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Trends in the U.S. IVD Market: Market Segments and Conclusions

Fri, 06/06/2014 - 1:55pm
Richard Park, Contributing Editor

During the past few weeks, I’ve been occasionally discussing a report by Kalorama Information (New York) titled, “The United States Market for In Vitro Diagnostic Tests.” This report examines the current state of the U.S. IVD market, analyzes the various emerging trends impacting the market, and discusses how these developments could affect IVD manufacturers. This week’s blog presents more of the report’s analyses.

Read: Trends in the U.S. IVD Market: Healthcare System Utilization and Aging Demographics

Market Segments
According to the report, professional point-of-care diagnostics is the largest IVD segment in the U.S. and generates $3.6 billion in annual revenues. The volume of this segment reflects the high penetration of point-of-care testing products in the U.S. healthcare system. It also reflects the IVD industry’s success in transitioning its products from centralized labs to non-lab settings such as physician offices and clinics. The second-largest U.S. IVD segment, noninfectious disease immunoassays, is projected to have limited growth of 2.6% annually.

“The majority of immunoassay testing in the U.S. is run on immunoassay analyzers or combined immunochemistry instruments,” said the report. “Other core lab IVD segments – clinical chemistry, urinalysis, and hematology – are also expected to see limited growth through 2018 as mature testing segments with demographically linked, stable volumes of demand and periodic system purchasing and upgrades.”

The report stated that the more dynamic IVD segments in the U.S. market include microbiology, molecular diagnostics, and histology. The leading growth rates of molecular diagnostics and histology in the U.S. IVD market are based on their utility in cancer detection and monitoring.

“Molecular diagnostics represents the latest major technological additions to the clinical lab and remains the most dynamic and fastest growing product spaces,” said the report. “The reach of molecular diagnostics and its utility in many forms of clinical testing has contributed to growth in other IVD segments, such as histology, microbiology, and blood bank testing.”

Read: Trends in the U.S. IVD Market: Diseases and Testing Venues

But the report also stated that IVD market growth in the U.S. has been inconsistent in recent years because of the uneven economic recovery, industry uncertainty regarding healthcare reform, and austerity measures. Incomplete and problematic reimbursement recoding and readjustments by the Centers for Medicare and Medicaid Services (CMS) and Medicare administrators also affected the market performance of high-growth molecular diagnostics and histology products.

“Difficulties for advanced IVD segments may persist into 2014, but are expected to subside in the coming years as a result of lab industry realignment and more consolidation permitting greater volumes of lower cost testing; product innovation and revised strategies by IVD vendors; and most importantly the pressure of clinical demand from an aging and increasingly insured U.S. population,” said the report.

The report found that in a wider context, the U.S. remains the core geographical IVD market in the world with more than $24 billion in annual revenues, or 44% of the global market. But IVD market growth in the U.S. has lagged behind the global average growth rate of 4-5%.

“While trailing behind nascent regional IVD markets and markets of emerging nations in terms of growth, the U.S. is expected to outperform other developed markets in Japan and Western Europe,” said the report. “The U.S. IVD market is projected by Kalorama Information to reach over $28 billion in 2018, following five years of growth averaging 3.5%.”

Read: Trends in the U.S. IVD Market: Medicare Reimbursement and the Affordable Care Act

Conclusions
The report concluded the U.S. IVD market is highly developed and, in some segments, saturated with a mature lab industry that is among the first worldwide to adopt new IVD products and technologies. While the nature of this market has limited domestic growth in the global context, it also provides stability and offers IVD manufacturers unique product development opportunities.

“Future U.S. IVD market growth will be a product of several factors,” said the report. “Those factors include demographic aging, which would provide clinical testing volume growth; Affordable Care Act (ACA)-related expansion of the insured population, which would be another boost to clinical testing volume; and continued, gradual economic recovery and job market improvement.”

However, the report also concluded that recent IVD market difficulties may continue for the next few years. Such difficulties could include the realignment of test price to payer-perceived test value; CMS-initiated test reimbursement cuts; resulting cost pressures on clinical laboratories; industry uncertainty regarding the impacts of the ACA; and a resolution of the problematic recoding and reimbursement adjustments for molecular pathology and other testing areas.

“But several of the regulatory challenges impacting the IVD industry are projected to abate or be resolved,” said the report. “Newly introduced molecular coding is likely to be refined and associated reimbursement rates corrected to address omissions and underpayment for tests. Broader schedule reimbursement cuts under the Medicare and Medicaid programs will affect lab investment in new instrumentation. Core lab vendors already heavily emphasize the cost-saving features of their instrumentation and will continue to stress returns on investment for instrument upgrades and other systems.”

The report found that molecular diagnostics did not meet market growth expectations in the U.S. in 2013, with most product areas showing mid-to-high single-digit and low double-digit growth rates. Molecular diagnostics, histology, and other specialty testing markets were affected by reduced reimbursements from major payers such as Medicare. They have been targeted due to a lack of transparency from the perspective of payers that are unable to discern clinical demand by analyte or test purpose. Despite payer resistance, molecular diagnostics and associated IVD segments (e.g., molecular microbiology testing, infectious disease testing, noninfectious molecular assays, histology, and cytology) will remain the highest growth prospects in the U.S. IVD market.

“Continued refinement in CMS molecular pathology codes and greater payer familiarity with the purpose, impact, and value of specific assays will lend stability and improved market growth to molecular diagnostics in the U.S.,” said the report. “Product innovation and bending of the cost curve will also greatly assist currently esoteric or specialty molecular assays. For example, molecular microbiology market development was achieved through automation and cost innovations that have led to significant market penetration and competitiveness compared with immunodiagnostic and traditional microbiology.”

The report also found that core lab IVD market segments (i.e., clinical chemistry, noninfectious immunoassays, urinalysis, and hematology) are projected to average a 2% annual growth rate. Relatively slow growth is a feature of core lab markets in developed countries. In the saturated U.S. market, core lab IVD market growth will be sustained through gradually rising testing volumes related to higher, post-ACA patient utilization of the healthcare system and continued lab investment in instrument and workstation upgrades that reduce the cost of testing.

Visit the Kalorama Information website for more information about the company and its IVD market reports.

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