In a recent note, I discussed the business model used by the two major reference laboratories, Quest and Lab Corp (see: Quest Diagnostics and Lab Corp Business Models Becoming Obsolete). My point was that it was becoming obsolete and vulnerable to innovative competitors like Theranos. There are two other national reference labs that are not as large as Quest and Lab Corp and also have different pedigrees -- Mayo Medical Labs and ARUP. Both have prestigious parent organizations but this doesn't mean that they will roll over in a fight. A recent article about a lawsuit between Mayo and Quest proves this point (see: Ex-Mayo Clinic exec resigns from Quest, lawsuit continues). Below is an excerpt from the article:
The doctor being sued by Mayo Clinic for allegedly stealing trade secrets has resigned from his job at a Mayo competitor, Quest Diagnostics. Dr. Franklin R. Cockerill III, the former CEO of the for-profit Mayo Medical Labs, resigned from his position as vice president and chief laboratory officer with Quest on Wednesday.... His acceptance of that job on Oct. 1 spurred Mayo Clinic to file a lawsuit against Cockerill alleging misappropriation of trade secrets and breach of contract. Cockerill officially worked at Quest only from Oct. 1 to Oct. 14. On Oct. 14, Olmsted County Judge Robert Birnbaum granted a temporary restraining order preventing him from working, because he could cause "irreparable harm" to Mayo Clinic. Quest filed a motion to withdraw from the case on Tuesday, since it "…no longer has a 'substantial interest' in this litigation that justifies or requires its continued participation."
Mayo Clinic issued a statement Thursday saying it had settled with Quest in the wake of Cockerill's resignation....While Quest is no longer a factor in the case, the Mayo Clinic's lawsuit again Cockerill continues to move forward....The lawsuit alleges that Cockerill covertly accepted the job in June, but he told Mayo Clinic that he was retiring at the end of September to help his 85-year-old mother run her fertilizer business in Nebraska. From June to September, he continued to work at Mayo Medical Labs, attending confidential meetings and negotiating contracts. The complaint filed by Mayo Clinic also claims that Cockerill was in communication with Quest throughout his final months and he left with clinic-owned memory sticks with data downloaded from his work station. On Oct. 1, he stepped into the position of vice president and chief laboratory officer with New Jersey-based Quest Diagnostics Inc., a multibillion-dollar public company.....Mayo Clinic responded [to the defense attorney's claims] that Cockerill's case was different than other executives who have left to work for competitors."… We understand that our staff members move to other organizations, and, when they do so in a transparent manner, we can manage any conflicts-of-interest during their transition, and we can protect our confidential information and trade secrets," stated [a Mayo spokesperson] by email. "Dr. Cockerill was not transparent and did not report his conflict of interest."
An executive working for a major reference lab would have deep knowledge about various types of the intellectual property of that lab. What comes first to mind as to what sort of IP would prompt a lawsuit is the client list and the pricing structure negotiated for any particular customer. Prices may be discounted from the list prices to varying degrees. A departing executive would also have a sense about the nature of the relationship between, say, an academic pathology department and the reference lab. Knowledge of such price and relationship information could facilitate an approach by a competing lab. In this era of significant pressure on hospital costs, competition is heating up across the whole healthcare spectrum and the reference lab industry is no exception.
I am particularly intrigued by the following quote from the article above: ...[Cockerill] told Mayo Clinic that he was retiring at the end of September to help his 85-year-old mother run her fertilizer business in Nebraska. Although I was tempted to comment further on this bit of biographic information, I was able to hold myself back.
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