May 15, 2010 (Vol. 30, No. 10)
Winny Tan, Ph.D.
Long-Term Health of Sector Dependent on Changes in Approval and Reimbursement
Tissue-based diagnostic testing continues to serve as one of the gold standards for cancer diagnosis. There is no other technology that can capture the biological context of the disease and the critical parameters that factor into patient outcomes. From a biopsy, a pathologist can determine the type of cancer, the stage, and the degree to which the cancer has invaded healthy tissue.
As the rate of cancer incidence grows steadily each year, tissue diagnostics will be in high demand and produce a robust market with many high growth opportunities. The total U.S tissue diagnostics market generated revenues totaling $1,029.7 million in 2009 and is forecasted to reach $2,278.2 million in 2016.
The tissue diagnostics market contains two submarkets with distinct market characteristics: the pre-analytical and routine staining market and the advanced staining market.
The pre-analytical and routine staining market typically exhibits single-digit growth and is largely governed by demographic phenomena like cancer incidence. The competitive landscape of the pre-analytical and routine staining market separates into two revenue tiers with three key market participants in tier I and several smaller companies in tier II.
The advanced staining market, on the other hand, typically exhibits double-digit growth that is largely driven by sales of IHC assays and the rapidly growing molecular diagnostic assays. The competitive landscape of the advanced staining market separates into three revenue tiers with a single tier I company, three tier II companies, and several tier III companies. The rapid market growth of the advanced staining market has attracted many market entrants, which, in turn, has increased the degree of competition.
The near-term health of the tissue diagnostics market is dependent on increasing process standardization in the anatomic pathology laboratory and on improving laboratory workflows. Currently, anatomic pathology laboratory processes lag behind the quality standards and productivity achieved by the clinical chemistry laboratory.
Variations in anatomic pathology processes can negatively impact the quality of diagnosis and workflow bottlenecks delay the speed in which the physician and patient receive laboratory results. The lack of modernization in the tissue diagnostics market, particularly the pre-analytical and routine staining market segment, provides ample opportunities for tissue diagnostic instrumentation manufacturers.
The long-term health of the total tissue diagnostics market is dependent on significant paradigm shifts surrounding companion diagnostics and molecular diagnostic technologies. The current reimbursement structure for diagnostic testing in the U.S. does not sustain an adequate return-on-investment for the developers of companion diagnostics as compared to their pharmaceutical partners that are developing the therapy.
Molecular diagnostic technologies are facing similar obstacles with the U.S. Food and Drug Administration being cautious in granting approval for ISH tissue diagnostic tests. In response, industry leaders are beginning the dialogue for the necessary industry-wide changes that will support companion diagnostics and molecular diagnostic development. The future viability of the tissue diagnostics market will depend on a favorable commercialization environment for these high growth diagnostic areas.