The recent shutdown of Claritas Genomics came as a surprise to many lab professionals with some reports making reference to the possibility that inadequate reimbursement for genetic testing may have been the root cause (see: Sudden Shutdown of Claritas Genomics After Five Years as A Leading Source of Pediatric Genetic Testing..) Below is an excerpt from the article:
[The shutdown of Claritas may be] the latest market sign of how health insurers are making it difficult for labs to get paid for proprietary molecular diagnostic assays and genetic tests....Claritas was like other genetic testing laboratories... that have long struggled to get health insurers to pay for rare disease tests. Also, Claritas and other genetic and molecular testing labs suffer financially as a direct result of the ongoing price wars among competing genetic testing lab companies....The testing lab combined low false-positive rates with interpretations from WuXi NextCode. The clinical expertise available at...[Boston Children's Hospital] gave Claritas the best diagnostic exome in the industry in terms of technical quality and diagnostic power....The decision to close the company, the source noted, was a result of misalignment between investors at WuXi NextCode and BCH. Other sources speculated that Claritas and WuXi NextCode were considering a merger, which did not happen....Ultimately, the source stated, BCH held the controlling interest and made the business decision to close the clinical laboratory company. And that the decision was unrelated to the lab’s quality....As an independent lab, Claritas had early success winning a role to do testing for the Million Veteran Program (MVP), a $9-million project of the US Department of Veterans Affairs. In October 2013, the lab company reported that it would do exome sequencing of samples from veterans. At the time, it was one of the largest sequencing initiatives in the nation.
Regardless of whether the closure of Claritas was due to reimbursement problems or management issues or other causes, it's clear that many clinical labs are suffering financial reverses (see: Threats to Profitability Causing Clinical Laboratories, Pathology Groups to Take on Added Risk...). Here is a quote from this article:
Clinical laboratories and pathology groups face another blow to their financial health on January 1, 2018, when new Medicare Part B price cuts take effect. Faced with increasing competition and declining reimbursement rates for anatomic pathology testing, medical laboratories will begin 2018 with their profitability under threat. In addition, healthcare legal experts warn many medical laboratory leaders risk further financial hardships by establishing “problematic” business relationships or developing pricing plans that put their labs at “unreasonable risk” with commercial payers and government regulators.
One facet of the lab industry that seems to be thriving is consumer-oriented genetic testing. 23andMe is offering a product called Genetic Health Risk Reports that includes tests for celiac disease, late-onset Alzheimer's disease, and Parkinson's disease and also the carrier status of cystic fibrosis, sickle cell anemia, and hereditary hearing loss. All of this for $169 with approval by the FDA following a period of tension between the company and the agency (see: Update on 23andMe; Time for a Review of FDA Definition of Medical Devices; 23andMe Database Sheds Light on Genetic Aspects of Racial Mixing; Home Genetic Testing May Cause Surprises; Better Pay Attention). The consumer-oriented genetic testing industry is based on cash-up-front payments and may thus be attractive for future lab start-ups.