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The Call @ Hedgeye | May 2, 2024

Takeaway: Decentralization of testing and the government-sponsored destruction of the large reference lab model ; DGX, LH, DHR, ABT, HOLX, QDEL

Weighing Anchor of the Mind | Politics, Policy & Power - 20210116P3

Politics. In the late 1960s, General William Westmoreland found himself in a war of attrition. Trained in conflicts where success was measured by conquered territory and freedom for millions, the general needed a different metric to demonstrate progress in Vietnam. Someone got the bright idea of publishing daily casualty figures.

Beamed back home were not the images of freedom from oppression that had reassured Americans throughout World War II that the cause was just but numbers. Simply math. More people died today than yesterday.

The mind was anchored.

When the basic principles of public health were tossed overboard in early 2020, the Trump administration chained itself to a program of unprecedented PCR testing after relentless pressure from political friends and foes.

Around daily case counts, the mind was anchored. Gone were the nuances critical to health care like age and health risk factors. Each case was considered a possible hospitalization and each hospitalization was a potential death.

As General Westmoreland and Donald Trump found and Joe Biden is slowly discovering, such simplification is fertile territory for political action. Case or casualty counts serve as a proxy for competency.

For good reason, President Biden is turning hard toward at-home Rapid Antigen Tests. The results of these tests are not reported through the public health system. All the testing for weddings and ski trips and exposure will simply disappear and all the dutifully reported epi curves will get smaller.

It is probably too late to save the presidency or his party – especially after last week. Given Joe Biden’s long tenue in Washington, you must wonder what took him so long.

Policy. There will be many questions asked – with some answered at the ballot box – about the execution of the COVID-19 response. The focus on PCR testing to the near exclusion of all other options will be one of them.

Federal health policy is a legal construct not a scientific one and certainly not a medical one. As such it tends to solve for the worst possible outcome. The Food and Drug Administration’s resistance to approving at-home Rapid Antigen Tests throughout most of the pandemic was rooted in a belief that tests for infectious disease must be reportable.

It was this policy choice that led first to an overreliance on DGX and LH – referred to as “Coke and Pepsi” by one Trump administration official – which were unable to meet demand. What followed was an effort to identify all capacity outside of the large reference laboratories and expand it to an unprecedent level.

DHR, QDEL, ABT, HOLX and Roche, all benefited from substantial grants expressly designed to expand capacity for PCR testing. As the manufacturers reported at JPM22, all increased their installed base. What is more, this money spigot is yet to be turned off. In September QDEL was awarded a $710M contract with the Defense Logistic Agency to provide laboratory equipment and supplies.

If there is one thing we know about capacity in health care, is that it has a way of bending the regulatory system to its will to ensure that capacity is utilized. Sometimes it is for the best – preventive services are one example – sometimes it is for the worst as is the case with unnecessary orthopedic procedures like spine surgery.

As most of us approach the end of COVID-19, it is easy to think that the diagnostic testing industry will return to pre-COVID behavior. With greatly expanded capacity, especially for high throughput equipment that outcome seems unlikely.

Providers, which need reliable PCR testing with rapid turn-around times and have cause to test everyone who comes through their doors, have purchased the necessary equipment and are enjoying the $100/per test reimbursement. Schools and sports teams have qualified for CLIA certification and installed point of care testing as well.

LH seems to understand this as they emphasize a future in drug development. DGX, on the other hand is doubling down on its reference lab strategy and betting on resilient demand from colleges, sports teams and the like. Given flood of capacity, that just does not seem reasonable or even possible.

Power. Before COVID-19, skepticism about the medical establishment, especially parts of the pharmaceutical industry, was growing. The Improving Wisely effort focuses on misuse, overuse and underuse of certain medical procedures, as one example. Deprescribing.org in Canada is promoting alternatives to pharmaceuticals for the treatment of chronic conditions. More darkly, the anti-vax/medical freedom movements have gained steam.

Meanwhile, since 2006, the Bernard Osher Foundation has funded integrative medicine programs across the country. This approach to practicing medicine pulls together disparate fields such as Tai Chi and nutritional counseling with traditional physician consultation.

In the last two years, skepticism has turned to genuine hostility as demonstrated by the seemingly impenetrable ceiling of COVID-19 vaccination rates. That is concerning, of course, but entirely predictable given the mauling traditional public health practice has taken during COVID-19

Happily, humans, with millions of years of evidence, are pretty good at staying alive. That was true before cable news doctors with undisclosed conflicts of interest, federal health agency leaders with their own agenda, and politicians starring in their own movie, and it is true now.

So, at the precise moment trust in the medical-pharmaceutical industrial complex has been depleted, technology is ushering in a new era of DIY medicine. Devices like Qardio offer accurate at-home blood pressure and weight monitoring. Using advances in neuroscience, apps like Noom offer guidance on nutrition and weight loss. The all too regulated continuous glucose monitors are enjoying some off-label uptake.

The notion that infectious disease should be identified through a PCR test at a lab is surrendering to at-home kits. California requires insurance coverage of at-home but off label syphilis tests. Nationally, insurance coverage has been mandated for COVID-19 at-home tests.

As health care sets sail in a new direction it seems that we are not all in this together. In fact, it looks like from here on out, we might all be going it alone, together.

Have a great rest of your weekend and a peaceful day honoring Dr. Martin Luther King.

Emily Evans
Managing Director – Health Policy


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