Whatever the outcome of Obamacare, one thing is certain: Government reimbursements for medical testing will continue to drop.
Despite this fact, Fort Myers cancer-testing firm NeoGenomics is racing to develop new tests and grow its business. “It's possible to make improvements in quality while you're reducing costs,” says Douglas VanOort, the chairman and CEO of NeoGenomics. “I think we've been able to prove that.”
Consider NeoGenomics' third quarter results. The $16.9 million in revenues it posted were 18.9% better than in the same quarter in 2012. Meanwhile, the average cost of goods sold per test fell 12%, indicating significant productivity improvements.
Those results came despite the fact that average revenue per test fell 8.5% in the first nine months of 2013 compared with the same period in 2012. “Everyone in the industry expects continued pressure on insurance reimbursements,” says VanOort.
Employees at NeoGenomics undertook a series of exercises this year to streamline operations. They analyzed all the steps they must take, from the time they receive the samples until they send out the results. “We have a very good team of people and they've been extremely productive,” says VanOort. Besides Fort Myers, NeoGenomics also operates labs in Nashville, Tenn., and Irvine, Calif.
At its headquarters in Fort Myers, for example, the company is tearing down the walls and rebuilding a more efficient lab based on lean manufacturing principles. “Before, we had departments walled off,” VanOort says.
In addition, the company created 30 new tests this year on top of the 50 new tests it developed in 2012. To develop these new tests, the company hired Maher Albitar, who previously oversaw the leukemia section of the M.D. Anderson Cancer Center at the University of Texas.
NeoGenomics says it has the most clinical oncology tests of any lab company in the country.
That kind of performance has attracted the attention of the pharmaceutical industry. Recently, NeoGenomics announced a partnership with Covance, one of the world's largest drug-development services companies, to provide specialty lab-testing services for global clinical trials.
Headquartered in Princeton, N.J., Covance has more than 12,000 employees in 60 countries and posted more than $2.2 billion in annual revenues.
Although the terms of the deal weren't disclosed and it's not clear how much revenue it could generate for NeoGenomics, VanOort says it could be significant. “It could be a key component of our growth going forward,” he says.
“What they have is relationships with all the top bio-pharmaceutical companies,” VanOort says of the new partnership with Covance. “If we had to do this on our own, we'd have to build a sales team. They have all the infrastructure and we don't have to re-create it.”
Because Covance has such a strong presence overseas, VanOort says the new partnership will help it grow its international business. “We're going to help Covance set up some of these tests in Shanghai, Geneva and Singapore,” he says.
Testing for clinical trials is growing because of the development of drugs for specific types of cancers. For example, NeoGenomics scientists have been working on tests to detect whether or not certain prostate cancer patients have an aggressive form of the disease. Such “personalized medicine” will be tailored to the individual cancer patient, the future of drug therapy.