(Bloomberg Opinion) -- Many of the recent stories are familiar, but still distressing and perplexing.
There was the gentleman in Tucson who waited 27 days to get results from a Covid-19 test, only to discover he didn’t have the virus and the two weeks he spent in quarantine had been pointless. There was the nonprofit nursing home chain in the Phoenix area that waited five days for test results, only to learn that several staff members and residents had the coronavirus; the asymptomatic staffers had roamed freely until the results arrived. And there have been many tales of Arizona residents waiting a week, on average, to get test results — and sometimes much longer — even though their state has been a coronavirus hotspot for more than a month. Texas, Florida, California and many other newly resurgent corona-states have similar stories.
Test results, to be useful, should arrive in less than two days. If they take longer, opportunities to isolate infected people and trace their contacts with others wither, undermining broader containment efforts. So why can’t the wealthiest and most innovative country in the world have more rapid-fire testing during a pandemic?
Several other wealthy countries already set good examples around testing that the U.S. might have emulated, measures including national testing strategies and aggressive contact tracing. The U.S. also had a lag between its first coronavirus outbreaks in the spring and the current surge, which gave private and public stakeholders in the testing community a chance to catch up. Yet even though testing has ramped up massively — to about 780,000 tests a day, from 145,000 per day in early April — some experts say that to combat the coronavirus effectively the country should be conducting at least 5 million tests a day. Federal health authorities recently said the U.S. has already reached its daily testing capacity, but by fall should have the ability to conduct about 1.3 million to 1.7 million tests a day. That would be an improvement, but clearly not enough — especially if a second coronavirus wave washes across America come October or November.
Even now, the spread of the virus has outpaced testing increases. (In Arizona, in-state testing volume jumped 50% while the growth in new Covid-19 cases exceeded 100%.) More testing isn’t a solution anyhow if results aren’t prompt. And the sheer number of cases in the U.S. adds to the problem. During the spring, coronavirus cases peaked at about 36,000 a day. Last Thursday, more than 75,000 infections were reported — a new record. That same day, a bipartisan group of health care experts, scientists, former senior public officials and investors released a report warning of further economic and social devastation if Covid-19 is left unchecked.
“Testing is the only way out of our present disaster, and it will remain the case until a vaccine or effective therapeutics are widely available,” noted the report, which was sponsored by the Rockefeller Foundation. The authors call for $75 billion in immediate public spending to buttress the testing effort, which would be “the single best investment America could make in averting an even more tragic and pending disaster.”
Even if you don’t believe the coronavirus has brought on an apocalypse, it still makes sense to fix and fortify national testing to protect public health before other disasters arrive. A civilized, equitable and well-functioning country shouldn’t be satisfied with the current testing regime. Rather, it should set to work to establish effective public-private partnerships, embrace the role of the federal and state governments as problem solvers, and hold the private sector to higher standards.
While the Trump administration and the federal government have drawn ample criticism for leadership failures around testing, the private sector has also proved unequal to the epic challenges a pandemic presents.
Federal agencies such as the Centers for Disease Control and Prevention, state labs and hospitals all provide testing services, but commercial labs dominate the market. The clinical testing business, which generates annual revenue of about $80 billion, has a number of big players, including ARUP Laboratories, BioReference Laboratories, Mayo Clinic Laboratories, and Sonic Healthcare Ltd. But two aggressive competitors, Quest Diagnostics Inc. and Laboratory Corporation of America Holdings, dominate the field.
Quest earned $858 million on revenue of $7.7 billion in 2019. The company says its operations “touch the lives” of 30% of the U.S. adult population and it boasts of relationships with about half of all physicians and hospitals in the country. LabCorp earned $824 million on revenue of $11.5 billion last year. It says it interacts with 3 million patients weekly, controls proprietary data derived from 35 billion lab test results (which includes about 50% of the U.S. population), and has contributed to the development of all 50 of the country’s top-selling drugs.
Both companies were assembled through decades of mergers and acquisitions, diagnostic ingenuity and an unrelenting focus on expanding their market share. Quest and Labcorp are preferred or exclusive providers for many of the largest private health insurance companies in the U.S., and they process a large portion of tests covered by Medicare and Medicaid.
Quest, in its securities filings, describes the testing market as “fragmented and highly competitive.” But Quest and LabCorp’s sales suggest they jointly control about a quarter of the business. Smaller competitors have complained over the years that Quest and Labcorp’s tight relationships with insurers and the federal government make it hard for them to break into health care networks to offer alternatives. Some consumers have alleged that the companies charge exorbitant prices for tests administered to uninsured patients, and both companies have drawn scrutiny for possibly overbilling Medicare and Medicaid (charges that they’ve denied).
In the spring, questions about how readily insurers would cover charges from all companies for Covid-19 tests, along with many patients’ reluctance to visit doctors’ offices, brutalized the testing industry’s bottom line. Quest and LabCorp seem to have weathered this better than most; the stocks of both companies are trading around their 52-week highs. Yet even they haven’t been able to meet the testing demands imposed by Covid-19.As the virus rampaged in June and July, both companies, having rapidly upped their testing game, still lagged. A three-to-five-day turnaround time for test results they announced at the end of June gave way to a four-to-five-day delay by the first week of July. After announcing the second delay, Quest said it didn’t expect to get any faster until the coronavirus stopped spreading nationally. Don’t expect that to happen anytime soon. In an interview with the Financial Times on Tuesday, a senior Quest executive said “it will be impossible” for his company “to increase coronavirus testing capacity to cope with demand during the autumn flu season.”
That leaves patients, hospitals and society in a bind. Consider Arizona, which has the highest Covid-19 positivity rate of any state. The virus has spread there so quickly and deeply that a public health official in the state’s most populous county has said contact tracing may have become worthless. Sonora Quest Laboratories — a partnership between Quest and the Banner Health hospital chain — handles 80% of Covid-19 tests in Arizona, making it the largest testing network in the state. And it can take 11 days for Sonora Quest to deliver test results.
Arizona Governor Doug Ducey, a Republican caught flat-footed by the outbreak, recently channeled $1 million in state funds to Sonora Quest to help buy equipment to process tests more quickly. He’s also started pushing a new testing partnership with Arizona State University, and he’s working with the federal government to set up free testing sites. Perhaps he will have better luck than Phoenix Mayor Kate Gallego, a Democrat, who said she requested federal testing sites in April and was rebuffed by the White House.
But Ducey comes late to his testing push, having been reluctant to impose other public health measures such as stay-at-home orders, masks and lockdowns. And regardless of his new incentives, it’s not clear how quickly Sonora Quest can ramp up testing and improve turnaround times.
Another governor decided to circumvent the major labs altogether. New York’s Andrew Cuomo, a Democrat, has advised his state’s residents to patronize local labs rather than Quest or LabCorp to get timely test results. About 70% of New York’s tests are now processed by 200 local labs that return results in one to three days, the state said.
Smaller labs around the country have excess capacity they’re unable to deploy because they haven’t been able to break into the insurance networks dominated by the big guys. And labs of all sizes struggle to operate at full capacity because a balkanized supply chain forces them to compete against one another for frequently scarce resources.
Those resources include reagents (the chemicals labs use to detect the presence of a virus), swabs for collecting patient samples, personal protective equipment, tubes and other media used to transport samples, and proprietary test kits that work with diagnostic machines from companies such as Hologic Inc., Thermo Fisher Scientific Inc. and Abbott Laboratories. Those kits are a special challenge because they’re not interchangeable: Labs that use machines made by Hologic, for example, can’t use kits designed for machines made by Thermo Fisher. A dearth of testing kits was a problem in the spring. Now there’s a dearth of testing machines. All of this has become a tar pit for labs and their employees working around the clock.
To top it off, the testing industry has technology and data challenges. As the New York Times recently detailed in a bit of startling reporting, some test results are still transmitted via fax machines and traditional mail, 80% of Covid-19 test results lack demographic information, and 50% have no associated addresses. Privacy requirements explain much of the problem, but it nonetheless hobbles testing during a pandemic.
Will companies sort this out on their own? No, because they’re competing against one another. Can states help? No, they’re competing against one another, too. That leaves the federal government as the logical referee. It’s Washington that can define and coordinate a national testing program, provide financial incentives to companies to speed things up, help steer resources so as to rationalize supply chains, and revivify a dilapidated public health infrastructure undermined by years of staffing and budget cuts.
However, the possibility of federal action collides with longstanding suspicion, and often outright hostility, in the U.S. toward centralized public health guidance and services. Countering that sentiment, and driving a national testing strategy, will require creative and purposeful leadership from Washington — and from the White House in particular.
When Covid-19 first escalated in the spring, President Donald Trump briefly came to recognize there was battle to be fought. “I view it as a, in a sense, a wartime president,” he said in March. “It’s a medical war. We have to win this war. It’s very important.”
But one month after setting up a coronavirus task force in the White House and putting his son-in-law, Jared Kushner, in charge of expanding testing, Trump effectively shifted primary responsibility for the battle to the states. It was as if, during World War II, Franklin D. Roosevelt had told governors to devise their own military strategies and produce their own tanks, ships and planes.
During the brief period the White House took the reins, some progress was made. More testing sites were opened and significant supply chain problems were tackled. An effort to offer drive-through testing services in commercial parking lots got underway. But Trump’s promise in the spring that “anybody that wants a test can get a test” wasn’t true then and it’s still not true today — largely because the president failed to forge a national consensus around testing in partnership with governors and public and private laboratories.
More recently, Trump has repeatedly denounced testing. And the White House has been trying to cut billions of dollars for testing and other public health initiatives that Republicans in Congress want baked into the next round of bailout funding. At a press briefing on Tuesday, Trump declined to say whether he personally supported further funding for testing. In the midst of a national crisis, that animus toward testing is reckless and dangerous.
Whoever is elected president in November may be enjoying his victory just as Covid-19 unleashes a brutal winter surge. Whether that’s Trump or Joe Biden, he will need to put the weight of the federal government behind initiatives to bolster public health services generally and break the testing logjam specifically.
An obvious first step would be for the White House to help speed up the creation and distribution of simple point-of-care tests that can be used in doctors’ offices, private residences, nursing homes, schools — anywhere they’re needed outside of laboratory settings, especially in underserved, low-income communities. These tests can produce results in an hour or less, but also have significant accuracy problems. There’s already ample research underway to improve POC tests, and the federal government has approved a small number for emergency use, including devices from Abbott, Quidel Corp. and Becton, Dickinson and Company. But there’s much work to be done there.
The U.S. has been playing catch-up on coronavirus testing almost from the start, ever since the faulty Covid-19 test the CDC sent to labs in early February turned out to be disastrously ineffective. Since then the government, which previously handled the development and distribution of diagnostic tests, has granted a series of emergency approvals for private companies to produce new tests. In contrast, Germany and South Korea have kept looser leashes on test development, bolstering their ability to test more broadly and effectively. The U.S. government would do well to continue loosening some of its testing regulations.
On the other hand, the government could use its regulatory powers to suppress any anti-competitive practices that some of the bigger testing companies may be engaging in. A more muscular interpretation of the Defense Production Act would also enable the White House to resolve myriad supply problems, whether by ensuring the availability and compatibility of testing equipment or by smoothing access to such basics as swabs and reagents.
The CDC, which Trump has undermined, could help institute a more effective testing regime by working with its traditional network of state public health agencies and private companies — if its budget was fortified and its regulatory and legal powers were enhanced. The CDC currently offers guidelines that states can take or leave. An empowered CDC should be authorized to devise enforceable rules that help rationalize how the testing industry operates.
Analysts, experts and medical professionals from ideologically diverse institutions — including the American Enterprise Institute, Duke University, Harvard University, Johns Hopkins University and the Rockefeller Foundation — have recently issued detailed reports calling for bolder steps to streamline and reinvent the U.S. testing system. All of them advocate a broader role for the federal government, ranging from coordinating information and supplies and supporting POC innovations to providing financial incentives, establishing private-public mega-labs, and establishing task forces to help carry out these initiatives.
The Harvard study goes so far as to call for the creation of a federal “Pandemic Testing Board” with “strong but narrow powers that has the job of securing the testing supply and the infrastructure necessary for deployment of testing.” The authors liken this to the War Production Board that the U.S. empowered for three years during World War II to supervise the production of weapons and military supplies.
That makes sense to me. After all, we won World War II and we’re now at war with Covid-19. Even Trump knows that.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.
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