Tue. Jan 18th, 2022

As anyone who has recently tried to get a Covid test knows, the pandemic has radically reformed the medical diagnostics market several times.

After a frantic scramble for tests at the start of coronavirus, the sector fell out of focus last year because the US and other rich countries prioritized vaccines. Now testing has moved to the front and center again as the Omicron variant spreads. Some prospective clients had to queue for hours for supervised tests, while others scrambled to get hold of rare home tests amidst hoarding.

Despite all this, Covid testing has increased revenue and profits at proven manufacturers and labs and attracted new players who smell an opportunity they believe will survive the pandemic. Attitudes towards home health care and routine disease screening have shifted dramatically and these companies want to be the one to benefit from both Covid and other diseases. But in the meantime, they should avoid alienating customers with shortages, high prices and unfulfilled promises.

The sharply rising share prices of Abbott Laboratories and Roche reflect the huge revenue gains they have made from Covid testing. Other groups hope to follow suit. Abbott, which has built two new factories, is the US’s largest supplier of rapid antigen tests, while the Swiss Roche is a world leader in laboratory-based PCR tests. Private equity-backed Innova Medical has won £ 3.7 billion in UK government contracts and now supplies 21 countries (although the newcomer also had to revokes US tests after failing to provide acceptable reliability data.)

Manufacturers across the board say their efforts to meet demand have been hampered by the way new variants have caused frequent shifts in public health education and conflicting government purchases. They also complain that national demands for specific packaging make it impossible to divert supplies when demand shifts.

Last summer, after US authorities shut down the use of rapid tests, Abbott laid off workers and got rid of components only to climb again this winter. Innova, which sells mostly Asian-made tests, is building a new production facility in Wales, but CEO Daniel Elliott says it does not have enough contracts to be profitable after the company could not get additional UK government orders.

Laboratories and medical clinics are also benefiting from the demand for supervised tests: profits at Australia’s Sonic Healthcare have more than doubled. But opportunistic outfits run the risk of undermining public confidence by promising prices and time scales they fail to deliver. In the UK, 13 major suppliers have the Laboratory and Testing Organization to set standards and self-policing.

Predicting demand is difficult. Debate over whether home tests should remain free is raging in the UK, just as the US government is starting to hand it out and insurers required to pay. The need for tests is likely to be seasonal and is likely to decrease, even if Covid-19 never completely goes away. Retail prices also vary widely: in the US it is more than $ 20 for two home tests, while French law limits levies to € 5.20 per test. Meanwhile, the World Health Organization says less than 1 percent of the tests went to low-income countries.

The lasting benefits in testing lie in convincing patients, insurers and governments that it is worth paying for routine screening for all types of diseases. The market has already grown, but Covid has accustomed many more people to self-testing. Some companies bet that patients will now be willing to try home tests to distinguish between flu, Covid and a common cold. Others see the market expand as tests are developed to look for the viruses that cause chronic diseases such as hepatitis C and cervical cancer.

Companies are also working on cheap readers who automatically upload the chemical results of a home test rather than relying on patients to report whether they see a line. There is potential money in pandemic preparedness if the austerity measures of the past two years make governments willing to pay to keep test production lines ready to roll so that it can be adapted for the next infectious disease.

These, and other bets that Covid is transforming medicine, including investments in telecommunications health and artificial intelligence-driven automation, help explain why venture capitalists are pumping $ 29 billion last year in US digital health start-ups. That’s almost double 2020’s record total, according to Rock Health.

Companies should do more to make Covid testing easy to access, use, and afford. There are long-term gains for them in it.


Follow Brooke Masters with myFT and so on Twitter

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