AMR Firms Stumble Amid Hospital Budget Constraints, Technology Shortcomings

NEW YORK – One of the hottest categories in the diagnostics space is  antimicrobial-resistance testing – and a subset of AMR testing, antibiotic-resistance testing – where there is no shortage of companies looking to cash in on what some say is a multiplying crisis fueled by the overuse of antibiotics.

In spite of that, companies offering new technologies in the space, or trying to break into it, have in, large part, struggled in recent years, and investors have been left scratching their heads wondering when their investments will bear fruit. 

Among the firms that have made AMR testing the cornerstone of their businesses are GenMark Diagnostics, OpGen, T2Biosystems, Accelerate Diagnostics, and Curetis. Each has seen its share of ups and downs over the past few years. 

Two, OpGen and Curetis, announced a merger in September, following prolonged rough patches for each company. Before the announcement, Curetis said it would be reviewing its options for securing the money it needed to remain in business. Meanwhile, OpGen has had to stave off delisting action by Nasdaq during the past two years.

Additionally, William Blair analyst Brian Weinstein said in an analyst note earlier this month that the investment firm has been "anxiously waiting" for Accelerate to hit its commercial stride, following stagnant uptake of its Pheno platform. 

In the case of GenMark, in August, after GenMark reported a 20 percent year-over-year increase in its Q2 revenues, Weinstein reiterated his Outperform rating for the company but also noted investors' lukewarm reception to the firm. While the Q2 results showcased "the opportunity in front of a team that has now strung together six straight quarters of above or in-line performance," Weinstein wrote in a research note, "We sense that this performance is still lost on most investors," though he believed that could change soon. 

And T2 Biosystem's share price has been on a topsy-turvy ride and for a few weeks during the past summer, its stock traded at below $1. 

According to one company executive, a key challenge to her company and others like it has been convincing hospitals and clinicians to adopt their technologies. The reluctance, said Romney Humphries, chief scientific officer at Accelerate, stems from cost concerns and hospitals' financial priorities.  

"Antimicrobial resistance, while we can all agree from a society perspective is an important thing for us to be focusing on, it's not always as apparent what the immediate impact to the hospital's bottom line will be," Humphries said. 

This lack of clarity is a major deterrent for many hospitals trying to decide what new technology requests to approve from lab directors. 

"We're all competing for the same pot of money," Beth Prouse, a clinical microbiologist at Peninsula Regional Medical Center in Salisbury, Maryland, said. "We have to present the case on how this new technology is going to help our medical staff take care of the patient better and how it will help improve outcomes." 

She and other lab directors said that it helps when there are published outcome studies or other scientific evidence to back up the technology's positive results – and AMR companies are looking to provide clinical validation data that shows cost savings and improved outcomes. That, though, can be time consuming. 

For example, for the past year Accelerate has worked with customers on studies and trials to measure whether its Pheno instrument enables earlier optimization of antibiotic therapy, said Andy Chasteen, Accelerate's director of global corporate and marketing communications.  

Before Prouse's lab adopted the Pheno system, they were using technology that provided rapid organism identification, along with detection of resistance markers from a positive blood culture. The technology could determine what the organism was resistant to but couldn't determine what antibiotics it was susceptible to. When the Pheno system came on the market, Prouse said, its ability to determine what antibiotics would work in 7.5 hours was a significant selling point. The system's "fairly high" cost per test was a possible deterrent, Prouse added, but the cost was worth it because they found susceptibility results were available almost 42 hours sooner compared to the method the lab was previously using. 

That cost is no small issue, since in the US, the list price for the Pheno system with two instrument modules is $200,000, although the actual price may vary depending on a customer's acquisition method or membership in a group purchasing organization, Chasteen said. For the Accelerate PhenoTest BC Kit that goes along with the system, the list price is $250. 

Prouse's lab has been using the Pheno system since December 2017, and it currently has three modules. Since its implementation, she said, it has seen a two-day decrease in length of stay in patients with positive blood cultures, who then received escalated or de-escalated antimicrobial therapy as needed, thanks to the shortened timeframe provided by the Pheno system. 

Margie Morgan, the director of clinical microbiology at Cedars-Sinai Medical Center in Los Angeles, said that her lab participated in the clinical trial for Accelerate's Pheno platform, so the hospital had months of experience using the Pheno system, which made deciding to adopt the technology easier. 

Before the adoption of Accelerate's technology, data from Cedars-Sinai showed that about 20 percent of the time, clinicians weren't de-escalating their therapy based on resistant-marker information alone, either because they didn't trust it or there had been a previous failure. With the addition of rapid susceptibility, the hospital believed physicians would be more willing to accept the interventions — a belief that turned out to be true, as Morgan said the hospital has reached 100 percent satisfaction with its interventions since using the Pheno system.

The Pheno system was also particularly appealing to Morgan's lab due to its ability to test Gram-negative rods from blood cultures, she said. 

Again, cost was a potential deterrent, but Morgan's lab made the case that the system would help get patients out of the hospital more quickly, which would allow some of those costs to be recouped. Since adopting the system, the hospital has seen a decrease in turnaround time for Gram-negative rod susceptibilities by about 36 hours, Morgan said. 

Both she and Prouse mentioned the importance of antimicrobial stewardship committees in these decisions, as well. The support of such committees can go a long way toward encouraging hospital administration to adopt certain instruments. 

Tied into cost considerations are the potential reimbursement options for different tests, which can encourage or deter use of a technology depending on coverage. Many of the lab tests are covered under a hospital's Diagnosis Related Group payment for certain procedures, but for those that aren't, proposed changes in code stacking could impact payments. 

Currently, there are codes for identifying specific pathogens or resistance genes, and a clinician can bill the code for however many pathogens or genes the test identifies. However, payors are pushing back against reimbursing for high-density multiplex panels, saying that in most cases there are only a few pathogens that contribute to the disease. Medicare administrative contractor Palmetto last year determined that only small multiplex viral panels in susceptible populations would be covered, signaling a move toward more restricted coverage. 

Palmetto's reasoning for the restriction was explained earlier this year at the American Society for Microbiology's annual Microbe meeting, where Palmetto Medical Director Paul Gerrard said diagnostic tests must change patient management to improve patient outcomes. If a test doesn't hit that bar, it doesn't meet the reasonable and necessary requirement for Medicare to cover it. 

There are plans to discourage code stacking by adopting a specific set of codes for multiplex rapid DNA tests where reimbursements depend on how many probes are in each test, OpGen CEO Evan Jones said. Although inpatient care is reimbursed through comprehensive payments using the Diagnosis Related Group Schedule, which means hospitals aren't likely to bill specifically for one test, the changes in reimbursement could still impact how hospitals utilize certain tests, especially if payments are reduced.

Another issue for AMR companies is that reimbursement is often viewed through an outpatient lens. "It's a lot easier to get adoption of tests that are geared for patients that are less sick and are being managed in the community than for patients who are critically ill enough that need to be admitted to the hospital," Accelerate's Humphries said. 

Other considerations

The difficulties with adoption and cost justification aren't the end-all, be-all for hospitals, of course. Quality of care is the priority, even though hospital "administration would argue you can get the same quality from something that's less expensive," Morgan said.

Workflow integration and appropriateness for the community being served is another key point labs look at, Prouse noted. Figuring out how the technology will be incorporated into the lab's workflow is a factor both for the lab director deciding whether to adopt the technology and hospital administration who will approve its purchase. Any technology that requires additional staff members or hands-on time may also make it difficult to make the case for adoption.

Hospitals also must consider the populations they're serving, Prouse said. Hospitals with large pediatric populations will necessarily have different needs than an academic medical center, and new technologies appropriate for one kind of facility may not be appropriate for the other.

Echoing the concerns of hospital lab directors, Alex Vadas, a healthcare consultant with LEK Consulting, noted that the technologies must change clinicians' behavior in a tangible way that will create value for both the patient and the institution, whether through fewer readmissions, better clinical outcomes, or reduced use of broad spectrum treatments.

Beyond the potentially high costs that hospitals may have adopting these technologies, there's also concern that the instruments currently available simply don't move the needle enough to justify the investment. 

As long as blood culture is the main method for rapid susceptibility testing with a new technology, the timeframe is still too long to make a tangible impact, said Vadas. Even Accelerate Pheno's improved time of 7.5 hours requires a blood culture, which usually takes one to two days to grow. Since clinicians can't just wait for results, they still need to rely on broad-spectrum treatments, rather than targeted therapies. "It's just not really giving a fundamental change in how a patient is managed," Vadas said.

Or at least, there isn't evidence that such a change will happen in the short term, he added. The industry is falling short in building evidence that demonstrates a material and meaningful impact and that compels people to adopt and use the new technologies, Vadas said. 

Humphries also brought up the difficulty for AMR companies in providing evidence. "On an individual hospital level, it's very, very difficult to measure, within that microenvironment of one hospital, a reduction in antibiotic resistance with the usage of tests that allows you to optimize therapy sooner rather than later," she said. "While there's a lot of good evidence that getting patients on the most narrow or targeted therapy as soon as possible is good for that individual patient's care, it's not hard evidence."

Vadas noted that clinician behavior is an impediment to new instrument adoption, due partially to liability concerns and difficulties accepting change. "These doctors are not trained to test first, treat later," Vadas said. "If the tests are not giving them the full picture and the answer within a very quick time period, ultimately it falls short."

Another hurdle Vadas noted is that drug companies aren’t incentivized to develop anti-infectives. Despite rising resistance, Vadas said the economics are not encouraging pharma to focus on that space, leaving a hole in the market, and that drug companies need to invest in the next generation of anti-infectives to move the area forward.

Vadas called the issues with the AMR market a "vicious cycle," a perfect storm of not enough evidence to make use cases for technology that just hasn't advanced far enough to be worth the investment. 

But the news for companies in the AMR space isn't all bad, and recent developments may harken to better days ahead. Several firms have shown improving financial results, and some have received recent clearances from the US Food and Drug Administration for their technologies or presented promising outcomes data for their technologies. 

T2 Biosystems recently announced a new agreement with the Biomedical Advanced Research and Development Authority that could provide up to $69 million in funding for the company. Following the announcement, Canaccord Genuity analyst Mark Massaro raised his price target on T2 Biosystem’s shares to $3.50 from $2.50 and noted that the award was the largest contract ever from BARDA to a diagnostics company.

And as long as antibiotic resistance remains a global concern, AMR firms will have at least some relevance.

"The fact that these solutions aren't perfect doesn't address the fact that we're having global resistance problems," Vadas said. "That's not going to go away."