Barely two months after LabCorp finalized its acquisition of Covance, Quintiles has signed a broad agreement with Quest Diagnostics to form a joint venture creating one of the world’s largest central laboratory services companies. The two high-profile central lab-CRO combinations raise the question of whether more such mergers and partnerships will follow.
“More deals like those two will happen, because both are about the information that is locked in various databases and siloed in different organizations,” said Michael Martorelli, director of Fairmount Partners, an independent investment banking firm. “This is not just about doing laboratory tests; it’s really about the data in those lab tests and how they enable you to do better biopharmaceutical clinical research.”
While the two deals are very different— LabCorp spent nearly $6 billion to acquire Covance, and the Quintiles-Quest joint venture has a 60%/40% ownership, respectively—both deals are a way for the CRO industry to use data and technology and become more efficient, said John Kreger, principal analyst at William Blair.
“The new joint venture provides further evidence that combining clinical trial services with central labs and reference laboratory capabilities and data may provide added value in the support of an increasingly complex clinical trial environment,” said Kreger. “In our view, combining two central labs gives you a lot of cost savings, but that was not the primary drive of each of those deals. It was more about accessing clinical data and using them to improve the overall efficiencies, including finding patients and picking doctors for trials. It also feeds into the Big Data trend. For pharma, these pairings are all about being more efficient with R&D dollars and using technology and data to make their CROs more efficient.”
Quintiles, in a statement, said the new entity created with Quest will draw on each company’s expertise in biostatistics, including Quest’s more than 20 billion processed tests and Quintiles’ electronic health records collected from more than 60 million patients and a network of 250,000 clinical investigators.
The idea is to apply that mammoth data set to the world of lab testing, using Quintiles’ vast database of major biopharmacuetical and medical device companies to create a one-of-a-kind therapeutic product offering.
“For Quest Diagnostics, the joint venture model will enable us to generate growth and value from our clincal trials assets while simultaneously strengthening our focus on our core diagnostic information services business,” said Steve Rusckowski, Quest’s CEO.
Quest and Quintiles anticipate the joint venture will lead to additional collaborations in enhancing patient recruitment and retention in trials. Together they will speed the validation, development and commercialization of companion diagnostics and develop new analytics and tools related to population health.
Martorelli sees some parallels between the new CRO-clinical lab strategy and the recent acquisitions of pharmacy benefit management firms (PBMs) by health insurers and pharmacy chains to help corporate America better manage its drug costs. He was referring to Rite Aid’s recent acquisition of Envision RX, a national pharmacy benefit management company, and UnitedHealth Group’s acquisition of Catamaran, merging it with Optum Rx, its existing pharmacy benefits company.
Although both PBMs are smaller than either ExpressScripts or CVS/Caremark, the goals are similar: controlling pharmacy costs by negotiating better prices, especially for some of the more expensive but life-saving drugs.
“The similarities are in unlocking information and providing significant information—at the beginning, in how we develop drugs and use data; and at the end, in gaining better drug pricing and health benefits,” said Martorelli.
Kreger said the PBM deals are more about scale and greater purchasing power to negotiate discounts with big pharma, while the CRO-lab combinations are trying to bring together the process of running clinical trials for new drugs and devices.
“Both [types of deals],” he said, “are being done to work better with pharma, in very different ways.”
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