We think we offer a complete system [that is] better and more customer oriented than many of our competitors," says Dr. Robert Baumann, manager of the company's biologicals and fine chemicals division. Major companies gear their instrument-reagent packages to different facets of the diagnostic laboratory market. Dow Chemical's diagnostics division, for example, aims at the small 50- to 200-bed hospital or private clinic that does not perform enough diagnostic tests to afford expensive, highly automated instruments, explains business manager James R. Seed. Dow's package includes fundamental instrumentation that places more emphasis than many of its competitors on the chemistry represented by its test. The division markets a line of fundamental colorimeters and spectrophotometers as well as somewhat more sophisticated protein measuring instruments, but many of its customers use equipment already available in their laboratories. The key to Dow's products, as Dr. Seed sees it, is that they offer very sophisticated and frequently patented testing methodology packaged to be performed easily in the smaller laboratory. Dow's triglyceride test, for example, contains 20 components. It requires only one or two reaction steps in the laboratory. One of the first major chemical companies to enter the diagnostic products
. . . with most going to hospital laboratories
Hospital lab· 60% F«4«raJ lab·* Privât· physician· L
11%
> Privai· lab· · 22%.
1974 U.S. sales of clinical reagents Sourc·: IMS America Ltd.
market, Dow began to market diagnostic products seriously in 1969. Its basically chemical approach to clinical testing has paid off. Since 1969, Dow's sales to the clinical diagnostic market have grown more than 30% per year, twice the growth rate of the market as a whole. And Seed expects the company to continue to lead the industry in sales growth through the end of the decade. Abbott Laboratories' diagnostic division also emphasizes high-quality chemistry in the tests it markets. However, the 12 reagent kits Abbott markets are designed much more carefully for use in Abbott's automatic instrument. The entire package, introduced in 1972, is aimed at large hospitals and private laboratories. Dr. Carl P. Henson, manager of clinical chemistry for the division, explains that the Abbott instrument uses one sixth to one twelfth the volume of reagents that would be needed to perform the same tests manually. Abbott's reagent kits frequently use relatively expensive enzymic reagents whose higher cost is compensated by the small volume needed for the Abbott analyzer. Union Carbide entered the diagnostic laboratory market in 1972 with an instrument-reagent package aimed at the medium-sized hospital laboratory. The system was expanded earlier this year to include a computer processing system that both converts chemical data into final test results and compiles test findings. Current annual sales of this system approach $20 million. The company's introduction earlier this month of the first automated instrument for radioimmunoassay testing (C&EN, June 23, page 6) also follows its complete system philosophy. The company has set up its own goat and sheep ranch to produce the immunological reagents that the instrument uses. Du Pont's instruments and reagents are so tightly integrated that the instrument cannot be run without Du Pont reagents, and the reagents cannot be used in any other instrument. In fact, it is not really accurate to call the consumables that Du Pont markets for its automated clinical analyzer reagents at all, says Thomas L. Defosse, national sales manager for the products. Du Pont's test packs include the reagents used for an individual diagnostics test premeasured and packaged in a container that serves as the reaction vessel and cuvette, and even programs the instrument to perform the proper tests. Du Pont's system, on the market since late 1970, aims for a broad market including low-volume and fairly high-volume laboratories. The system performs one test at a time, unlike many instruments that run one test on several samples at once. Unlike most systems, the cost per test in the Du Pont analyzer is the same regardless of the volume of tests for laboratory runs.
what test it can be used for, and how many tests can be run from each reagent package. Stronger quality assurance measures are on the way, however. FDA is in the midst of preparing a product class standard for the most commonly run diagnostic test, that for blood glucose. The class standard, similar to the U.S. Pharmacopoeia standards for drugs, will establish a particular test method run under specified conditions of the standard to which all products marketed must be compared. Reagent packages will be required to indicate whether the reagents give results at least as accurate as the standard. Products not meeting the standard still can be sold, but FDA hopes, Diagnostic products market is expected by requiring that these products be labeled as not meeting the standard, it to grow 12% annually through 1980 can discourage their use. The agency hopes to have the glucose standard This gives the Du Pont system an advantage in small laboratories and a published by the end of the year to be disadvantage in very large clinics. Du followed by about 10 others for the Pont's first instruments could run more common diagnostic tests over the about two dozen of the more common next four years. These will be difficult standards to meet, an FDA official exdiagnostic tests. Recently, however, test packs development has expanded plains. Not all products currently on to include many less frequently run the market will be able to meet them. Major drug companies selling to the procedures. A particular instrument can perform no more than 29 different diagnostic testing market all emphatests, and the combination of tests size the high quality of their reagents available can be modified to fit the and fully expect to be able to meet the upcoming FDA standards. In fact, needs of particular laboratories. Since reagents are the major con- many expect to gain market share at sumable portion of these diagnostic an- the expense of smaller, less chemically swer system packages, they represent oriented companies now in the field the area of greatest growth and highest when the standards come into effect. If profit for drug and chemical com- these class standards are forerunners of panies. Union Carbide, for example, extensive government effort to assure estimates that a five-year supply of that only high-quality diagnostic rechemicals for its automatic analyzer agents are marketed, then the large, represents the same volume of sales for high-technology chemical and drug the company as the original instrument company may come to dominate the purchased. For its new radioimmu- diagnostic laboratory supply market noassay analyzer, which uses much completely within the next decade. Exactly how large that market will more expensive immunological reagents, one year's chemical reagent be a decade from now is hard to detersales will equal the cost of the instru- mine. As the market matures, few companies expect sales to continue to ment. To assure a steady reagent market, increase at their current growth rate. many companies make special arrange- In fact IMS America, a market rements to get their instruments in the search group specializing in the health laboratories. Abbott and Beckman, for care field, already has seen a slight fallexample, offer "reagent rental" pro- off in diagnostic reagent sales over the grams, in which the company supplies past year. Still, fear of malpractice a laboratory with its instrument in ex- suits is causing physicians to be inchange for a long-term contract for re- creasingly defensive in a diagnosis of agents at a somewhat increased price. patient ailments. They are asking for Beckman and others also lease instru- more tests to back up their diagnoses, a trend that is likely to continue. ments to laboratories. The general trend in medicine today As markets for drug reagents grow, so does the attention they are receiving toward early detection of diseases and from FDA. So far efforts to regulate preventive medicine also favors more the quality of these products are limit- clinical testing, and is not likely to reed to labeling requirements that went verse in the near future. Finally, ininto effect last fall. The labeling must creased third-party payments for mediinclude the contents of the reagent, cal expenses is another continuing trend that favors increased clinical diagnostic testing. On the basis of these trends and others, analysts and chemiOn the cover cal companies are predicting continuScientist at work at Beckman Instruing sales growth of reagents and instruments' diagnostic and clinical chemments in the range of 12 to 15% per icals plant in Carlsbad, Calif. year through 1980. D June 30, 1975 C&EN 9
