Author Archives: Ken Powell

Ken Powell

About Ken Powell

Ken Powell is the President of Genesis Business Development, a global health care consultancy. Mr. Powell has experience in the identification, acquisition, and commercialization of intellectual property, new businesses, and products in the clinical diagnostics, life sciences and medical device market segments. He has knowledge about emerging technologies, industry consolidation, personalized medicine, molecular diagnostics, hospital, commercial reference and physician labs, clinical lab systems, point-of-care, genomics, proteomics, life sciences, lab distributors and medical devices. He has provided Expert Witness testimony in an international lawsuit at the Royal Court of High Justice, London, England. Mr. Powell is also knowledgeable about evolving clinical diagnostic regulatory (FDA, CLIA, Congressional) and reimbursement issues. He has held senior management positions with Becton Dickinson, Roche Diagnostics, Technicon (Revlon Healthcare), Armour Pharmaceuticals, and Upjohn Clinical Laboratory Procedures. Mr. Powell is conversant in all aspects of clinical diagnostics, life sciences segments, current and emerging companies and select medical device segments. He has provided Expert Witness testimony in an international lawsuit involving infectious disease diagnostic technologies at the Royal Court of Justice in London, England.

How will the health care supply chain be transformed in 2015?

Introduction

The healthcare system is transforming due to a myriad of internal and external factors.  The challenge common to Integrated Health Care Delivery Networks (IDNs), Accountable Care Organizations (ACOs) and others can be summed up in a single word – reimbursement.  A survey of thought leaders from these organizations found that over 70% expect their margins to decline 10-20% due to lower reimbursement.  Manufacturers see significant supply chain improvement opportunities through the adoption of new technologies such as cloud computing to reduce costs and increase revenue.  Quite clearly, healthcare in general and hospitals in particular need to rapidly change, adapt and embrace the benefits of supply chain management long employed by healthcare industry manufacturers and suppliers.

The Suppliers

Pharmaceutical, medical device and other suppliers have incorporated supply chain management systems into their companies.  A 2015 study found that supply chains are responsible for 25% of pharmaceutical costs and 40% of medical device costs.  Cleary, there is work to be done here given the annual spend of $230 billion on pharmaceuticals and $125 billion on medical devices. If the healthcare sector as a whole adopted the systems used in other fast moving industries such as consumer and technology, it is estimated that costs could fall for the above two mentioned segments by more than $130 billion.  The lead time from pharmaceutical plants to distribution centers is on average, 75 days.  Contrast this to approximately a week, from order to deliver, for a shipment of laptops from sources in the Far East.

Suppliers of healthcare will likely find 2015 supply chain solutions in cloud computing.  The Cloud offers a common supply chain platform that ameliorates many of the problems associated with implementing fully integrated, specialized supply chain systems and addresses the critical need for collaboration amongst all in the value chain, and yet, challenges remain.  Cloud computing is very dependent on legacy systems and although Information Technology (IT) departments are asked to do more, they only spend on average 10% of their budget on new applications.  As cloud computing becomes more widely adopted by large scale supply chains, they can look to enjoying the rewards of greater response speed, agility and resolving problems through greater collaboration between all stakeholders. These benefits can be expected to improve the bottom line, resulting in increased margins and revenue.

Hospitals

IDNs, ACOs and large hospital groups are faced with not only lower reimbursement, but the impact of legislation from the enactment of The Affordable Care Act (ACA), commonly known as Obamacare.  This alone has morphed the reimbursement focus from being volume based to incentive based. Instead of being paid on the number of procedures performed, hospitals must embrace end to end healthcare delivery supply chains to manage procurement costs, monitor cost per case, re-admissions and other factors that could jeopardize their continued operations.  It is a business tenant that you cannot manage what you do not monitor. Supply chain systems provide the data that can be turned into actionable management, system improvements and business critical cost savings.

Expect the distribution model to continue to change in response to market factors.  Many IDNs and ACOs are adopting Warehouse Management Systems (WMS) of their own, rather than ordering from large medical supply distributors such as McKesson, Cardinal and others.  Savings from these new procurement solutions is a significant opportunity for users.  Simply put, it immediately eliminates the distributor markup on products and does so in a very fast period of time. It is estimated that with self-distribution, where hospitals purchase directly from the manufacturer and assume the distribution responsibility by implementing WMS’s, the payback can be in as little as six months by moving just ten vendors from traditional to new self-distribution systems.

Summary

Healthcare is an extremely fragmented and non-standardized industry relying on traditional methods and systems to successfully overcome today’s rapidly changing challenges. Utilizing new technologies such as cloud computing, WMS and fully integrating and refining supply chain management systems will help both suppliers and users of healthcare products to deliver better quality of health care at a lower cost. Collaboration among all those involved in the value chain, IT software suppliers, manufacturers and end users, to name a few, is essential for the healthcare industry to profit, evolve and prepare for the business challenges of 2015 and beyond.

Courts Impact on Clinical Diagnostic Companies

More than regulation and reimbursement, court decisions regarding key US patents are shaping the landscape for innovative molecular diagnostic tests and the fortunes of companies that develop them. The first case this year was decided in June by the Supreme Court of the United States. The decision of the Court invalidated some of Myriad Genetics’ patents covering its well-known BRAC ½ test that is used in determining a woman’s risk of developing breast and ovarian cancer based on their genetic profile. This opened Myriad’s virtual monopoly on BRAC ½ testing to new and some very adept competitors such as Ambry Genetics, GeneDx and the largest commercial reference lab in the world, Quest Diagnostics. Continue reading

Hospital Mergers Yield Many Benefits

The largest surge in hospital mergers over the past ten years is having an unexpected benefit. These new super-sized healthcare systems are gaining leverage over managed care systems as they negotiate new contracts. Two recent reports in the New York Times and by Pricewaterhouse Coopers cite that this round of hospital consolidation will give large regional hospitals systems the ability to not only negotiate more favorable terms with payers, but also to raise prices, even in face of lower reimbursement rates from payers such as Medicare and Medicaid. According to Booz Allen, up to 1,000 of the nation’s approximately 5,000 hospitals may merge over the next 5 years. Continue reading

Myriad Genetics Faces New Competitor

Myriad Genetics is known for its proprietary test for BRAC1/2 mutations that can predict a patient’s chances of developing breast and ovarian cancer. Actress Angelina Jolie brought a wave of publicity in May this year after having undergone a double mastectomy procedure following her BRAC1/2/ test results. According to leading breast cancer medical guidelines, approximately 2 million women should be screened for BRAC mutations, but just 10% of those are currently being tested for the mutations. This under penetrated market is an obviously attractive growth opportunity for commercial reference labs, both small and large. Continue reading

A Tale of Two Clinical Diagnostic Companies

Quest Diagnostics and LabCorp are the two largest commercial reference labs (CRLs) in the US. CRLs are an essential component in healthcare delivery, providing vital routine and esoteric clinical diagnostic test results to physicians, hospitals and numerous alternate site market segments. Since over 70% of all clinical decisions are made on the basis of a diagnostic test result, the value of clinical diagnostic testing in the healthcare continuum speaks for itself. Continue reading

Roche Seeks Sequencing Strategy

Roche’s failed 2012 attempt to acquire Illumina for $6.7 billion has not stopped the global leader in clinical diagnostics from its intent to be a player in the high growth “nex-gen” sequencing market. Several recent moves by this diagnostics leader provide insight into Roche’s sequencing strategy. Continue reading

Clinical Labs Cut Costs but Face Future Challenges

Taking a play from many healthcare payer playbooks, hospital labs have instituted cost cutting and proactive screening programs that yield substantial bottom line benefits. Copying third party payer pre-certification programs for high-cost tests, a Florida healthcare system initiated an esoteric test approval program for any request in excess of $1,000. The result of this program was an annual savings of $220,000. The lab then went on to introduce and monitor test formularies designed to reduce the volume of send out tests to commercial labs. This saved $74,000 and utilizing “best practices” for blood products added another $412,000 in savings. Continue reading

Roche Diagnostics Teams Up with New NGS Partner

Not to be stopped from entering and likely building a leadership position in the “nex-gen sequencing” (NGS) market following a failed attempt at acquiring Illumina, Roche has announced a partnership with Pacific Biosciences (NASDAQ: PACB) to develop diagnostic products based on PacBio’s SMART technology. The potential deal is worth more than $75 million to PacBio in upfront and supply agreement revenue. PacBio shares closed up today at $5.98 (+72.83%). Continue reading