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Clinical Laboratories and Pathology Groups

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Preparing Clinical Laboratories for Invasive Federal Enforcement of Fraud and Abuse Laws, Increased Scrutiny by Private Payers, New Education Audits, and More

Medical laboratory leaders need to take opportunities to stay abreast of government and payer activity, particularly as payer audits become tougher, say legal experts

Even compliant clinical laboratories and anatomic pathology groups are reporting tougher audits and closer scrutiny of the medical lab test claims they submit for payment. This is an unwelcome development at a time when falling lab test prices, narrowing networks, and more prior-authorization requirements are already making it tough for labs to get paid for the tests they perform.

Clinical laboratory leaders can expect continued scrutiny of their labs’ operations and financials as government and commercial payers move forward with invasive programs and policies designed to ferret out fraud and bad actors.

Federal officials are focusing their investigations on healthcare providers who mismanage or inappropriately use Medicare and Medicaid programs, while commercial payers are closely scrutinizing areas such as genetic testing prior authorization, say healthcare attorneys with Cleveland Ohio-based McDonald Hopkins, LLC.

“The government is looking at fraud, waste, and abuse, and all the different ways they come into play,” said Elizabeth Sullivan, Esq., a Member and Co-Chair of the firm’s Healthcare Practice Group, in an exclusive interview with Dark Daily. “We anticipate there will be more enforcement [of fraud and abuse laws] centered around different issues—anything that can be a false claim.”

Specifically, government officials will key in on violations of the Stark Law, EKRA (the Eliminating Kickback in Recovery Act of 2018), and other anti-kickback statutes and laws, Sullivan said.

“And clinical laboratories, by virtue of the type of services and service arrangements they offer, will continue to be a target,” she added.

Medical laboratory leaders also must prepare for aggressive tactics by insurance companies. “On the commercial side, payers are getting more aggressive and more willing to take things to ligation if they don’t get what they want and don’t see a settlement that satisfies their concerns over issues,” said Courtney Tito, Esq., also a Member with McDonald Hopkins, in the Dark Daily interview. 

Current Investigations Likely to Impact Clinical Laboratories

Sullivan and Tito advise clinical labs to be aware of the following issues being fast-tracked by government and private payers:

The TPE audits program, according to CMS, is focused on providers with high claim error rates or unusual billing practices. During a TPE, a Medicare administrative contractor (MAC) works with a provider to identify and correct errors.

“The TPE audits are real hot right now. We are seeing a lot of clients go through this,” Tito said.

Feds Crack Down on Genetic Testing Fraud Schemes

Genetic testing is another “hot button” issue for enforcement by government and private payers, Sullivan and Tito state.

In fact, the US Department of Justice (DOJ) and the US Department of Health and Human Services (HHS) in September announced charges against 35 people including nine physicians for allegedly participating in healthcare fraud schemes involving genetic cancer testing of seniors nationwide, states a DOJ news release.

CMS is taking action against testing companies and practitioners who submitted more than $1.7 billion in claims to Medicare, the statement added.

The scheme involved medical laboratories conducting the genetic tests, McDonald Hopkins noted in an Alert about the DOJ investigation. The alert described how the scam operated:

  • Scam recruiters approached Medicare beneficiaries at health fairs;
  • In exchange for a DNA sample (in the form of a cheek swab) and a copy of the victim’s driver’s license, the “representative” offered a free genetic test;
  • Representatives allegedly asked the seniors’ doctors to sign-off on test orders. If the seniors’ physicians refused, the scammers offered kickbacks to doctors already in their group;
  • Clinical laboratories that performed the tests were reimbursed from Medicare and, allegedly, shared the proceeds with the scammers.

“Although these opportunities may seem appealing as an additional revenue source for providers, it is always important to review the regulatory requirements as well as the potential anti-kickback statute and Stark implications for any new arrangement,” Sullivan and Tito wrote in the McDonald Hopkins Alert article. 

Criminal Behavior in CMS Programs

Effective Nov. 4, 2019, CMS issued a final rule intended to stop fraud before it happens by keeping “unscrupulous providers” out of the federal healthcare programs in the first place, states a CMS news release.

The rule (CMS-6058-FC), called “Program Integrity Enhancements to the Provider Enrollment Process,” has new revocation and denial authorities to stop waste, fraud, and abuse, the news release points out.

Reasons CMS can revoke or deny enrollment to providers, according to another McDonald Hopkins Alert, include:

  • Outstanding debt to CMS following overpayment to the provider;
  • Coming back into CMS programs with a new identity;
  • Billing for services from non-compliant locations;
  • Abusive ordering or certifying under Medicare Part A or Medicare Part B.

Additionally, EKRA establishes “criminal penalties for unlawful payments for referrals to recovery homes and clinical treatment facilities,” Dark Daily recently reported. However, as the e-briefing points out, it is unclear whether EKRA applies to clinical laboratories.

Nevertheless, Sullivan points out that, “Even without EKRA, the anti-kickback statute applies to any arrangement between individuals. And, it is good to have an attorney look at those arrangements. What your sales reps are doing in the field, how they are communicating, and their practices warrant oversight. EKRA just makes it all the more important.”

During an upcoming Dark Daily webinar, attorneys Elizabeth Sullivan (left) and Courtney Tito (right) of McDonald Hopkins, LLC, will advise clinical laboratory leaders and financial staff on how to prepare for future aggressive payer audits, rigid enforcement of fraud and abuse laws, and more. (Photos copyright: LinkedIn/Dark Daily.)

Clinical Laboratories Need Compliance Plan, Focus on Payers

With so many legal requirements and payer programs, Sullivan advises medical labs and pathology group practices to work with resources they trust and to have a compliance plan at the ready. “Have resources in place, including but not limited to a compliance officer, a committee, and someone who is spending time on these issues. Monitoring government enforcement and payer activity is the most critical,” she said.

To assist labs in remaining fully informed on these critical compliance topics, and the federal government’s latest legislation to combat fraud, Dark Daily is offering a webinar on November 20th at 1pm Eastern time. Sullivan and Tito will offer their insights and advice on how labs should prepare for CMS’ battle to reign in fraud and commercial payers’ increased scrutiny into prior authorizations.

Clinical laboratory leaders, compliance officers, and finance staff will benefit greatly from this crucial resource.

Register for “Bracing for Aggressive Payer Audits, Rigid Enforcement of Fraud and Abuse Laws, and More” at https://www.darkdaily.com/product/payor-audits-webinar/ or by calling 512-264-7103.

—Donna Marie Pocius

Related Information:

Dark Daily Webinar: What Lab Leaders Need to Know About How to Prepare for 2020: Bracing for Aggressive Payer Audits, Rigid Enforcement of Fraud and Abuse Laws, and More

Federal Law Enforcement Action Involving Fraudulent Genetic Testing Results in Charges Against 35 Individuals Responsible for Over $2.1 Billion in Losses is One of the Largest Healthcare Fraud Schemes Ever Charged

OIG Focusing on Laboratories Involved in Genetic Testing Scams

CMS Announces New Enforcement Authorities Reduce Criminal Behavior in Medicare, Medicaid, and CHIP

CMS Aims to Combat Criminal Behavior Through Enrollment Process

Does New Opioid Law Require Clinical Laboratories to Change How They Pay Sales Employees?

17 Former Employees Accuse Orig3n of Clinical Laboratory Test Inaccuracies, Contamination, and Fabricated Test Results

This is not the first time genetic-testing company Orig3n has been scrutinized by state and federal investigators over its business practices

It’s not often that multiple employees of a clinical laboratory company go public with criticism about the quality of their lab company’s tests. But that is what is happening at Orig3n. Problems at the Boston-based genetic testing company were the subject of an investigative report published by Bloomberg Businessweek (Bloomberg).

In September, Bloomberg reported that 17 former Orig3n employees said the company’s Deoxyribonucleic acid (DNA) tests sometimes failed to deliver the intended results or were often contaminated or inaccurate. The individuals had been employed by the company as managers, lab technicians, software engineers, marketers, and salespeople between 2015 and 2018.

The former employees claimed that Orig3n “habitually cut corners, tampered with or fabricated results, and failed to meet basic scientific standards,” Bloomberg reported. The individuals also stated that advice intended to be personalized to individual consumers’ genetic profiles was often just generic information or advice that had no scientific basis.

According to Bloomberg, the individuals also alleged that Orig3n’s lab was careless in its handling of genetic samples in several ways, including:

  • Multiple samples being labeled with the same barcode;
  • DNA and blood samples for stem cell bank misplaced or mixed up;
  • No controls to ensure accuracy;
  • Handling methods that could lead to contamination; and
  • Fabricating results when a test outcome was unclear.

The former employees also stated that “Orig3n ran tests without proper authorization in its lab at the 49ers’ stadium, and that managers regularly compelled them to write positive reviews of Orig3n’s tests on Amazon.com and Google to offset waves of negative feedback,” Bloomberg reported.

“Accurate science didn’t seem to be a priority. Marketing was the priority,” said a former lab technician who spoke with Bloomberg on the condition of anonymity. Orig3n denied the accusations in a statement, describing them as “grossly inaccurate,” and claimed the former employees were simply disgruntled.

“In some cases, former employees are former employees for a reason,” Orig3n Chief Executive Officer Robin Smith told Bloomberg. “We’ve found after employees are gone that they have not done things appropriately.”

Jessica Stoll, MS, CGC (above), a certified genetic counselor and Associate Director of the Gastrointestinal Cancer Risk and Prevention Clinic at the University of Chicago Medicine, told NBC, “The majority of genetic testing is still a gray area and there’s always the possibility of uncertain results. I don’t find them particularly useful, and in some cases I can actually find them harmful.” (Photo copyright: Cancer Wellness Center.)

Is it Dog or Human DNA?

In 2018, NBC Chicago (NBC) conducted an investigation into various consumer DNA testing kits. NBC sent DNA samples to several different testing companies. This included non-human samples, which NBC’s investigators had obtained from a female Labrador Retriever.

With the exception of Orig3n, all of companies identified the DNA as non-human and did not process the kits. Orig3n did, however, process the canine DNA. It then returned a seven-page analysis that suggested the subject of the sample “would probably be great for quick movements like boxing and basketball, and that she has the cardiac output for long endurance bike rides or runs,” NBC reported.

This would be funny if it weren’t so concerning.

Following reports that it had processed dog DNA, Orig3n stated it had made changes and improvements to the company’s testing methodologies. Smith also stated Orig3n’s lab protocols had been improved as well.

“Sometimes we look at the accuracy of things and go, ‘Man, that’s not working,’” Smith told Bloomberg. “Our approach and our philosophy is [sic] to constantly improve the products.” 

Serious Accusations of Clinical Laboratory Malfeasance

Founded in 2014 with the intent of creating the world’s largest stem cell bank, by 2016, Boston-based Orig3n had refocused its attention on the burgeoning field of direct-to-consumer DNA testing. On its website, Orig3n sells several DNA-testing kits with varying costs.

Orig3n’s attempt to offer free genetic tests to large numbers of people at a professional sporting event in the fall of 2017 may be what caught the attention of federal investigators and led to a deeper investigation. Dark Daily previously covered this controversy, which centered around Orig3n’s plan to distribute free genetic testing kits to fans at a Baltimore Ravens football game.

In that situation, state and federal healthcare regulators blocked the giveaway over concerns about protected health information (PHI). Now, Orig3n is being accused of questionable business practices by 17 of its former employees. 

The former employees’ statements that the company’s genetic testing lab did not follow appropriate test protocols—and that it allegedly mishandled specimens and even reported false test results—are serious allegation of malfeasance and warrants an investigation.

Pathologists and clinical laboratory managers know that patient harm can potentially result from inaccurate genetic test results if used for clinical purposes. Dark Daily will continue to follow the investigation into Orig3n.

—JP Schlingman

Related Information:

DNA Company Tampered with Results, Former Employees Say

Home DNA Kits: What Do They Tell You?

Orig3n Holds Inaugural Ravens DNA Day on September 17 at M and T Bank Stadium to Kick Off the Season

Orig3n Partners with San Francisco 49ers to Reward Fans for Contributions to Advancing the Future of Medicine through Genetics and Regenerative Medicine Research

State and Federal Agencies Throw Yellow Flag Delaying Free Genetic Tests at NFL Games in Baltimore—Are Clinical Laboratories on Notice about Free Testing?

Senior Citizens on Medicare Are Particularly Vulnerable to New Scams Involving Fraudulent Genetic Test Orders

Medical fraudsters are targeting Medicare recipients with schemes to persuade them to agree to genetic tests advertised as informing them if they are predisposed to specific chronic diseases or cancer

Medicare scams involving orders for unnecessary, expensive testing are not new. However, clinical laboratory managers and anatomic pathologists need to be aware—particularly those working in hospital and health system labs—that an entirely new wave of fraud involving medical laboratory testing is gaining momentum. This time, instead of specialty cardiology, toxicology, and pain management testing, the scam involves genetic tests.

The shifting focus to genetic tests by fraudsters is a recent development to which many hospital-based medical laboratory professionals may be unaware. One reason that the hospital lab managers can be extraordinarily compliant with federal and state laws is because they don’t want to threaten the license of their hospital. So, hospital lab staff often are unaware of the types and extent of fraud involving certain lines of clinical lab testing that surface in the outpatient/outreach market.

The growing number of fraudulent activities associated with genetic tests is now an issue for federal healthcare fraud investigators. Former US attorney Robert M. Thomas, Jr., a whistleblower attorney, adjunct professor at Boston University School of Law, and a civil rights advocate, wrote in STAT, “What’s going on here is the same pattern of activity that has occurred throughout the healthcare system: a great majority of law-abiding actors and a few that seek out opportunities to game the system of government reimbursement. If you can get a saliva swab and a Medicare number [to provide a specimen for a genetic test] from an unsuspecting senior and falsify a doctor’s order (or find a shady doctor to write one), there’s an easy four-figure sum to be had.”

This aligns with a recent fraud alert from the US Department of Health and Human Services Office of Inspector General (OIG) that states: “Scammers are offering Medicare beneficiaries ‘free’ screenings or cheek swabs for genetic testing to obtain their Medicare information for identity theft or fraudulent billing purposes. Fraudsters are targeting beneficiaries through telemarketing calls, booths at public events, health fairs, and door-to-door visits.

“Beneficiaries who agree to genetic testing or verify personal or Medicare information may receive a cheek swab, an in-person screening or a testing kit in the mail, even if it is not ordered by a physician or medically necessary.

“If Medicare denies the claim, the [Medicare] beneficiary could be responsible for the entire cost of the test, which could be thousands of dollars.”

In a STAT column, former US attorney Robert M. Thomas, Jr. (above), noted that “All a scammer must do is find a medical laboratory willing to split the profit from the testing once the DNA samples are in hand. With more and more labs opening, there are plenty of doors upon which to knock.” This makes it imperative that clinical laboratory managers train their staff to identify and question potentially fraudulent test orders. (Photo copyright: Twitter.)

How the Scam Works

As with similar fraud cases, the scamsters pay inducements to often-unaware patients, physicians, and others to encourage an order for a genetic test. They then bill federal health programs and private insurers at inflated prices.

Thomas describes one such scenario used to increase genetic test orders. “A typical scheme might go something like this: A scammer offers free ice cream sundaes, gift cards, or even casino chips at a retirement community or ‘Medicare expo’ for anyone who would like to hear about the exciting new technology of genetic testing and what it might reveal about ‘your family’s risk of cancer’ or some other come-on,” explained Thomas. “The scammer describes this sophisticated technology and downplays or ignores the medical necessity criteria and the need for a doctor’s order. He or she persuades some attendees to provide saliva samples and gets identifying information, such as the senior’s name, date of birth, and Medicare number.

“The scammer then approaches a testing lab, saying, ‘I can find you a lot more business and get you a lot more patients if you share the proceeds with me.’ This, of course, violates the federal anti-bribery law known as the Anti-Kickback Act. But the lure of high-volume profits can be strong enough for some to ignore that roadblock,” he noted.

What Medical Laboratories Need to Know about Fraud and Genetic Tests

Regardless of how the fraudster proceeds—whether asking the lab company outright to split profits or by simply sending a high volume of the same genetic test to the lab without explanation—clinical laboratory managers should be alert to such activities.

Thomas writes: “An ethical lab would detect that something is amiss with such a request [involving a genetic test]. An alert lab might question how an individual, who is not a doctor, has gotten so many saliva samples and [so much] personal information from so many ‘patients.’ Other [genetic testing] lab companies may simply play the game without asking enough questions, or worse, knowing that the tests are not medically necessary, as required by the rules. The promise of easy money can be just too alluring.”

Physicians and medical laboratories that participate in these scams are in violation of the federal anti-bribery laws. In “Federal Investigations into Alleged Kickback Schemes between Hospitals and Physicians Increase in Number and Scope,” Dark Daily reported on new OIG investigations into hospitals alleged to have violated anti-kickback legislation.

Current Cases Involving Genetic Testing Scams

Fraudulent medical test ordering schemes are an ongoing problem that Dark Daily has repeatedly covered. Though the genetic testing aspect is relatively new, there are several recent and current cases that outline the consequences of participating in the new scam.

For example, in February GenomeDx Biosciences Corp. (GenomeDx) agreed to pay $1.99 million to settle a federal case regarding unnecessary genetic testing. In this case, post-operative prostate cancer patients were given a genetic test called Decipher even though they “did not have risk factors necessitating the test,” a Department of Justice (DOJ) press release states. The DOJ claimed GenomeDx fraudulently billed Medicare for the tests, violating the False Claims Act.

A similar federal case involved a doctor who was charged with ordering genetic tests for patients he never saw or treated. Though the doctor was licensed to practice medicine in Florida, the “patients” in question resided in Oklahoma, Arizona, Tennessee, and Mississippi. One patient testified to having responded to a Facebook ad that offered a $100 gift card “for people interested in genetic testing,” a press release from the US Attorney’s Office District of New Jersey stated.

One important recommendation is that medical laboratory professionals learn how to spot and question potentially fraudulent testing requests. This shift to genetic testing is just the latest threat. Even clinical labs that are well prepared could be caught unaware, particularly if the fraudster sends genetic test orders to multiple labs to process what are probably medically-unnecessary tests.

—Dava Stewart

Related Information:

Genetic testing: The Next Big Arena for Fraud?

Fraud Alert: Genetic Testing Scam

Genetic Testing Company Agrees to Pay $1.99 Million to Resolve Allegations of False Claims to Medicare for Medically Unnecessary Tests

Florida-Based Doctor Charged with Fraudulently Ordering Genetic Tests

Federal Investigations into Alleged Kickback Schemes between Hospitals and Physicians Increase in Number and Scope

Kroger Prescription Plans Partners with Myriad Genetics to Offer GeneSight Genetic Tests and Genetic Counseling in Kroger Pharmacies

Clinical laboratories may soon find opportunities to assist retail pharmacists who are doing genetic test counseling, as employers’ support of genetic testing advances

In another market example of acceptance of genetic tests by major employers, a new pilot program is underway by Kroger Prescription Plans that offers GeneSight by Myriad Genetics as a benefit. GeneSight is an LDT, a laboratory-developed pharmacogenomic test, used to treat psychiatric disorders, such as depression.

As part of the agreement with Myriad Genetics, Inc. (NASDAQ:MYGN), pharmacists at more than 2,300 Kroger stores will offer counseling about GeneSight to eligible employees and coordinate the testing with referring healthcare providers, according to a news release.

Clinical laboratory leaders and clinical pathologists will want to observe these early steps by Kroger to offer genetic tests and genetic test counseling in a retail pharmacy setting. If the GeneSight benefit option and in-store pharmacy interventions prove popular, Kroger Prescription Plans may soon offer other genetic tests, as well.

“Depression is a leading cause of disability and lost productivity in the United States, and only 40% of people reach remission after their first antidepressant medication,” Colleen Lindholz (above), President of Kroger Health, told the Cincinnati Business Courier. “We are committed to helping people combat this debilitating disease, and we’re proud to launch this pilot program. This test can help patients escape the frustrating process of trying multiple medications in the hopes of finding one that works.” (Photo copyright: EatingWell.)

Kroger Not the Only Pharmacy to Offer Genetic Tests and Counseling

Headquartered in Cincinnati, Ohio, Kroger (NYSE:KR) is the largest supermarket chain in the US and the country’s fourth-largest employer. Kroger Prescription Plans—a pharmacy benefit manager (PBM)—provides pharmacy management services and clinical programs to employers, including Kroger, in 32 states. But it’s not the only pharmacy company to offer genetic tests and genetic counseling.

Last year Albertsons Companies and Genomind, a personalized medicine platform, launched Genecept Assay (now known as Professional PGx)—a genetic test designed to help doctors make informed treatment decisions for their mental health patients—as well as pharmacy-based genetic counseling at select Albertsons and its subsidiaries, according to Supermarket News.

Participating locations include:

  • 21 Sav-On pharmacies at Albertsons in Boise, Idaho;
  • Five Jewel-Osco pharmacies in the Chicago area; and
  • Two Sav-On pharmacies at Acme supermarkets in the Philadelphia area.

The Albertsons-Genomind partnership is aimed at patients who may be struggling with a medication for depression, anxiety, obsessive-compulsive disorder, or other mental illnesses. Patients can receive counseling from “specially trained pharmacists” who work with referring clinicians to offer [Professional PGx], noted Supermarket News.

Pharmacists as Genetic Test Counselors?

Pathologists and medical laboratory leaders may be intrigued by the concept of putting pharmacists into the role of a genetic test counselor. However, pharmacists may need to increase their knowledge of pharmacogenomics, reported Drug Topics.

“The science advances in the field are just making it more critical that pharmacists have a really strong understanding of how to blend [pharmacogenomics] into their training,” Kathleen Jaeger, National Association of Chain Drug Stores (NACDS) Senior Vice President of Pharmacy Care and Patient Advocacy, told Drug Topics.

However, some see pharmacists as the natural experts in the space. “In my opinions, [pharmacists] should be the people who own pharmacogenetics. It’s a relatively new field, and who better than pharmacists to optimize drug therapy?” Daniel Dowd, PharmD, Vice President of Medical Affairs at Genomind, told Drug Topics.

Pharmacists will need to be proactive in working with companies that provide genetic testing, according to a Managed Health Care Connect Pharmacy Learning Network analysis, which also indicated billing for pharmacists’ informational services would need to be addressed.

“These opinions about this type of role for pharmacists will not be what pathologists want to hear,” stated Robert L. Michel, Editor-In-Chief of The Dark Report, Dark Daily’s sister publication. “Pathologists have had the role of the ‘doctor’s doctor’ for decades. Pathologists are trained in how to recognize disease, how to determine which medical laboratory tests are appropriate for the symptoms displayed by a patient, and how to interpret the results to select the best therapies.

“Additionally, pathologists are trained to understand the technical performance of clinical laboratory tests, such as whether the sample was of acceptable quality to produce a reliable result, whether the analyzer that produced a result was performing within specifications, and what factors should be considered in tandem with the lab test results when making a diagnosis,” he explained. “It is easy to see why the pathology profession would argue that pharmacists lack this depth of knowledge and experience when ordering and interpreting medical laboratory tests. How the pathology profession will respond to these developments involving pharmacists, interpretation of genetic test results, and counseling patients is not yet clear.”

Opportunities for Clinical Laboratories to Assist Pharmacies

This is not the first time Dark Daily has reported on genetic tests becoming popular as a corporate benefit. In “More Companies Pay for Employees to Have Genetic Tests in a Trend That Brings More Lab Test Volume to Medical Laboratories,” we predicted that genetic test coverage by companies would expand and possibly drive new sources of revenue through increased lab test volume.

Additionally, we suggested, clinical laboratory leaders and pathologists could find opportunities helping others understand the results of the genetic tests.

The recent partnerships between genetic test companies and corporate retail pharmacies suggest that clinical laboratories could benefit from reaching out to pharmacists who are now at a point-of-care and who may be looking to improve their knowledge of pharmacogenomics.

—Donna Marie Pocius

Related Information:

Myriad Announces Coverage Decision by Kroger Prescription Plans for GeneSight

GeneSight GUIDED Study Published in the Journal of Psychiatric Research

Myriad Pushing Ahead with Payers on GeneSight as Data from Large Randomized Study is Published

Impact of Pharmacogenomics on Clinical Outcomes in Major Depressive Disorder in the GUIDED Trial: A Large Patient-and-Rater-Blinded, Randomized, Controlled Study

Albertsons Cos Pharmacies Offer Genetic Testing

Pharmacogenomics and the Future of Pharmacy

Consumer Genetic Testing Pharmacogenomics, a Potential Opportunity for Pharmacists

More Companies Pay for Employees to Have Genetic Tests in a Trend that Brings More Test Volume to Medical Laboratories

Popularity of Direct-To-Consumer Genetic Tests Still Growing, Regardless of Concerns from Provider and Privacy Organizations

For blood brothers Quest and LabCorp this is good news, since the two medical laboratory companies perform most of the testing for the biggest DTC genetic test developers

Should clinical laboratories be concerned about direct-to-consumer (DTC) genetic tests? Despite alerts from healthcare organizations about the accuracy of DTC genetic testing—as well as calls from privacy organizations to give DTC customers more control over the use of their genetic data—millions of people have already taken DTC tests to learn about their genetic ancestry. And millions more are expected to send samples of their saliva to commercial DTC companies in the near future.

This growing demand for at-home DTC tests does not appear to be subsiding. And since most of the genetic testing is completed by the two largest lab companies—Quest Diagnostics (NYSE:DGX) and Laboratory Corporation of America (NYSE:LH)—other medical laboratories have yet to find their niche in the DTC industry.

Another factor is the recent FDA authorization allowing DTC company 23andme to report the results of its pharmacogenetic (PGx) test directly to customers without requiring a doctor’s order. For these reasons, this trend looks to be gaining momentum and support from federal governing organizations.

How will clinical pathology laboratories ultimately be impacted?

Data, Data, Where’s the Data?

Dark Daily has reported on DTC genetic testing for many years. According to MIT’s Technology Review, 26 million people—roughly 8% of the US population—have already taken at-home DNA tests. And that number is expected to balloon to more than 100 million in the next 24 months!

“The genetic genie is out of the bottle. And it’s not going back,” Technology Review reports.

The vast majority of the genetic information gathered goes into the databases of just four companies, with the top two—Ancestry and 23andMe—leading by a wide margin. The other two major players are FamilyTreeDNA and MyHeritage, however, Ancestry and 23andMe have heavily invested in online and television advertising, which is paying off.


In an op-ed response to a NYT editorial that warned readers to avoid 23andMe’s DTC genetic testing, 23andMe CEO and co-founder Anne Wojcicki (above) wrote, “We believe that consumers can learn about genetic information without the help of a medical professional, and we have the data to support that claim.” The FDA agreed and in February approved 23andMe to report pharmacogenetic test results directly to its customers. How this will play out for clinical laboratories remains to be seen. (Photo copyright: Inc.com.)

As more people add their data to a given database, the likelihood they will find connections within that database increases. This is called the Network Effect (aka, demand-side economies of scale) and social media platforms grow in a similar manner. Because Ancestry and 23andMe have massive databases, they have more information and can make more connections for their customers. This has made it increasingly difficult for other companies to compete.

Quest Diagnostics and LabCorp do the actual gene sequencing for the top players in the DTC genetic testing sector. The expected wave of new DTC genetic test costumers (74 million in the next 24 months) will certainly have a beneficial revenue impact on those two lab companies.

Why the Explosion in Genetic Testing by Consumers?

In 2013, just over 100,000 people took tests to have their DNA analyzed, mostly using Ancestry’s test, as Dark Daily reported. By 2017, that number had risen to around 12 million, and though Ancestry still had the majority market share, 23andMe was clearly becoming a force in the industry, noted Technology Review.

Given the reports of privacy concerns and the difficulty removing one’s genetic data from the Internet once it is online, why are people so eager to spit in those little tubes? There are several reported reasons, including:

And now there are several health-related reasons as well. For example, the study of pharmacogenetics has led clinicians to understand that certain genes reveal how our bodies process some medications. The FDA’s clearance allows 23andMe to directly inform customers about “genetic variants that may be associated with a patient’s ability to metabolize some medications to help inform discussions with a healthcare provider. The FDA is authorizing the test to detect 33 variants for multiple genes,” the FDA’s press release noted.

Controversy Over DTC Genetic Tests

The use of DTC genetic tests for healthcare purposes is not without scrutiny by regulatory agencies. The FDA removed 23andMe’s original health test from the market in 2013. According to Technology Review, the FDA’s letter was “one of the angriest ever sent to a private company” and said “that the company’s gene predictions were inaccurate and dangerous for those who might not fully understand the results.”

23andMe continues to refine its DTC tests. However, the debate continues. In February of this year, the New York Times (NYT) editorial board published an op-ed warning consumers to be wary of health tests offered by 23andMe, saying the tests “look for only a handful of [genetic] errors that may or may not elevate your risk of developing the disease in question. And they don’t factor into their final analysis other information, like family history.”

Anne Wojcicki, CEO and co-founder of 23andMe, responded with her own op-ed to the NYT, titled, “23andMe Responds: Empowering Consumers.” In her letter, Wojcicki contends that people should be empowered to take control of their own health, and that 23andMe allows them to do just that. “While 23andMe is not a diagnostic test for individuals with a strong family history of disease, it is a powerful and accurate screening tool that allows people to learn about themselves and some for the most common clinically useful genetic conditions,” she wrote.

Nevertheless, privacy concerns remain:

  • Who owns the results, the company or the consumer?
  • Who can access them?
  • What happens to them a year or five years after the test is taken?
  • When they are sold or used, are consumers informed?

Even as experts question the accuracy of DTC genetic testing in a healthcare context, and privacy concerns continue to grow, more people each year are ordering the tests. With predictions of 74 million more tests expected in the next 24 months, it’s certain that the medical laboratories that process those tests will benefit.

-Dava Stewart

Related Information:

More than 26 Million People Have Taken an At-Home Ancestry Test

How a DNA Testing Kit Revealed a Family Secret Hidden for 54 Years

23andMe Sells Data for Drug Search

Why You Should Be Careful About 23andMe’s Health Test

23andMe Responds: Empowering Consumers

Police Are Using Genetic Testing Companies to Track Down Criminals

The Problems with Ancestry DNA Analyses

FDA Authorizes 23andMe to Report Results of Direct-to-Consumer Pharmacogenetics Test to Customers without a Prescription, Bypassing Doctors and Clinical Laboratories

Erasing ‘DNA Footprint’ from the Internet Proves Difficult for Consumers Who Provide Data to Genetic Testing Companies

FDA Authorizes First Direct-To-Consumer Test for Detecting Genetic Variants That May Be Associated with Medication Metabolism

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