The COVID-19 pandemic put unprecedented pressure on clinical laboratories and in vitro diagnostics (IVD) companies. A glaring lack of test kits, supplies, and staff drove record amounts of money into the IVD space, both from governments and venture capital. Diagnostic testing companies received $5.3 billion in capital alone in 2020, compared to $2.3 billion in 2019, according to Outcome Capital, a life sciences advisory and investment banking firm.
But what happens next? Will that level of investment remain? Has research and development in other categories suffered? And how will technologies developed during the pandemic affect laboratory testing going forward? We asked experts from the industry what they anticipate for the future.
Shifting to the New Normal, With COVID-19 Lessons in Mind
The abrupt turn toward meeting the demands of the pandemic both sidelined a range of routine medical procedures and testing and demanded investment in SARS-CoV-2 technologies, reagents, and other supplies no one anticipated. That affected companies in different ways, though representatives from Beckman Coulter, Roche, and Siemens Healthineers all said that they’ve had a strong 2021 so far and anticipate the same to be true for 2022.
Moreover, these and other companies expect their innovations from the pandemic to play a key role in the future, along with a renewed focus on better processes and moving testing closer to patients—whether that’s at the hospital bedside or at home. The amount of money put into diagnostic testing during the pandemic from private capital, governments, and nonprofits will “bring forward the next generation of testing to market,” said Deepak Nath, PhD, president of laboratory diagnostics at Siemens Healthineers.
“We’ve always been keenly aware of the value that diagnostics bring to patient care and just how much of clinical decision-making rests on diagnostics and diagnostic products. The awareness and increased investment are a good thing for the industry,” he added.
The crisis had uneven effects on research and development budgets as the world raced for COVID-19 solutions. Chris Hagen, vice president and general manager at Beckman Coulter Diagnostic’s North American Operations, said that while this may have momentarily pulled work away from other projects, it has led to process improvements that will benefit all development moving forward.
“When you put a research and development organization through the wringer and ask them to be very innovative, they very quickly build new muscle in the process of developing, validating, and going through the studies to gather data,” he said. He anticipates that they’ll be able to leverage what they learned in the development of SARS-CoV-2 serology assays for future projects.
The pandemic also has underscored the value of laboratory data and insights, as well as the need for clinical laboratorians to contribute to population health initiatives. “There’s been a push within the hospital environment for Lab 2.0 for a while now,” he added. “The pandemic just reinforced the need for that evolution.”
The pandemic also “provided opportunities to engage new customers as we worked together to expand access to SARS-CoV-2 testing,” said Matt Sause, president and CEO of Roche Diagnostics North America, which is vital given the spike in the number of cases due to the more infectious delta variant. Roche invested more than $300 million to increase testing capabilities, which Sause said will double their global installed base of instruments and allow the production of millions of tests per week by the end of 2021.
Creativity Amid the Chaos in EUAs
The ability to tap an emergency use authorization (EUA) from the Food and Drug Administration (FDA) as a rapid path to market also spurred innovation. Before COVID-19, the most EUAs granted for one public health emergency had been in response to the 2009 H1N1 swine flu. FDA has issued more than 400 EUAs related to COVID-19.
“FDA’s changing the regulatory pathway and allowing for this emergency use authorization has probably been the single largest positive impact in the overall development process in bringing something to market,” Hagen said.
Global cooperation also has pushed the market forward. Roche’s Sause noted that the company benefited from the knowledge gleaned and shared worldwide. The company’s experience with COVID-19 “accelerated our innovation and ability to bring tests to market,” he noted. “Developing, securing regulatory approval, manufacturing, and distributing tests to our customers within a matter of months is unheard of in the diagnostics industry.”
The EUA greatly benefited “early stage, entrepreneurial diagnostic companies,” said Craig Steger, senior vice president of life science and diagnostics practice lead at Outcome Capital, though not all of those products—whether from small companies or established giants of the industry—were successful. Some antibody tests didn’t work or were so inaccurate that they were as good as guessing, he added.
Consolidation, however, is inevitable. “Many of these companies will disappear, and a few of them will be gobbled up by the big guys,” Steger said, adding that larger firms will wait to see which of the products developed by startups hold up before inquiring about a merger or acquisition.
Sause noted that the pandemic has also created opportunities within a new category of testing in at-home and retail, “which have historically had large barriers to entry,” he said. “It will be interesting to see how this gets leveraged and plays in concert with traditional testing infrastructure.”
Reversion to the Mean or a New Era of Investment?
COVID-19 has changed the way that companies and investors think about the future of laboratory medicine. Sause underscored the way it’s driving testing closer to patients with a focus on at-home and point-of-care solutions, developing better sample collection techniques, and strengthening supply chains to ensure that companies are prepared to handle increases in volume associated with high numbers of case counts. Companies also see the need to integrate digital offerings with testing solutions, especially considering the popularity of telemedicine and remote diagnostics.
The pandemic also put a spotlight on what has long been a problem in laboratory medicine: staffing shortages. Hagen said that once SARS-CoV-2 tests were readily available, their customers faced the problem of having access to tests but not enough people to run them.
The problem now is “can I manage routine testing and SARS-CoV-2 testing on top of it?” As an example, he mentioned Beckman’s DxA 5000 Fit workflow automation system, designed to support small to mid-sized laboratories that can’t afford to invest in the largest systems adopted by some reference laboratories. Information technology (IT) investments are also important, he said. Some of his customers had to manually report COVID-19 case counts to local governments and health departments, a drain on staff time that also opens the door to possible reporting errors.
“In addition to handling the current pandemic, the demand from COVID-19 has highlighted the need for automated solutions that can scale to support a wide variety of test volumes both within and outside a pandemic,” he said.
Hagen also believes that the pandemic will discourage the recent trend of outsourcing more testing to independent laboratories. After some hospitals faced 7- to 10-day turnaround times for SARS-CoV-2 tests they sent out, health system leaders see the value of supporting their own hospital’s laboratories.
“Hospitals have learned that they need a lab onsite, in their local community, so that when something like a pandemic happens, they can address the needs of their community immediately,” he said. For these reasons, he anticipates that diagnostic companies will continue to see investments in workflow automation and clinical IT that make doing this kind of testing on site easier and faster.
Whether or not the current level of investment in the diagnostics space continues is an open question, said Obed Ben-Johnson, PhD, managing director of Outcome Capital. The IVD space hasn’t had this much attention since the mid-1980s, in response to the emergency of HIV and its potential effects on the worldwide blood supply. “The COVID-19 crisis created a renewed interest in this segment, particularly by venture capital which has historically shied away from in vitro diagnostics,” he said. “So maybe there’s some renewed interest longer-term, but that’s yet to be seen.”
Jen A. Miller is a freelance journalist who lives in Audubon, New Jersey. @byJenAMiller