College of American Pathologists
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Keeping score: Daniel Farkas, PhD, tracks the recent hits and misses in molecular testing

April 2003
Daniel Farkas, PhD

This past year has seen significant developments in molecular diagnostics—new tests, new companies, and new strategies for patient management. To get a feel for where molecular pathology has come from and where it’s going, CAPTODAYpublisher Bob McGonnagle interviewed Daniel H. Farkas, PhD, for Diagnostic Insight, the magazine of the Biomedical Marketing Association. Here, in CAPTODAY, is an excerpt of that interview.

Dr. Farkas began his career in molecular diagnostics as a doctoral student in the Department of Cellular and Molecular Biology at Roswell Park Cancer Institute, Buffalo, NY. He earned his PhD in 1987 from State University of New York, Buffalo. He is now director of molecular pathology at Methodist Hospital, Houston, where he is setting up his third molecular diagnostics laboratory, the first two having been at Saint Barnabas Medical Center, Livingston, NJ, and William Beaumont Hospital, Royal Oak, Mich. He is an associate professor of pathology at Baylor College of Medicine and consultant to the clinical and molecular genetics devices panel of the Medical Devices Advisory Committee, Center for Devices and Radiological Health, Food and Drug Administration. He is president of the Association for Molecular Pathology, and he is the American Association for Clinical Chemistry’s liaison to the CAP Molecular Pathology Committee. He will be a speaker in the two-day molecular pathology session during the 2003 CAPannual meeting in September.

Dr. Farkas spent four years in product development, first at Clinical Micro Sensors, Pasadena, Calif., and then with Motorola Life Sciences after the company acquired CMS. He has “seen both sides now,” he says, and is thrilled to be back in the clinical laboratory.

Taking a retrospective look atmolecular diagnostics, what is your view of the progress of the technology in clinical applications?

It is a difficult question to answer and depends on the time frame you choose. If you choose the big picture of molecular diagnostics, it is still on the upswing.

Like the stock market, if you look at the stock market charts from 1900 to 2002, it is nothing but straight up. If, however, you look at any two- or three- or five-year period, then it might be wildly down, as for example it has been in the past few years.

Sticking with the stock market analogy, I am still bullish on molecular diagnostics. From the point of view of having been away from the clinical environment during my four years in the biotech industry, I am a little disappointed that there hasn’t been more progress. In other words, while technology has progressed nicely over the last few years—for example, the dramatic rise in the use of real-time PCR—the number of high-volume, high-impact laboratory tests that have been introduced is fairly small. I think that, in time, molecular diagnostics, techniques, and pathology will make their way to every area of medicine, with the possible exception of trauma, and certainly to every area of diagnostic medicine.

On the flip side, however, there have been very few home runs. You can count the home runs in molecular diagnostics on the fingers of one hand—they are chlamydia/gonorrhea and HIV viral load. The new home run that is about to leave the ballpark is screening for the cystic fibrosis panel of mutations as recommended by the American College of Obstetricians and Gynecologists and the American College of Medical Genetics.

Those three tests are and have the potential to be very high volume because they make a difference in the way physicians manage their patients. All of the other singles and doubles on the molecular test menu—sticking with the baseball analogy—also have great potential and great practical value, but they are simply much lower volume. For example, Factor V Leiden would probably be a double. Other tests that can be seen as singles would be leukemia and lymphoma genotyping. Colon cancer mutation analysis remains relatively low volume today but has great potential for growth as tests are developed for not only familial colon cancer but also the much more common sporadic form of colon cancer.

The same thing goes for hereditary breast cancer, which has a much lower prevalence in the population than sporadic cases, though the reference laboratory with the patent on the BRCA1 gene is making a nice living and doing an impressive volume of tests to detect gene mutations.

HPV has the potential to be a home run, but at least here at Methodist Hospital, physicians are not gravitating toward its use to replace the Pap smear. Recently, the Association of Reproductive Health Professionals published clinical practice guidelines that recommend HPV testing for the management of women with abnormal Pap smear results, but for some reason this is not generating the same kind of interest that CF testing has.

Then again, progress is also a function of science. The molecular diagnostics community can only take advantage of what the scientific research community gives us. We are still very early in the genomics era. The data we can get from the sequencing of the human genome and their translation into targets for clinical tests are still developing. That is why molecular diagnostics is very exciting, but ironically, even though we have been doing molecular testing for almost 20 years now, it is still early.

Can you comment on what appears to be the limited distribution of molecular testing over the past few years? The principal amount of molecular testing is still performed in a relatively small number of labs.

I think that perception is finally changing. The 2002 record-breaking Association for Molecular Pathology meeting provided a tangible signal that molecular diagnostics is spreading. There are probably a couple of hundred laboratories doing molecular diagnostics in this country. There may be some 5,000 doing glucose tests, so there is a large gap. But it all goes back to medical need and utility. Economics is also a factor. Many hospitals simply can’t afford to put any sort of investment in their laboratory medicine department. That includes molecular diagnostics; it may just be easier for them to send these tests out.

Molecular diagnostics continues to grow at an attractive rate, which is why it is so interesting to vendors. Test volumes at Beaumont Hospital, when I was there from 1991 to 1998, grew at least 20 percent every year. While I was in industry I continued to speak with my colleagues and from their comments I know that an annual 20 percent to 30 percent rate of increase in test volume is about average for established molecular labs.

Can you describe your experience in industry?

It was great for the first two years while we were Clinical Micro Sensors. I was part of a team that was dedicated and 100 percent devoted to perfecting the electronic DNA detection technology. It was a very exciting time. Maybe we were infected with a little bit of naiveté and believed we could really make a difference in the way physicians practice medicine and pathologists practice molecular diagnostics. It was very much a collegial team environment.

Then when Motorola bought the company, everything changed because the great upside of working in a startup evaporated for the most part. To be fair, that purchase coincided with the downturn in the economy in 2000, so things changed everywhere and would have changed even if CMS had not been bought. Of course, we are all capitalists at heart, and we were partially driven by the wealth-building opportunity at Clinical Micro Sensors. When Motorola bought us that was instantly capped, and it became more of a job and less of a passion.

Naturally, it is understandable that Motorola wanted to keep tabs on us and get a return on its investment. In a perfect world, when the stock market hadn’t tanked like in the heady days of 1998 and 1999, I think that Motorola, and for that matter all larger companies that acquire startup technologies, should have given us a lump sum and said, “Here, go away for five years, then come back and dazzle us.” Under Motorola, the environment became more bureaucratic and lost a lot of its luster. Most larger companies are probably better at manufacturing than at developing, and ours was a technology still in development and not yet mature enough for revenue in 2000 and 2001.

This is part of a generic problem we see in technology acquisitions. Often larger companies that enter the field of biotechnology probably should do a little more due diligence than they have been on the technology they are acquiring to really understand what they are investing in and what their likely return is over the short- and long-range period.

The thing that disappointed me the most about Motorola buying Clinical Micro Sensors is that there were so many opportunities in health care and diagnostics that could have benefited from Motorola’s core expertise in Internet solutions, communications, and electronics and that was not brought to bear on the DNA detection technology that CMS had. The ideas and technologies were never married. A lot of factors may be the reason for this, including that the economy tanked and Motorola could no longer afford the development costs.

Based on your experience inindustry, what are the warning signs in a startup?

That’s easy—design control. Once the company begins instituting design control on the researchers and does not allow them a free hand, this is a clear warning sign that innovation might begin to wither.

There is an analogy to this situation in diagnostics. A molecular diagnostics lab is run by the book—according to CAP and CLIA—and according to protocols that are demanded when you are generating patient results. But at the same time many molecular labs do translational research. They run studies that use data derived from other labs’ specimens and add that to data from their own specimens to develop new tests that physicians can use. While the appropriate scientific method is employed, labs do not apply the same rigor of CAP and CLIA guidelines to this translational research because it is not yet ready for prime time.

By the same token, design control is absolutely essential for companies, because they are commercial and need something to sell and because to bring a product to the FDA you need to do it by the book. But when you impose this design control on researchers who are trying to improve and develop new aspects to the technology, it’s stifling. If a company does not have the ingenuity to let the researchers run and fly without imposing a lot of bureaucracy on them, this to me is a major warning sign that maybe this is not going to work out.

On the other hand, that may be a business decision. The company may think the technology is mature enough to serve the marketplace and there is no reason to let the scientists run free—it is time to manufacture. But a startup by definition is not mature. So design control can be good or bad; it depends on the business plan.

Which company most impresses you in terms of its development of a molecular diagnostic technology?

BioMérieux is the beneficiary of my kudos in this answer only because it was smart enough to buy Organon Teknika’s NASBA technology. It has been nicely developed into something that is quick, easy, and relatively inexpensive and has an incredibly large test menu. The whole world seems to use Bayer and Roche for HIV and HCV—NASBA is a viable third alternative. Maybe they are like Avis—“we try harder.”

On the other hand, Roche and Abbott clearly have not done a great job. Roche has had the rights to PCR for some time now. The molecular diagnostics community was extremely disappointed about how long it took for PCR-based methods and tests to come to the clinical laboratory in the 1990s. And the rate at which new tests are coming out remains extremely slow. To be fair, it is not all a function of Roche. The company has a very difficult government bureaucracy to deal with in this country. Despite that, Roche’s new strategy of ASRs for different analytes using its real-time PCR instrument is growing into an impressive test menu.

Abbott, on the other hand, started off well and is beginning to crawl out of the hole of the FDA consent decree. Only time will tell how it will fare with its new molecular systems and in its new partnership with Celera. The potential is certainly great.

Maybe the solution to this situation is ASRs. It is obvious that it is so much easier and cheaper for IVD companies to use the ASR route to bring products to market. But there seem to be hypocrisy and double standards in this area. Visible Genetics staked its corporate life and existence on getting FDA approval for its HIV genotyping test, anticipating appropriate preferential treatment in the marketplace. But after getting FDA approval, the FDA did not shut down the use of laboratory-developed tests. So Visible Genetics could not get the accounts it needed and had to sell the company. Bayer got this technology for a song. Somehow Visible Genetics got its wires crossed.

On the other hand, I think that the FDA’s ASR strategy to allow laboratory-developed tests to multiply and continue is based on the fact that the FDA trusts CAP-accredited laboratories. Lab directors know how to validate tests, how to make sure they are reproducible and have value. The FDA-approved molecular test menu includes only 50 to 60 tests. So the FDA ASR rule really opened up the universe of molecular test analytes as opposed to saying that labs can only run tests that are FDA approved. In this way ASRs are a good thing. Molecular labs would have continued to offer tests, of course, but at least now there is some quasi good housekeeping seal of approval on lab-developed molecular tests from the FDA in addition to CAP accreditation.

What do you, having been on thesupply and demand sides of molecular diagnostics, think about patent protection of genes?

In principle I am against patents on gene sequences, but in practice I understand why they are of such important practical value to the patentholders. From a utopian perspective, it is inappropriate to patent genes, gene sequences, and sequences within bacteria. In a practical business sense, of course, it is necessary and legal. Companies have to have a way to recoup their investment. I don’t have any Solomonic answer to this difficult problem. It takes so much money to bring a product to market that companies have to be zealous in protecting their intellectual property.

A possible solution is if the government—and I don’t know what part of the government has jurisdiction here—could be forward thinking enough to perhaps convene a group of diagnostic experts to come up with a new and relatively inexpensive system to verify that a diagnostic product is good, safe, and efficacious. Maybe then these patents that are legal and business appropriate could be licensed at an equitable rate. No one wants to deny a company’s opportunity to make a profit, but at the same time you can’t make the cost of licenses to patented materials so onerous that diagnostic laboratories cannot afford to pay those license fees. Maybe today’s system by which tests are approved is OK for chemistry or hematology, but DNA is different and so maybe part of the solution is to change the way in which DNA tests are approved. By that I mean making them simpler and less expensive to approve, not the opposite, which some in society desire.

Is there a place for point-of-caremolecular tests?

If you can do them cheaply and quickly, then there is an opportunity for POC molecular tests for infectious disease diagnostics and pharmacogenomics. But the requirements for a POC test are rigorous and it is still difficult to do DNA extraction, amplification, and detection for $10 to $20 and in less than 20 minutes. If you can do it, then you really have something.

Another opportunity for molecular POC tests is in the OR. Automated instruments that can extract nucleic acids from tissue or a blood sample in five minutes are now available. If this DNA can then be tested for markers of metastasis or cancer in a real-time cycler by a technologist in the OR, this can be an excellent complement to the frozen section for cancer diagnosis. The same model applies to detection of pathogens in the delivery room setting.

What would you say is the futureof molecular diagnostics?

Right now finding the right drug and dosage for a patient is based on a physician’s experience but does involve a lot of trial and error. Molecular diagnostics can make a huge contribution in this area, but it will take a mammoth sea change. Part of that change will, unfortunately, be driven by lawsuits initiated when physicians did not use a pharmacogenetic test that was available. Also, the FDA will ultimately drive this sea change by approving drugs only in conjunction with an appropriate pharmacogenetic test linked to the use of the drug. When these tests are utilitarian and available and are relatively inexpensive and produce test results quickly, this will be huge.