In new healthcare world, are diagnostics king?

With pressures at an all-time high to bring healthcare costs in check, diagnostics will emerge as the new must-have business for biotechs, pharmas and device companies. That's according to Jim Datin, executive VP and managing director of Life Sciences at Safeguard Scientific. Based on feedback from the government and insurers, Datin says his firm's investment focus has shifted toward diagnostics, which now make up 50 percent of the life science division's investments. One of Safeguard's most notable deals came last year when GE paid $587 million for Clarient, a molecular diagnostics company focused on cancer markers.

That diagnostics would be attractive to companies traditionally focused on drugs or biologics is not surprising. Companion diagnostics identify patients who'll benefit most from their prescription medications; insurers are more likely to cover a costly drug if healthcare providers can first prove it is being administered to a patient who will benefit from it. On the development side of the equation, diagnostics can assist drugmakers in executing better-targeted clinical trials. That helps developers save money before their products hit the market, as well as increase their drug's chance of being approved by the FDA and reimbursed by CMS and insurance companies.

"We've heard from CMS that for companies to get approval in the future, their product has to reduce the cost of healthcare and be efficient," noted Datin in a phone interview with FierceMedicalDevices. Speaking to the top pharma companies at the JPMorgan healthcare conference in January, Datin noted that executives from all top 10 pharmaceutical companies plan to partner or invest in diagnostics in the coming year. He added the emphasis is on diagnostics that can be delivered directly to the patient at the point of care, be it at a doctor's office or a clinic. Immediate results, rather than sending a test to a lab, will contribute to better outcomes and greater cost savings.