Kalorama Information (New York) recently released a report entitled, “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 in the market, and discusses how these developments could affect IVD manufacturers. The following presents some of the report’s analyses.
The report concluded that the United States is still by far the world’s largest IVD market with $24.1 billion in annual revenues, accounting for approximately 40-45% of the global IVD market. While some IVD companies have been looking to emerging markets for growth, the sheer volume of the U.S. IVD market is one of its strongest advantages. However, this market has recently dealt with interrupted lab and healthcare sector investment in anticipation of implementation of the Affordable Care Act (ACA), as well as several regulatory and austerity measures on the part of government payers that constricted payments for clinical lab testing.
“Such developments obscured market factors and trends in the U.S. that usually lend stability and growth to IVD sales,” said the report. “For example, the expansion of the insured population under the ACA; demographic aging that increases demand for clinical testing; Medicare, a medical program that serves as a leading, stable vehicle for payment; optimistic macroeconomic indicators vis-à-vis the domestic outlook five years ago and other developed markets in the world; and continued product innovation and industry responsiveness to clients’ needs in this market.”
The report projected that several other factors could dampen the U.S. IVD market growth to a rate below the projected growth of U.S. health expenditures (5.8% annually): frequent government targeting of clinical lab testing for overall Medicare and Medicaid cost savings; related private payer insistence on test payment rates in line or closer to government reimbursement rates; sustained but lukewarm U.S. economic growth; and the extensive regulatory and reimbursement approval processes applied to new IVD technologies and tests, including products introduced to provide more cost-effective testing.
According to the report, clinical lab testing volumes are fundamentally products of patient utilization of the U.S. healthcare system. The majority of IVD tests completed in the U.S. originate as orders or requisitions from physicians to a hospital, independent, or other clinical laboratory. Healthcare system utilization (measured through inpatient and outpatient visits and procedures) entails clinical lab testing as part of diagnosis, admission, and monitoring.
“Generally speaking, U.S. IVD market growth can be achieved through the following factors: 1) higher product pricing; 2) a shift in clinical lab testing toward more sophisticated and specialized tests (e.g., molecular assays or tests using gene-based reagents); 3) the introduction of new products in response to unmet clinical demands; 4) more intensive testing per patient episode; and 5) the expansion of the patient population through greater healthcare system utilization,” stated the report. “During the past five years, U.S. IVD market growth has been accomplished primarily through the second and third factors. IVD product prices have only gradually risen outside of system or test upgrades.”
Healthcare System Utilization
The report found that by various metrics, the economic recession in the U.S. depressed healthcare system utilization, which has had a negative effect on the U.S. IVD market. Between 1995 and 2008, national inpatient admissions increased each year, with the exception of a 0.1% drop in 2007. However, during and after the recession (2008-2011), the national inpatient admission volume fell each year from 35.76 million admissions to 34.84 million admissions. Declining U.S. hospital inpatient admissions cannot be entirely attributed to the effects of the economic recession. Between 1992 and 2011, U.S. inpatient admissions per 1,000 persons fell during 16 out of the 20 years, with most of the greatest annual rate reductions following 2008.
“Another major indicator of healthcare system utilization is outpatient visit volume, which actually rose consistently at U.S. hospitals even during the economic recession,” said the report. “Per 1,000 persons, hospital outpatient visits rose from roughly 2,000 in 2007 to 2,100 in 2011. However, the hospital outpatient visit volume was static during 2010-2011 at slightly more than 2,100 visits per 1,000 persons. The Centers for Medicare & Medicaid Services (CMS) has also noted the slowing growth in hospital outpatient services. However, outpatient visits and services outside of the hospital have been a growth area in the U.S. healthcare market. When appropriate, healthcare providers and payers seek to provide traditional inpatient services in an outpatient setting to net cost savings and capture higher margins.”
The report concluded that the economic recession and its lingering impact on employment in the U.S. suppressed growth in outpatient visits and procedures, though the outpatient sector remains on a positive long-term trajectory. Outpatient visits to a general physician per 1,000 persons increased from 1,480 in 1999-2000 to 1,663 in 2009-2010. During the same period, outpatient visits to a specialist physician per 1,000 persons increased from 1,415 to 1,719. The low point for U.S. patient visits at physician offices and other outpatient care settings was likely 2011.
The report stated that in the U.S., a leading driver behind greater clinical lab testing is aging demographics. In this decade, the U.S. is expected to witness the highest rate of growth of its elderly population in more than a century as the baby boom generation gets into its sixties (ages 60-69). Between 2010 and 2020, the proportion of the total U.S. population aged 60 years and older is expected to increase from 18.4% to 22.2%. The elderly population will grow by nearly 3% a year during the same decade, or by approximately 1.9 million a year, to reach 54.8 million individuals in 2020 from 40.2 million in 2010.
“Non-communicable and chronic disease incidence is significantly higher in the aged population than in the general population,” said the report. “Conditions and diseases such as cancer, diabetes, hypertension, heart disease, and arthritis require specialized tests for diagnosis and during treatment. In addition, these diseases are frequently preceded by routine tests or screening tests used to assess health in older patients and initiate preventative care. Medicare aged individuals have also been estimated to average nine or more lab tests a year.”
During the coming weeks, I’ll present more analyses from this report. For more information about Kalorama Information, look through their IVD market reports.