Report On Analysis Of Laboratory Information System Industry In North America

Executive summary

Over the past 50 years Laboratory Information system industry has been a boon to the Laboratory oriented organizations specially in healthcare and oil and gas industries. In the year 2018, it has been estimated that the LIMS market is going to double in the next 5 to 10 years in terms of revenue as increasing number of consumers turn towards Lab information technology also known as lab informatics (18). Despite the threat of new entrants and substitutes entering the market frequently, LIMS industry has only evolved more to include a lot more features. Each key player in the market has something new and advanced to provide its consumers. In addition to providing infrastructure for the labs, LIMS incorporates other business processes essential to internal functioning, such as billing, test quality control and assurance, reagent and kit/forms inventory, etc. This industry analysis report deals with the different business trends in the LIMS industry with prime focus on North America. As it’s a common fact that North America spends a large amount of money on health care system, but it lacks efficiency due to different regulatory barriers.

As we move forward in our analysis we find out the different technological advancements that has increased the life span of patients thus increasing the demand for faster and more efficient laboratory informatics. The key strengths and weakness of any industry is its bargaining power of suppliers and buyers along with its battling power against the rivals, substitutes and new entrants. Environmentally and scientifically LIMS has so much to offer to all the sectors of health care that it’s a target of several substitutes and entrants due to its broad base use and software development which requires constant upgrading and quality control. We have also graphically represented the increasing market revenue of LIMS industry based on different products, software and services being provided and distributed by Key market players in the industry. Some of these companies will be discussed in the second part of this report.

Introduction

Laboratory systems are usually the most sophisticated systems in any health organization worldwide. Because of this, laboratory computing has been at the leading edge of health information systems application development for the past five decades (1) specially in North America and fully integrated laboratory information technology (IT) systems have become the prerequisites for efficient clinical service delivery and laboratory management.

One common core commodity of laboratory is information. In a very broad sense, the term IT is frequently used to refer to the interaction between people, processes, data and technology. Today, laboratory stakeholders want this information to flow faster in a comprehensive manner and more securely than ever before to satisfy external clients and improve internal options by managing the inherent complexity of laboratory. Laboratory informatics is essential to enable research center laboratories and hospital laboratories to deliver information in timely manner and in standardized electronic formats. Although electronic information management systems are mostly expensive than their manual counterparts, it reduces errors, reduces dependency on one-off processes that are difficult to maintain long-term and promotes uniformity and agility in the laboratory. In short, laboratory information technology (IT) services are now a mission-critical component of laboratory operations. This brave new world of laboratory informatics represents a clear break from the past where information management activities were completely covered by the laboratories (2).

Historical Background

During early 1960’s, the pressure of handling large volumes of data efficiently had become extremely challenging leading to the reason for early laboratory involvement in computing. Earlier systems were used to carry out functions such as analogue-to-digital conversion for raw data obtained from spectrophotometers and other instruments. Later radio-immuno assay techniques were developed to handle sophisticated calculations. As the growth in demand for laboratory tests increased so did the difficulty in storing large amount of results (2). During the 1970’s, systems were adapted to automated laboratory administration to overcome the result storage and retrieval demand. Management of laboratory samples, associated analysis and reporting were time-consuming and error prone due to manual processes. Hence some organization geared up with the different mode of data collection and reporting while some enterprising entities started developing commercial reporting solutions in the form of instrument-based systems. A need for a more effective system felt and a next stage of Laboratory information management system (LIMS) started developing. The technology used to design systems in 1980’s managed to outperform more modern database technologies, but the situation changed in the following years with new developments in technology, the drawbacks of 1980’s language became more evident specially in terms of data maintenance and business functions. The era of 1990-2010 saw a massive technological development as internet became extremely common in every organization also referred to as an era of dot-com bubble. This fast paced development of internet led to the origin of emailing reports, online data access from wards and clinics, remote test ordering. This further led to the development of integrated robotic laboratories, bed side analyzers could be controlled much more efficiently and data could be accessed by the patients from the convenience of their homes(3). In the year 2010, LIMS focused on providing a user-friendly and integrated data management solution for effective management of the laboratory [4].

The financial aspects were always important while selecting a LIMS however other factors like using the latest in chip and operating system must also be ensured [5]. LIMS has the potential to bring all laboratory data together in a single unified repository. Cost, flexibility, ease of use, and ease of implementation are all important considerations when choosing a commercially available LIMS product. LIMS at presentThe latest generation of LIMS is different and has drifted away from sample test and result management and moved towards providing sophisticated Laboratory Informatics architecture. This has allowed all the data and information to be enhanced and managed effectively as well as optimize the performance of the laboratory or organization. Also, the value of historical data assets can be maintained by ensuring continued accessibility of this data within a single application. Effective management system totally depends on the infrastructure of laboratory. Hence, proper study of the laboratory functionalities is required before going ahead with the solution (3). The ability to monitor, track and communicate data and quality control gives laboratory tools to improve its methods and work practices which results in more samples per hour. In short, the general and specific requirements of LIMS are as follows:

• Cross-system manufacturer integration
• Standards for device integration in flexible laboratory automation
• data mining is integrated in process and optimized
• Modern solution concepts of web engineering for development
• Service of LIMS including new heterogeneous software technologies
• Solution concepts for IT-supported quality assurance, in particular for validation processes; IT security in LIMS
• Option of the direct integration of devices and the use of web-based systems for minimizing installation and maintenance costs [6].

Pestel: Environmental Analysis

Political: The year 2018 is considered the year of sending mixed policy signals to all the organizations in North America. Policy makers are grappling with many health care issues in 2018. These issues are directly affecting the key decisions of Affordable Care Act to potential budget cuts effecting the Medicare and Medicaid programs in the clinical laboratory sector. This is a big federal policy challenge for labs over the next year (7).

Economic: The U. S. economy suffers from an overly expensive healthcare system that exhibits a high degree of complexity, opacity and regulatory barriers, resulting in elevated inefficiencies across the value chain. The result of excessive consumption, uncompetitive prices and inefficient resource allocation is a gigantic deadweight loss that makes this sector a prime candidate for disruption. The increase in competition and innovation in the delivery of healthcare, especially using new technologies, could help contain cost increases. A profound structural reform of the healthcare system would increase productivity growth, potential output and the well-being of the population. Thus, reducing spending and increasing efficiency would boost productivity growth and the well-being of the population (8).

Social: The baby boomer generation continues to drive healthcare and pharmaceutical choices and costs and will continue to do so for some time. However, baby boomers will soon be eclipsed by millennials in driving healthcare and drug trends: millennials outnumber baby boomers by approximately 7. 7 million (9). Millennials are patients will influence healthcare sector in many new ways, as their use of online resources and telehealth continues to grow. Like baby boomers and Generation Xers changed aspects of healthcare, millennials are fully the first generation expected to share the burden of their health benefits. Also the millennials believe that healthcare costs are too high, and that third-party health payers or insurers have too much power.

Technological: In current times technology is highly affordable, there is wide spread availability of Wi-Fi and obsessive use of social media. This has led to greater acceptance of sharing data and engagement of data between consumers and healthcare providers. The consumers are now very comfortable being monitored by healthcare providers. The demands of consumers who increasingly expect more transparency and choice regarding their treatment and referral decisions has been fulfilled by being constantly connected with technology. We are seeing a rise in the creation of digital apps that let consumers access their own healthcare information, and online services and social networking platforms that let consumers see advice and information where, when and how they want it. Digital connectivity is also changing the physical environments, such as a patient’s home, with devices keeping them linked to their medical provider. Devices can track whether pills are being taken, if a patient is sleeping, or if their heartbeat is regular, with alerts being sent to the healthcare professional when there are issues (10). Two of the other biggest technology trends, Augmented Reality (AR) and Virtual Reality (VR), are helping with training clinicians through simulation, as well as educating patients and aiding with treatment.

Environmental: Many industrial information system control installations have positively impacted environment with water treatment plants or plants using chemical processes. The activities in these types of infrastructures are run by interconnected automatic controllers which are connected to internet. As a result, these systems are not always well protected and are extremely vulnerable to cyberattacks. For IT industries, going digital is a great opportunity as it simplifies processes and renders infrastructures automatic. However, industrial systems and the networks they are connected to must be completely secured. The impact of a cyberattack is real and can be huge. Only a suitable security strategy can provide protection and prevent negative consequences from harming the environment (11).

Legal: Regulations are not very strong and clear on Laboratory Information systems. According to the Center for Connected Health Policy, in the 2017 legislative session, 44 states introduced more than 200 telehealth-related pieces of legislation. No two states are alike in how tele health is defined and regulated, which has created a confusing environment for Medicaid reimbursement, licensing and prescribing, among other issues. Ransomware attacks on healthcare providers are on the rise. As a result, the Food & Drug Administration has issued guidance and webinars to address the management of cybersecurity in medical devices (12).

Industrial Analysis

Strategic posture: It is important for laboratories to understand critical trends to form and improve strategies to make the labs function efficiently. There has been a broad development in healthcare trends including decline in death rates from diseases like AIDS, HIV and other chronic as well as hereditary diseases. It has been estimated by the social security administration project that life expectancy will increase to an average of 80 years for both men and women by the year 2025 (13). The consumers extended life expectancy has led to the increase in needs of more tests in laboratories. More consumers are now insisting on getting detailed information while the laboratories must provide them without inferring with the procedures followed by physicians. The systems increase efficiency to interpret large batches of samples in short span of time. It is cost effective means of prevention and detection of diseases. It enables development of services to improve patient care. Another strategy to increase the efficiency of lab information systems is to create partnership with other industries to enhance biotechnology and pharmaceutical development along with client trials and cardiology screening services.

Cost cutting strategies: Laboratories must acquire or develop latest technology to remain competitive and to create new businesses. New advances in technology will improve turnaround time of laboratory tests or bedside tests. New technology will also streamline labor intensive technology by developing automated systems, To save costs staff members must be cross trained to minimize over time and boost flexibility. Staff must be skilled with a mix of techniques. Technologists must be trained to perform traditional management and supervisory functions in order to reduce cost of hiring higher level of labor. Laboratory operations like supply chain must be outsourced to venders for inventory and re stocking. This would speed up the process of any large busy organization. Other operations like courier service, billing, information system management, marketing of the lab instruments and products, special reagent preparations, specialty testing and transcription services must also be outsourced depending upon the laboratories capabilities (14).

Porters five force Analysis of LIMS industry

This is the pressure that suppliers can exert on businesses by their bargaining power like raising prices, reducing products availability and lowering quality of products. The suppliers can be segmented according to type, component, deployment, industry and region. They may have different bargaining power depending on their advantages and disadvantages (15).

Bargaining Power of Buyers: Buyer bargaining power refers to the pressure consumers can exert on businesses to get them to provide higher quality products, better customer service, and lower prices. Buyers are hospitals, research centers and physician office when we consider only the health care industry. Buyers can be broad based depending upon life sciences, chemical, food & beverage and agriculture, environmental testing laboratories, petrochemical refineries and oil & gas industries. Different industries require different customized models of LIMS depending upon the technology required by them. Consumers also have the option of choosing between thick-client (Web-enabled) solutions, thin-client (Web-based) solutions, and a new segment of cloud-native LIMS solutions.

Each of these solutions caters to the various needs in the market. An increasing number of consumers are shifting away from thick-client LIMS solutions to more affordable and flexible solutions to meet their needs. Bargaining power of buyers is significantly high as there are multiple organizations that depend upon LIMS for distribution of information requiring exceptionally high customer services including proper installation and staff training. Suppliers of LIMS are flexible in providing them with higher quality product specific to their needs due to the increasing competition of suppliers in the market (15)

• Industry Rivalry: The intensity of rivalry among competitors in an industry refers to the extent to which firms within an industry put pressure on one another and limit each other’s profit potential. As each firm is providing LIMS with different features like broad based, industry specific, web based and a cheaper version of web – enabled solution, there is an obvious significant level of rivalry among the firms in terms of the new technologies being provided by them and in terms of profit potential(16).
• Threat of new entrants: This is the threat of new competitors to existing competitors. Usually, a lucrative industry will attract more competitors who would seek profits. The adoption of LIMS in hospitals, research centers and other life science, oil and gas industries are rapidly increasing with many enterprises implementing the solution due to its advantages like better storage and operations. This has pushed vendors to add technically advanced features to LIMS, which can integrate it with the traditional systems. Also, cloud-based companies are venturing into the market, which is expected to increase the rate of adoption of LIMS in the next few years. With the IT infrastructure adding innovative solutions to primary and secondary healthcare systems, the number of end-users for the LIMS market is set to increase over the period. (16)
• Threat of Substitutes: Threat of substitutes is availability of products that consumer can purchase instead of the desired product. There are several vendors selling Lab systems that are based on high end technologies compared to the traditional LIMS. Each system has broad as well as industry specific features and prices are competitive. Some of the systems have built in LIMS, quality control as well as software for business intelligence. Each firm is trying hard to provide something more advanced compared to its competitor firm in terms of technology and cost.