Lab Soft News

Status and Challenges of Offshore Clinical Trials

I have posted a number of previous notes about the globalization of clinical trials and the contract research organizations (CROs) that provide lab support for such trials such as Covance and Charles River. Clinical trials are an important market for the clinical lab industry. A recent article about the globalization of clinical trials (see: MIT Study Quantifies Globalization Trends) provides some additional insights into this trend. I provide an excerpt from it below with boldface emphasis mine:

Outsourcing of biopharmaceutical clinical trials to China and India is growing at a substantial rate, but in real terms the much-ballyhooed nations are still "very minor players," [according to an MIT professor]. [The U.S.] commands a 48.7 percent share of total trial activity and has eight times the number of trial sites of second-place Germany....India, a growing global hub for trial-related technology, is also well positioned to become a major clinical trials player....Trial density, the proportion of recruiting sites relative to overall population, is greatest in the U.S., Canada, and several Western European countries....But it's becoming substantial in some Eastern European countries such as the Czech Republic, Hungary, and Estonia. Presumably, this makes the region increasingly able to offer a competitive number of sites suitable for global trials....Pooling data from ethnically and culturally diverse populations may become problematic with the march toward personalized medicine and pharmacogenomics...and at some point may even reverse the current globalization trend. Drug-naïve patients on vegetarian diets may also be differentially affected by classes of drugs commonly used in the Western world. Further, the integrity of the informed consent process may be jeopardized in nations where the physician-patient relationship is more "hierarchical."

Despite the possible cost advantages of conducting clinical trials offshore in less developed countries, I agree with the general drift of this article that the majority of them will continue to be conducted in the U.S. One reason is the challenge, as noted above, of conducting clinical trials in countries like India where the genetic character of the research subjects may differ from the majority of patients in the U.S. There are other scientific and ethical barriers to overcome with offshore clinical trials as reflected in the following 2004 article (see: Indian Guinea Pigs for Sale: Outsourcing Clinical Trials):

"When getting a subject's informed consent, some research is complex and it is difficult to convey the relevant issues," notes US-based bioethicist Ruth Macklin who has participated in the development of various international ethical guidelines for collaborative research in developing countries. Equally worrisome is the fact that "people may not distinguish between treatment and research. There is a false belief that sometimes research may have a direct benefit. Research does not provide individualized medical treatment, titrating doses according to the patient's need, for example."

As a former member of a hospital institutional review board (IRB), I found the review of the occasional offshore studies that came to the committee to be very challenging. The motivation of impoverished people to enroll in clinical research studies can be far different than subjects in developed countries like the U.S.

Economic Malpractice Discussed Regarding Drug Dosages

Anyone working in healthcare will be all too familiar with the definition of malpractice. However, a phrase appearing in a recent article in the New York Times -- economic malpractice -- caught me by surprise (see: Cutting Dosage of Costly Drug Spurs a Debate). I thought that it would be worthwhile to explore the meaning of this phrase and some of the implications for lab professionals. Below is an excerpt from the article (boldface emphasis mine):

...Cerezyme is used to treat a rare inherited enzyme deficiency called Gaucher disease. Some experts say that for most patients, as little as one-fourth the standard top dose would work, saving the health care system more than $200,000 a year per Gaucher patient. “It is economic malpractice to give a much higher dose of an expensive drug than is required,” said Dr. Ernest Beutler, an authority on Gaucher disease at the Scripps Research Institute.... But all sides agree on one thing. “Nobody would even be wasting their time talking about this if it were a cheap drug,” said [another physician], In that sense, the dispute over Cerezyme could be a sign of the increased scrutiny that dosing will receive as drugs become more expensive. Pharmaceutical companies have faced complaints for years over prices, but now they might have to defuse efforts to use less of their drugs to cut costs, and to rebut accusations that doses are inflated to bolster profits....With Cerezyme, which is made by Genzyme, the profits are sizable. Gaucher disease, which can have complications like ruined joints, is rare; only about 1,500 people in the United States are on the drug and about 5,000 worldwide. Sales of Cerezyme totaled $1.1 billion last year, making it a blockbuster by industry standards.

I have a premonition that the term economic malpractice will become more common with regard to all of healthcare although the current target is the drug companies. Perhaps because of naiveté, I have always assumed that appropriate drug dosages were determined by scientific methods and medical research. However, I now fully understand that attention to the bottom line may cause the pharmaceutical company scientists and physicians to tweak the recommended drug dosages upward.

When I read this article, my thoughts did drift toward the general topic of inappropriate use of resources by physicians. Although articles commonly appear about unnecessary lab test ordering by physicians, most such criticism tends to stay submerged. The reason for this is that the cost of lab tests is relatively minor compared to the yearly cost of, say, some biotech drugs. However, this attitude is rapidly changing due to the rising co-payments for lab tests. Also, the cost of some of the newer esoteric genomic and proteomic tests can be substantial. That's why Myriad, the company that offers BRCA testing, provides a risk calculator on its corporate web site to determine which patients are most suitable for the test.

Economic malpractice may be a charge leveled in the future against clinicians for their lab test ordering practices. In anticipation of this, lab professionals need to provide clinicians with better tools to assess the need for various lab tests at the time of test ordering. I have discussed ways that this can be accomplished in previous notes about the use of algorithms to guide clinicians in appropriate lab test ordering (see: ARUP Offers Lab Algorithms for Disease Diagnosis Support; Static Versus Dynamic Lab Test Selection Algorithms).

 

Charles River Expands Its Ohio-Based Lab Operations

I have posted a number of previous notes about Covance, a contract research organization (CRO) with special expertise in clinical lab testing. In a recent note (see: CROs Favored by Investors Due to Growth in Phase IV Studies), I also discussed how Big Pharma seems to be ailing due to a lack of potential blockbuster drugs in the pipeline and an aging business model. However, the pharmaceutical industry is still generating business for the CROs because of the new emphasis on Phase IV studies and also the trend to  outsource its non-core operations. Now comes news that another flourishing CRO, Charles River Labs, is expanding its lab operations in Northwest Ohio (see: Drug-testing firm to double size of northwest Ohio lab). Below is an excerpt from the article (bold face emphasis mine):

Charles River Laboratories will double the size of a medication testing laboratory in Spencerville [Ohio] and boost its 240-member work force by 80. The 58,000-square-foot addition is to be completed in mid-2009 at a cost of $16 million, company officials said...."A key driver of this growth is the continued investment by pharmaceutical and biotechnology companies in basic research and their increased use of outsourced drug development services, [said a company official]" Spencerville is near Lima, 85 miles southwest of Toledo....Charles River is among the largest firms pharmaceutical companies turn to for testing services.It has 8,300 employees worldwide and takes in $1.1 billion annually.

Charles River also announced last August that it was building a new facility in Sherbrooke, Quebec:

Charles River Laboratories ...intends to build a new facility in Sherbrooke, Quebec, to support the company's expanding Preclinical Services business. This facility will provide essential drug discovery and development services to the international pharmaceutical and biopharmaceutical industries. When completed, the new facility will be approximately 300,000 square feet. Approximately 25 percent will be constructed in the first phase and is expected to be dedicated to one or two clients.

It seems to me, using this multifaceted Charles River Labs expansion as evidence, that a key element in the emerging turnaround story for Big Pharma is to turf increasing amounts of business to CROs. A 2006 story (see: CRO Industry Update: Growth, Expansion and New Opportunities) described the CRO market size as $10B and growing at 14-16% a year. This same report make reference to an increased emphasis on the CRO full-service model, the bundling of CRO services, and global mega drug trials. All of these factors would seem to portend a rosy future for CROs despite the ambiguity about the "health" of the pharmaceutical companies that are actually generating the business for the CROs.

Despite the emphasis on the increased number and size of Phase IV studies mentioned in my previous note, this  is only a part of the picture. It seems that the larger issue is that Big Pharma is outsourcing its non-core competencies and the CROs are now offering, in response, a full-service model, which is to say a total solution for managing large controlled clinical trials on a global basis.

CROs Favored by Investors Due to Growth in Phase IV Studies

I have previous notes about Covance, a contract research organization (CRO) with special expertise relating to lab testing in controlled clinical trials. A recent article called attention to this company as well as other CROs and suggested that such firms are attracting more attention from investors (see: Drug-testing firms attracting more investors). Below is an excerpt from the article (boldface emphasis mine):

Increased regulatory scrutiny of new drug candidates in recent years has produced more business for companies that conduct clinical trials for pharmaceutical firms....But despite trading at historically high valuations, further growth is likely because of the rising number of lucrative post-market studies and as the sector becomes a shelter from a political storm that could target health care, many experts said. Growth of the research organizations has been powered by an increased number of clinical trials, thanks in part to a rise in outsourcing at pharmaceutical companies, which have been cutting costs as they face rising competition from generic medication, emptier product pipelines and a tougher regulatory environment....The big reason for optimism in the stocks is a relatively new phenomenon in the drug-approval process—the growth of post-market studies. These Phase IV studies, which track a drug after it receives Food and Drug Administration approval, are lucrative for the research organizations because the studies are large, long in duration and unlikely to be canceled.

In a previous note (see: DOD Will Share Electronic Medical Records with the FDA), I discussed how the FDA planned to interrogate DOD-supported electronic medical records in a program called the Sentinel Network in order to study the efficacy and safety of prescription drugs already approved for use, which is to say Phase IV studies. This current news reflects another response to the growing interest in monitoring drugs already on the market, this time describing the bullish interest in CROs for whom participation in such studies enhances their bottom lines.

Just to round out this note and to bring a few other points to bear on the discussion, here's how the Wikipedia defines Phase IV studies:

Phase IV trials involve the safety surveillance (pharmacovigilance) and ongoing technical support of a drug after it receives permission to be sold. Phase IV studies may be required by regulatory authorities or may be undertaken by the sponsoring company for competitive (finding a new market for the drug) or other reasons (for example, the drug may not have been tested for interactions with other drugs, or on certain population groups such as pregnant women, who are unlikely to subject themselves to trials). The safety surveillance is designed to detect any rare or long-term adverse effects over a much larger patient population and longer time period than was possible during the Phase I-III clinical trials. Harmful effects discovered by Phase IV trials may result in a drug being no longer sold, or restricted to certain uses: recent examples include cerivastatin (brand names Baycol and Lipobay), troglitazone (Rezulin) and rofecoxib (Vioxx).

Assigning Some Numbers to the UnitedHealth-LabCorp Contract

I have written previous notes about UnitedHealth, a major health insurance company, and also about the recent lab contract that was signed between UnitedHealth and LabCorp. This contract was previously held by Quest Diagnostics and its loss was damaging to the prestige of the company in the market. It is well known that there is fierce competition between the national reference labs for these large insurance contracts. However, reimbursement to the lab under them is generally far below the actual cost of performing the tests. A recent article in CAP Today addresses the issue of how low these contract prices have actually sunk (see: Pricing slugfest—can labs outlast blows?). Below is an excerpt from the article (boldface emphasis mine):

LabCorp hasn’t revealed the UnitedHealthcare rates. But lab and managed care industry veteran Michael Snyder says he was involved in negotiations with United on behalf of other laboratories until about 30 days before the contract went to LabCorp. “At that time, United was pushing for pricing 50 percent below the Medicare fee schedule,” says Snyder, a principal with Clinical Lab Business Solutions. (To put that 50 percent figure in context, Snyder says that when he worked at United until mid-2005, its fee schedule for LabCorp was about 65 to 66 percent of Medicare, and for Quest, about 70 to 72 percent.) Snyder also points out that LabCorp has said it has a tiered rate from United so that even though “the rates for the CBCs, urinalyses, and chemistries are cheap, cheap, cheap…the molecular testing and pathology are at a higher price point.” LabCorp also reportedly accepted significant monetary risk in the contract for so-called leakage, whereby physicians send lab testing to labs outside the United lab network, which costs the payer more money and shatters its actuarial assumptions.

Readers who are not fully acquainted with the lab industry may well ask how a company can lose money on a set of services and still keep its head above water. Well, the answer is the physician office pull-through testing. Here's a description about how this works (see: Managed Care Contract Shakeups for Lab Testing: Is a Price War Underway?):

In terms of pricing, LabCorp’s strategy may be to sacrifice some of its short–term profitability by increasing revenue potential through “pull–through” testing, said Hirsch, who is now President of Laboratory Billing Solutions ..., an outreach billing service for hospitals and smaller independent labs. This means that once a lab contract is in place, clinicians and laboratory directors will begin sending [ALL] testing specimens to the contracted lab, even if it’s out-of-network for some insurance plans. These pull–through tests are not part of the LabCorp contract, and therefore would typically be reimbursed at higher prices. “They are hoping that some of the better–priced testing will accompany the contracted specimens,” he explained. “But that is a very risky and dangerous strategy.”

This whole lab reimbursement system also strikes me as shaky and vulnerable. UnitedHealth is actively trying to diminish test leakage, and antagonizing office-based physicians in the process, by fining them for sending tests out-of-plan. When this happens and as noted above, it is forced to cover the costs of these same tests at higher rate than it negotiated with UnitedHealth. LabCorp, in turn, also incurs financial penalties due to UnitedHealth when test leakage occurs. The presumption is that it bears some of the blame for the loss of testing by not offering clinicians and patients a sufficient level of services to staunch this flow to other labs. Meanwhile, Quest is operating in the background and presumably doing whatever it can to retain the loyalty and business of the office physicians.

Profit Margins of Large Commercial Reference Labs

I published a previous note about the profit margins generated by the large national reference labs (see: Spectrum of Profit Margins for Reference Labs). Below is an excerpt from that note:

Google Finance shows the net profit margin for Quest Diagnostics...for 2005 as 9.93%. For LabCorp...for 2005, the comparable number is 11.61%. We are thus left with the impression that large national reference labs, generally understood to be a high-volume low-margin business, yield a net profit margin of around 10-12%.

I recently came across a financial article on the web discussing Bio-Reference Labs (see: Bio-Reference Labs: Just What the Doctor Ordered) that compared the company's performance to that the major national labs. Below is an excerpt from that article:

Another difference is the impressive margins these big players [Quest and LabCorp] sport -- operating margins approaching 20% and net margins in the 9%-10% area. Bio-Reference simply lacks the scale to even aspire to such fat profits--the company currently has margin rates of about half that of the big players. But with the evolution in the market toward the higher-margin business of esoteric and genomic testing, where Bio-Reference is strong and evidently growing, investors can see the potential for margin expansion.

Here is a definition for the operating margin:

Measures a firm's profitability by examining the pre-tax profit generated from primary operations (versus extraordinary items) in relation to net sales. Operating profit divided by net sales.

Financial articles like the one quoted above continue to make reference to the "high-margin" esoteric and genomic testing as an opportunity for smaller regional players such as BRLI to improve their financial performance. The national reference lab industry is a commoditized business that favors large-scale players like Quest and LabCorp. Moreover, these companies will ensure that the business continues to operate in this way. They do so by negotiating rock-bottom contracts with large healthcare insurance companies such as UnitedHealth. The insurance companies can also continue to play Quest and LabCorp off against each other at contract time to ensure continuing low prices for lab services.

The reagent and instrumentation costs for many esoteric and genomic tests at the present time are high and demand is relatively low. As these trends reverse, the national labs will jump into the fray and, as they do for other tests, and drive the cost of it down by competing for the business on the basis of low cost.

However, one aspect of the "lab business" that they cannot compete for is the interpretation of multiple biomarkers based on a patient's complete medical history. In my opinion, this form of diagnostics/prognostics will become too complex for many physicians to manage and may provide a new business opportunity for those labs performing esoteric testing and with access to patient EMRs. However and at least for the present, the national reference labs lack access to such records and would probably find such business too labor intensive for their taste even if they could enter it.

Genetic Testing for Patients Treated with Warfarin

The Dark Daily recently reported on a research collaboration between the Mayo Clinic and Medco (see: Mayo Clinic Considers Implementing Genetic Tests Enable Personalized Medicine) with an excerpt from the note below. Here is a link to the original news article (see: DNA Tests to Determine Warfarin Dose)

It may be that the hospital industry's first implementation of genetic testing will be to support improved use of the prescription drug warfarin in anti-clotting therapy. Healthcare companies and hospitals are banking on the fact that genetics can answer questions about which drugs are safe for individuals to use. Medco Health Solutions and the Mayo Clinic are currently collaborating on a study on personalized medicine to confirm whether genetic testing can help eliminate the life-threatening and costly complications that many patients develop after starting a prescription of the anti-clotting drug warfarin.

More details about the science behind the genetic testing to determine the optimal warfarin (coumadin) anticoagulation dosage is provided by another article posted on the Genelex web site (see: Warfarin (Coumadin) and DNA). Genelex provides the DNA testing services to reveal abnormalities in the ability of a patient to metabolize warfarin. Below is an excerpt from this article:

In addition to the physical characteristics [of patients such as age, gender, and weight], functional characteristics also influence the most appropriate dose of warfarin. The major functional characteristics which influence the warfarin dose are how rapidly the individual metabolizes warfarin and how much warfarin is required in the body to inhibit to formation of clotting factors. These characteristics can not be assessed without specific diagnostic testing.

The active component of warfarin is metabolized by cytochrome P450 2C9 (CYP2C9). Up to 35% of the population inherits a form of the CYP2C9 gene which results in a CYP2C9 enzyme deficiency. A deficiency in CYP2C9 causes slow metabolism and higher than expected concentrations of the active drug to accumulate. This increased warfarin concentration in the body increases the risk of bleeding.

Warfarin inhibits the formation of active clotting factors by inhibition of vitamin K epoxide reductase complex subunit 1 (VKORC1). Inherited differences in VKORC1 increase or decrease the amount of warfarin needed to inhibit the formation of the clotting factors. When the amount of warfarin exceeds what is needed, the risk of bleeding is increased.

So the bottom line regarding genetic testing for patients being considered for long-term warfarin therapy is the following recommendation:  sufficient mechanistic and clinical evidence exists to support the recommendation [of using] lower doses of warfarin for patients with genetic variations in CYP2C9 and or VKORC1 that lead to reduced activities.

Medco is a major pharmacy benefits manager (PBM) so it should come as no surprise that the company has a special interest in the appropriate dosages of various drugs. At first glance, though, it might be mildly surprising that a cost-conscious PBM would be exploring the use of expensive genetic testing to achieve such a goal. However, it immediately occurred to me that the additional lab costs would be borne by the healthcare insurance companies or perhaps even the patients. Please forgive my cynicism -- this is a very suitable area of medical practice to explore and a great early example of the emergence of personalized medicine with critical lab support.

Poppy Seed Strudel and Drug Testing

I was browsing one of my favorite blogs called Dumneazu that focuses on "ethnomusicological eating east of everywhere" when I happened on a note describing the type of foods that appear in the markets and restaurants in Budapest at Easter time (see:  Easter: An Extremely Porky Week in Budapest). Below is an excerpt that discusses strudel with poppy seed filling:

Some of the best looking strudel I've seen in a while. The white fillings are cheese, the black fillings are poppy seed. There is enough poppy seed inside these babies to keep you failing your drug testing pee-tests well into the next century. It's sad, but in the US it is legal to deny work to a prospective employee who fails a drug test because opiates show up in the seeds of legally available poppy seed bagels. And Switzerland forbids importation or even mere possession of poppy seeds. Now as any culinary scientist knows, the active ingredient in opium is absent from the seeds, but the tests are designed to detect the traces of any part of the poppy plant.

What? Is this some sort of urban myth? You eat one poppy seed bagel and fail your pre-employment drug test? My frenzied research about this topic on the web took me to to another article in a Q and A format (see: Will poppy-seed bagels cause you to fail a drug test?) that I quote from below:

Q: You mean I could get high eating poppy seed rolls?
A: No, goofball, I said they might make you flunk a drug test. The amount of morphine and codeine in poppy seeds varies enormously. One study found that Dutch, Czech, and Turkish poppy seed contained minimal opiates, Australian seed was up there, and Spanish seed sounded like it should be sold by creepy-looking guys on street corners. But, while test volunteers who ate poppy seed products sometimes flunked urine tests, nobody really got what you could call stoned.... You're limited by the fact that the poppy seeds are usually contained in food--you get full long before you get high.

Here's more discussion about this same topic (see: More Frequently-Asked Drug Testing Questions);

It's true that poppy-seed ingestion can cause false positives for opiates a few hours later in urine tests. But labs claim that hair analysis can distinguish between opiate abuse and poppy-seed ingestion. Additionally, the Feds are familiar with urine-adulteration tricks. Consequently, the Feds upped  the ng/ml detection level beyond that of "normal" poppy-seed ingestion, but still within the range of abuse. Normal ingestion is considered to be like two poppy-seed muffins in a day, tops.

And here is yet more information to satisfy your curiosity (see: Poppy Seeds & Drug Tests):

Poppy seeds contain both Morphine and Codeine and can cause false positives for Opiates in urine tests. Most Opiate urine tests have a cut off level of 300 ng/ml. Ingestion of a single poppy seed bagel can produce an opiate level somewhere around 250 ng/ml three hours later. 3 teaspoons of store bought poppy seeds can result in 1200 ng/ml 6 hours later. We have read an estimate that 70% of DOT opiate positives are from poppy seeds. The U.S. Military uses cut off levels of 3000 ng/ml in order to minimize false positives.

I come away with the distinct impression that eating one large Hungarian strudel stuffed with poppy seeds and then reporting for a drug test, Hungarian or otherwise, is not a wise move. Take a nap. The urge to get a job will surely pass.

Quest Diagnostics to Buy Ameripath

I first learned about the purchase of Ameripath by Quest Diagnostics in the Dark Daily yesterday morning (see: Quest Diagnostics to Buy AmeriPath for $2 Billion). Below is an excerpt from the article:

Quest will pay $1.23 billion in cash and assume about $770 million of debt when the transaction closes. With its purchase of AmeriPath, Quest Diagnostics picks up three diverse businesses in laboratory testing. First, it acquires Specialty Laboratories...based in Valencia, California. Specialty Labs provides reference and esoteric testing services to hospital and certain physician specialists. Second, it will own AmeriPath Dermatopathology. This business division employs 80 pathologists located in offices across the United States. This business line is fast-growing and very attractive to Quest Diagnostics. Third, it will come into ownership of the remaining anatomic pathology assets owned by AmeriPath. The largest component of this business division is the hospital-based pathology group practices that AmeriPath acquired over the past 10 years. There are also several pathology subspecialty centers in areas such as gastroenterology, oncology, women’s health, and urology.

Another article describing the purchase indicates that AmeriPath dermatopathologists interpret some 2.4 million biopsies a year. 

The opinion of another financial reporter was bearish about the acquisition (see: Quest Buying AmeriPath For $1.23 Billion):

"Our early view is negative, given (that) both AmeriPath and Specialty Laboratories, which was consolidated with AmeriPath, struggled as public companies," said Bank of America analyst Robert Willoughby. "Competitors, including Quest Diagnostics and LabCorp of America, successfully made inroads into Specialty Laboratories' market share, contributing to disappointing organic growth," Willoughby said.

In 1999, Quest bought the clinical laboratory operations of SmithKline Beecham, now part of GlaxoSmithKline, for approximately $1.3 billion in cash and stock. Quest purchased LabOne for $869.9 million in 2005, adding risk assessment and drug screening for employers and insurers (see: Quest Will Buy AmeriPath for $1.2 Billion and Debt). One wonders whether the acquisition of Specialty by Quest as part of this Ameripath deal will run afoul of the FTC anti-trust regulations because of the continuing consolidation in the reference lab industry. This same issue was raised previously in connection with the LabOne purchase.

Pressure Mounts on UnitedHealth Regarding Threatened Physician Fines

I have posted previous notes about how UnitedHealth has threatened to fine physicians who refer their patients who are UnitedHealth members to a reference lab other than LabCorp. LabCorp recently was awarded the UnitedHealth lab contract. The Wall Street Journal recently published an article (see: Doctors Assail UnitedHealth's Threat of Fines) discussing some of the backlash that has resulted from this heavy-handed policy. Below is an excerpt from it:

Most health plans are designed so their members pay more when they go to an out-of-network doctor or take a nonpreferred medication. But the financial sanctions -- which UnitedHealth has yet to impose -- mark the first time a physician could be fined by a health insurer if he or she directs a patient to seek out-of-network care or testing....To squeeze as much savings as possible out of the Lab Corp. deal, UnitedHealth sent a not-so-friendly reminder to doctors to play along....The strategy threatens to backfire. A backlash brewing among physicians and regulators is creating a public-relations mess as the company continues to struggle to recover from a stock-options backdating scandal....The AMA and a number of state medical societies have demanded that UnitedHealth rescind the policy. In New Jersey, the health insurer temporarily suspended the threat of sanctions after the state Department of Banking and Insurance said it had concerns about their legality.

The Dark Daily has provided recent coverage about this same issue (see: Update on United HealthCare's Plan to Fine Physicians for Using Out-of-Network Labs). Below are two excerpts from this article:

In March, the California Medical Association said that this new policy illegally interferes with PPO patients’ right to access out-of-network benefits and improperly obstructs the physician-patient relationship. “Patients have the right to decide where to receive health care services, without having to worry that their physicians are being fined or otherwise penalized for their choices. This right is particularly acute for patients who pay premiums for nonexclusive PPO benefits,” wrote CMA chief legal counsel Catherine Hanson.

it is important to remember that, as part of the 10-year exclusive national lab services contract between UnitedHealth and Laboratory Corporation of America, UnitedHealth has a commitment to take active steps to enforce compliance by its physicians with the laboratory services network. It is believed that the financial benefits to UnitedHealth from this exclusive national lab services contract are significant enough to motivate it to continue its tough stance.

I agree that UnitedHealth has stirred up a hornet's nest with this notion of penalizing physicians for the behavior of their patients. I suspect that the company will not formally retract the policy because they may be desperate enough to actually enforce it, or policies like it, in the future. I predict that they won't stand behind it for the time being and hope that the bad publicity will just go away. In the long run, however, they control the purse strings and this will always be the position of power in healthcare. For physicians, I fear, this is just a preview of coming attractions.