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The Changing Tides of the In Vitro Diagnostics Market

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Read time: 6 minutes

Diagnostics is the new cherry to pick. For too long now, diagnostics has been overshadowed by therapeutics and medical devices. Therapeutics and device industries were always thought to have more excitement than the diagnostics space, but this field is growing and changing as fast as its counterparts. Not only is it changing but it’s a primary cause for revolutionizing healthcare across the world. 

Diagnostics is more than just a way to identify which patients have a specific disease, it has evolved to play a vital role in drug development and predict diseases before they even start showing symptoms. With the increasing focus in personalized medicine, diagnostics plays a crucial role in monitoring a patient. There is growing awareness among physicians now, on the importance of diagnostics in patient care continuum. The famous fact, “only 2% of investments go into diagnostics which is used to make 70% of medical decisions” is changing. With the increasing awareness comes the investment to innovate and design products that meet needs among consumers. Diagnostics is becoming a large part of patient care (as shown below).


The diagnostics is an umbrella consisting of many fragmented areas. The main focus of this article is on the in-vitro diagnostics (IVD) market which currently holds close to $50.0 Billion in 2014 with a compound annual growth rate of 7.3% and is expected to reach $62.6 Billion by 2017. It is the second largest market in healthcare only after the pharmaceutical industry.  The sheer need in this industry is forcing many companies to start investing in these markets.

What is the IVD market?

The IVD market consists of a group of tests that can detect diseases, conditions, and/or infections. Many of the tests are conducted using fluids like blood, tissue and urine. As shown in the diagram below, the largest segment in the IVD market is Immunochemistry which accounts for close to 40% of the global market.  Molecular and Point-of-care (POC) tests are segments that are growing rapidly, especially now, when healthcare models are changing to become more patient-centric and efficient.


The IVD market is influenced by various factors and pressures. As populations continue to grow and age, the burden of chronic diseases will spur the growth in this market. To meet these demands, there is going to be increasing investments into innovating new diagnostic products especially in the genomic and proteomics area. There are also emerging areas in informatics and digitalization of products that are changing the dynamics of diagnosing a patient. Any changes and trends in this mammoth market will impact global healthcare systems. There are at least six various trends in the diagnostics industry in the world that is revolutionizing patient care. Here they are:

Reimbursements and Regulations

Globally the reimbursement criteria and regulations for these tests are changing. US, Europe and Japan remain the strongest players in terms of adoptability and profitability. India, Brazil and China are emerging as not only large consumer regions but a hot spot for innovation and growth in these markets.  The US, even though it holds the largest market share than other regions, the market is hampered by strict Food and Drug Administration (FDA) policies. In the western hemisphere, there is a movement towards a more integrated solution to diagnostics. Due to the increasing globalization of healthcare and the dominance of a handful of players in this market, the push and pull between each region reshuffle business models. Emerging countries like China have regulations that favor local companies versus foreign manufacturers to obtain an approval for their test or device. Whereas US have a stringent regulatory system that impedes growth which forces manufacturers to seek regions like Europe to launch new products.  Overall, there is a structured but restrictive trend in the regulator policies across countries that make certain regions more amenable to foreign manufacturers compared to others.

Consolidation and Automation of Labs

This is one of the trends that is prevalent in all of regions. With reimbursement cuts and pricing pressures, many laboratories are struggling to stay afloat. In the US, with the implementation of the Affordable Care Act (ACA) the push for value based systems called for large healthcare budget cuts which adversely affected clinical laboratories. Quest Diagnostics one of the larger laboratory conglomeration, has been on an acquisition spree of privately held laboratories. This consolidation of not just labs and hospitals is an attempt to be more cost effective due to the budget cuts. Clinical and pathology labs have increasing number of mergers and acquisitions and this consolidation is going to continue in this region. The consolidation of labs is calling for a more unified and structured solution to diagnostic practices. With the increasing consolidation of labs, it is inevitable that there are going to be a handful super corporations owning majority of the laboratories. What this means to manufacturers and  laboratories is still unclear, however, there is going to be less duplication of devices in laboratories and a demand for more efficient technology to deal with demand. 

With the growing call for consolidation of labs there is a demand for automating and unifying laboratories to increase their efficiency. One of the ways that laboratories can more efficient is through installing devices that are unified and can be easily customizable. Technology that is user friendly and simplified where technicians with little or no training can use it with ease. Increasing number of clinicians are opting for analyzers that meet end-to-end needs of the labs, from sample preparation to analysis. With the growing trend toward value based systems and cost effective measure in al regions, there is going to be a higher investment in these systems and older systems that have singular functions will be discarded in the next 5 years.

Healthy Convergence

The iVD market space has been historically fragmented into many categories. There is increasing sub-segment convergence to better meet patient needs. There is increasing involvement of genomic sequencing in pathology for better clinical data and diagnostics. The integration provides a comprehensive platform and a guided and focused treatment and surgical procedures.  There is also a convergence between industries that were historically mutually exclusive. IVD diagnostics is playing a key role in pharmaceutical drug development and monitoring a patient through their treatment regimen.  The FDA approves drugs that have a supporting companion diagnostics during the clinical trial process. There is also a convergence between IVD and medical devices especially in the cardiac space allowing a wholesome platform for diagnosing a patient. 

Competitors Remodel to Meet Needs

With changing regulatory dynamics across the world, manufacturers are changing their models to meet needs. Companies are investing in high growth areas like next-generation n sequencing, personalized medicine and molecular diagnostics and downsizing on mature markets like diabetes diagnostics. Many of the global manufacturers are partnering with local companies to penetrate challenging markets like China, Brazil and Japan. They are offering consultation services in addition to their tests to harness revenues. There are five main strategies that are being implemented among manufacturers to deal with the changing tides (as shown below). In addition to restructuring product portfolios there are more partnerships between diagnostics and pharmaceuticals and medical devices. 

With the increasing regulations across the regions, companies are investing in clinical studies to validate their tests. Many companies are creating add-ons rather than new products to be more cost effective and still meet demands. Many of these strategies are taking place as a reactive response to the changes; companies that are paving their way with disruptive and proactive models are seeing rapid growth in this changing environment.


Emerging Disruptive Technologies and Business Models

Small emerging companies are flourishing in this new environment because they either have a test that is cost effective, easy to use and accurate or they have a different business model all together. Diagnostic tests that use printed paper as an assay to diagnose patients accurately is disruptive especially in emerging countries.  Boston-based Diagnostics for All is a company that uses this technology and can revolutionize the testing market. With 60% of the world’s population not having access to these tests, this is a cheap and easy option to patients who can’t reach urban hospitals and medical infrastructures.

There are companies like Theranos that is offering 229 tests to consumers directly through retailers like Walgreens. The tests utilize only a single drop of blood and are supported by the FDA.  They offer a simple end-to-end procedure that requires minimal training and the results are obtained with hours rather than the usual days when patients go to labs. In addition to all this Theranos offers these tests half of the price that is reimbursed by Medicare.  This not only allows consumers who cannot afford insurance to also be able to test themselves.  Theranos disrupts the archaic centralized lab testing model where large hospitals and clinics outsource tests to these companies.  Retailers like Walgreens, Target, Walmart and CVS are beginning to pave way for a direct-to-consumer model that allows consumers access to diagnostic tests. The technologies that show the most promise are the ones that is not only cost effective and efficient but also empower consumers. 

Consumer Power with Growing Digital Health

Patients are looking increasingly to diagnose themselves through not just the internet but through applications and other websites like WebMD. Patients are getting more accustomed to accessing their information at their fingertips, through a smart device. Patients understand their conditions better and are becoming more aware regarding tests and their validity. IT companies like Google, IBM Apple and Amazon are all planning to leverage this to their advantage. Google and Apple are both trying to obtain metrics from devices and apps to understand consumer health behaviors. IBM is another company that is using Artificial Intelligence to manipulate and store large healthcare data to enable precision medicine. It has the access to the HealthKit app by Apple and has a goal to be the largest healthcare database.  Apple’s Research kit App brought scientific studies to people’s fingertips where patients can sign-up for studies with a click of a button. With the ability for researchers to recruit larger Ns, there will be significant data to validate studies. The effect s of “Big data” in the IVD market is still incomprehensible but the impact will be surely game changing.

Still Think Diagnostics is Boring?

All these trends point to a single aspect—patient care continuum. IVD is at the forefront of this healthcare revolution where models are changing to support value of service. There is more to come from this industry, it’s not just tests and diseases, it is more, it’s about dynamic models and disruptive technologies that changes how we treat patients. 

This article was authored by: Aishwarya Vivekanandan |  Industry Analyst: Diagnostics |  Frost & Sullivan