Why Disruptive Innovations Matter in Laboratory Diagnostics

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1 Article: S. Nam.. Clin Chem 2015;61: Guest: Spencer Nam is a Research Fellow specializing in healthcare at the Clayton Christensen Institute for Disruptive Innovation. This is a podcast from Clinical Chemistry, sponsored by the Department of Laboratory Medicine at Boston Children s Hospital. I am Bob Barrett. Advances in clinical laboratory testing have had a profound impact in improving the quality of medical care. Today laboratory diagnostic tests inform physicians and patients of the exact causes of a number of diseases and disorders, including cancer, chronic diseases, infectious diseases, sexually transmitted diseases, and genetic disorders. Laboratory diagnostics have traditionally served as the trailblazers of medical innovation by creating new pathways to identify and overcome difficult medical conditions. However, a challenge facing the clinical diagnostics community is in the rising cost of healthcare. Less progress has been made to make diagnostic tests more affordable and accessible. With genetic testing expected to become more prevalent in the future, the cost issues in laboratory diagnostic testing will only become more serious. Without a major paradigm shift the confluence of these conflicting issues lowers the visibility on how research efforts, investment activities, and usage decisions will be made in the clinical diagnostics community. In the July 2015 issue of Clinical Chemistry, Spencer Nam from the Clayton Christensen Institute for Disruptive Innovation published an opinion piece titled Why Disruptive Innovations Matter in Laboratory Diagnostics. Mr. Nam joins us in this podcast. Tell me what are some challenges facing the field of laboratory diagnostics in the next years? So I think President Obama outlined some of this in his State of the Union address, but the precision medicine is getting a lot of attention. And as we look forward to some of the issues that we will be facing in healthcare, precision and 2015 American Association for Clinical Chemistry Page 1 of 7

2 personalized diagnostics will be one of the biggest challenges that we will have to overcome. With lot of the chronic disease patients coming out of the woodwork we will have to think about how to diagnose their problems and how to treat them properly. So we think that that's going to be a big issue. Another issue is monitoring and also clearly identifying the disease progression of these chronic patients over time. And right now many of our diagnostic tests and devices are not equipped to do that well. So that s another challenge that I think will become more important as we move forward. And then finally, preventive and predictive diagnostics, so instead of dealing with diseases that have progressed to a point where they become somewhat acute, we will be thinking more along the lines of, how do we prevent certain types of diseases, and in order to do so how do we actually identify at what point we will need to intervene, or change our behavior to a point where we will avoid onset of the disease. And then related to that, because we all are different individually, how do we customize these predictive approaches in diagnostics so that individuals can have a customized way of knowing when I am going to be coming down with a particular disease and how do I prevent that, and all that will be more important as we look ahead. How would you describe the evolution of laboratory diagnostics over the past two to three decades? What has the field accomplished and where does it need to go? So as we look back, I think of three things that really made significant progress. The first is the diagnosis of acute diseases. So the refinement of polymerase chain reaction, also known as PCR, technology has really become so prevalent and also dominant in molecular diagnostics field, and we have been able to really diagnose some pretty tricky diseases over the years. And then recently the ability to analyze genes, DNA structures, and so forth have allowed us to identify more rare diseases that we have not been able to identify in the past. So those abilities have really increased our ability to tackle some of the challenging diseases, I would say, in the past two to three decades. And then you add automation to that and then you have the confluence of large volume processing capabilities, tracking 2015 American Association for Clinical Chemistry Page 2 of 7

3 down some of the more esoteric diseases, and so those are some of the positive things that we have seen. But as we look forward, and I think I pointed some of this out in my answer to a previous question, we certainly need more precision diagnostics in more challenging diseases like cancer or neurological disorders such as Alzheimer s disease, as well as some of the behavioral disorders. We just don t have any of those diagnostics really wellestablished at this point. So those spaces will be, I think, the next frontier of the laboratory diagnostics. Your research at the Institute focuses on disruptive innovations. Let s talk about those. How are they different from other types of innovations? Sure! So the way we think about innovations, we think of two areas. First is sustaining innovations and second is disruptive innovations. Sustaining innovations are innovations that are essentially incremental improvements of existing products or solutions or services. And then sometimes these improvements could be quite dramatic, but the idea is that whatever we have today, tomorrow it will become more impressive, faster, stronger, more accurate, sometimes going virtual, could be another improvement, and these are all how we define sustaining innovations. On the other side, with disruptive innovations, particularly in healthcare, the way we think of them are, those are the solutions that make healthcare more affordable, more accessible, and performing at a very high level. So products and services that make healthcare cheaper and also more accessible without compromising the quality of the technology or of the service would be examples of disruptive innovations. And so, we hope that as we think about the current challenges in our healthcare environment, as the cost of healthcare continues to rise, that we think that disruptive innovations will be critical in bringing down or stabilizing the cost issues over a course of several years or decades, so that we can actually have these life-saving products and solutions for a broad set of patients in a very affordable way. So what are some examples of disruptive innovations? Are there examples that you can point out in laboratory diagnostics? 2015 American Association for Clinical Chemistry Page 3 of 7

4 Yes. So the disruptive innovations in healthcare, I can think of a few. One example that is well-known is the drug-eluting stents. Until about the 90s, the standard of care in cardiovascular disease treatment was CABG, the bypass surgeries, and those were very invasive. Obviously some people were not eligible for invasive procedures like that. Then came along stenting, that basically did not require opening up a patient's chest, and then over time the stenting actually became much more versatile and almost all of the simple bypass cases were being done through stenting, and the CABG become really isolated for more challenging and complex cases. At the same time, the drug-eluting stent became much cheaper, much more affordable than these bypass surgeries, and then the application of the stenting also became much broader than what the bypass surgeries could address. So more patients dealing with broad issues being able to access the life-saving procedure at an affordable rate, these are all sort of the key elements of disruptive innovations. So that would be an example from the overall healthcare space. In diagnostics, I think that most of the innovations up to this point have been sustaining innovations in diagnostics. Although point-of-care diagnostics, in general, seems to me has the closest disruptive elements in them, because pointof-care diagnostics really take diagnostic tests that s available in the laboratory environment or in physicians offices and you really bring them outside of that and you bring the test to the patient s bedside. That is a significant change in how the process of diagnosis is done. So in general, the point-of-care diagnostics we consider to be disruptive if a broad population can access that. But these days there are lot of interesting examples that are emerging. For example, Theranos, which is a startup company, although now it s worth billions of dollars, out of California, started by a dropout from Stanford, the model basically allows a number of tests to be offered to a patient at an extremely affordable rate. And so something like that could really change how diagnostic tests are priced and how they are offered to patients. Recently, in the last ten years, CLIA lab-based diagnostic testing also has proliferated because of the challenges associated with getting FDA approvals for these diagnostic tests. That s another model that could potentially change the process significantly American Association for Clinical Chemistry Page 4 of 7

5 And then, when we think about genetic testing, I think 23andMe has gotten lot of attention. 23andMe, when they first came to the market was not an FDA approved test; in fact, it was not even a clinical test, it was more of a test to have your curiosity satisfied. Curiosities of the individuals who wanted to trace their ancestry and so forth. But now that once people have understood the boundaries of what this test can do, now it has received FDA approval for at least a couple of different indications. And so you start this test outside of the FDA realm, and then eventually the public acceptance has brought the test within the clinical settings, and that is a clear example of disruptive innovation. Why are disruptive innovations important in laboratory diagnostics? Why can't other innovations satisfy those needs? So in diagnostics we have the responsibility as a gatekeeper for identifying, monitoring, and also following the progress of all the diseases. So diagnostic tests could actually serve as a way to really effectively treat diseases, but it also can serve as a way to prevent diseases. The prevention is, as we all know, is the best way to really deal with some of the nasty diseases that we know, but if the preventative method becomes too costly, then that actually makes it difficult for a large population to access such product or service. So, from the perspective of how do we create a product that is going to be accepted and accessed by a large population in an affordable way, we think that disruptive innovations would be the best way to address those challenges or those parameters. And so in diagnostics we think, disruptive innovations really need to play an important role in keeping the cost structure of diagnostics tests at a stable fashion and continues to allow new innovations to emerge, such that the general population will have easier access over time to use these tests on a regular basis to diagnose disorders that they may have or may not have. What are some challenges in bringing more disruptive innovations to clinical environments, and how can these issues be overcome? 2015 American Association for Clinical Chemistry Page 5 of 7

6 I think the biggest challenge is, although we need this, is the regulatory environment, the FDA, as well as the reimbursement community, putting a lot of restrictions on what can be reimbursed, these are the challenges that I believe make any product, but particularly diagnostics products, to come to the market effectively and in time. It usually takes -- some diagnostics tests will take as long as five to seven years to be approved by the FDA, and that is a lot of investment required and also time consumed before a test is marketable. So the regulatory burden really puts to lot of damper on some of the more interesting technologies that would like to be marketed. But having said that, as 23andMe is an example, as I explained earlier, 23andMe actually successfully bypassed that problem by offering the test as a consumer product initially, and then once they developed enough data points to go to the regulatory bodies to explain the product clinically, justify the product, they were able to get the approval very quickly on a couple of indications. So there are ways to go round the problem or circumvent the problem by reaching out to the edge of the regulatory boundaries, if you will, and really establishing the validation away from the regulatory bodies initially and then try to have the regulatory agencies approve the product after the fact. It is an interesting strategy to bring products faster to the market. Another way lot of diagnostic companies have addressed these regulatory issues is to use a new business model. So instead of a self-contained test or diagnostic kits, they have used CLIA labs to essentially run non-approved diagnostic assays. Labs can market those tests to hospitals and other large laboratories. And so some of these business models that also take advantage of the current policy and current rules in the industry have also helped to overcome the regulatory challenges. But these are some of the examples of how we could potentially bring some of these innovative tests to the market sooner than later. Well, finally, please talk about what areas of laboratory diagnostics you think need disruptive innovations the most, and why? 2015 American Association for Clinical Chemistry Page 6 of 7

7 I think the theme has been pretty consistent throughout this discussion, but I think the chronic diseases, particularly cancer, diabetes, neurological disorders, many of these difficult to treat diseases, or the diseases that are very difficult to pinpoint exactly when the disease begins and how they progress, are areas where we need more effective diagnostic products. So not only identifying what the disease is and what's causing it, but also understanding at what point the disease began and then what is the rate of progression of the disease as we follow the patient along. And then, if we take that to the next level, each patient is genetically somewhat unique and based on that uniqueness or unique characteristics, can we tell something about how a particular disease progresses in person X versus person Y? And finding ways to address these issues will be an opportunity or an area where disruptive innovations could make an important contribution. In fact, because some of these questions are challenging, even with today's advanced technology and medical knowledge, we think that disruptive innovations that really focus on how to offer a very affordable but highly effective solution to a broad population is probably the Holy Grail that will continue to push the boundaries of our innovation further along. So we think that, as we think about these challenging diseases, disruptive innovation is a significant driver for us to really conquer these diseases over the next several decades. Spencer Nam is a Research Fellow specializing in healthcare at the Clayton Christensen Institute for Disruptive Innovation. He has been our guest in this podcast from Clinical Chemistry on disruptive innovations in laboratory diagnostics. I am Bob Barrett. Thanks for listening! 2015 American Association for Clinical Chemistry Page 7 of 7

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