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Lab Rats

The quest to privatize clinical labs threatens public health

When a nurse draws blood from your arm, when a resident asks you for a sputum sample, when a hazmat-suited doctor takes back the nasal swab you’d been handed at a Covid testing site, what happens to that little alienated bit of you after it has traveled from body to vial? Perhaps it will be processed in a lab on hospital premises; perhaps it will be sent for analysis at a nearby university or a state-run public health lab. Or perhaps, as with so many medical tests in the United States, it will be packed in dry ice and shipped to one of the country’s ever-growing private clinical labs.

In the United States, it is precisely these private players––and particularly the twin behemoths of Quest Diagnostics and LabCorp, which together constitute what is essentially a duopoly––that have been put at the helm of the country’s push to process coronavirus tests as the number of cases continues to explode. Trump administration officials met with industry representatives in early March to discuss coronavirus testing; shortly thereafter, a number of these executives stood behind the president during an address at the White House Rose Garden, lauding the role that big business was playing in the effort to defeat the pandemic. Pence painted a Norman Rockwell-worthy image of Target, CVS, and Walmart as “companies that are synonymous with communities large and small, where people come together”; Fauci told the audience that it was imperative to “embrace the private sector”; and White House Coronavirus Response Coordinator Dr. Deborah Birx thanked LabCorp and Quest by name. The phrase “public-private partnership” was brandished like a nazar bead by Pence at regular intervals, as though those words alone contained enough apotropaic power to keep the virus at bay.

The pandemic has not left conservatives chastened regarding their usual calls to weaken or eliminate public health programs.

All of this occurred, meanwhile, against the backdrop of Trump’s attempts to slash Centers for Disease Control and Prevention funding for the fourth year in a row. While his proposed cut would keep infectious disease programs safe, it would come at the cost of other preventative health programs. The pandemic has not left other conservatives chastened regarding their usual calls to weaken or eliminate public health programs: though a recent Cato Institute piece begrudgingly admitted that the kinds of benefits created by organizations like the National Institutes of Health and the CDC might be “underprovided by markets,” it nevertheless asserted that any increase in funding for the two organizations would only be acceptable if concomitant cuts to the Department of Health and Human Services were made.

Today, private labs processing both diagnostic and public health-related tests form a major part of America’s private health care landscape, but one that is often overlooked. It is easy to focus on points of contact in the health care system––the interactions that occur when we are given an exam, when we receive the results, and when we are presented with the bill. What happens in between––screening and re-screening by unseen laboratory technicians––is liable to dip below the horizon of our attention.

Under normal––that is, non-pandemic––conditions, some thirteen billion laboratory tests are performed in the United States each year, a figure that makes the private diagnostic lab industry potentially highly lucrative. In recent years, clinical labs and testing have become a fertile area for investment by private equity firms eager to carve ever more profits out of the American health care landscape. Big Pharma giants like Roche and Novartis have also gotten in on the action, seeing expansion into the diagnostic sector as a pipeline through which to funnel more customers towards the expensive medications that are their usual wares.

As with blisteringly high prices for insulin and routine medical procedures that cost $10,000 more in the United States than they do in nations with socialized health care, for-profit medical labs exist in a philosophical ecosystem that says health care is not a right but a commodity. But how does the prominence of these labs concretely impact the experience of patients requiring diagnostic tests? The profit motive brings with it the temptation to put a thumb on the scales. Quest, for instance, has fielded a long history of lawsuits claiming it was defrauding the very same public it now claims to be partnering with in the fight against the pandemic. As recently as 2015, Quest settled a whistleblower lawsuit alleging that the company was submitting duplicate blood test reimbursement claims to Medicare/Medicaid, resulting in multiple payments for a single test. This came not long after a $302 million settlement––the largest paid for a medical equipment malfunction lawsuit in U.S. history––arising from allegations that its subsidiary knowingly sold faulty test kits that resulted in inaccurate diagnoses, needless medical procedures, and false Medicaid claims. In 2017, both Quest and LabCorp were the subject of class-action lawsuits for unfair billing practices, alleging that individual patients were charged as much as ten times what hospitals were for the same tests. Naturally, the Trump administration’s recent embrace of private clinical labs makes no mention of such allegations, not even in cases where one of the alleged victims of the fraud was the federal government itself.

Indeed, as with everything else about the United States’ Covid response, the private-public partnership so vaunted by Trump administration officials as the solution to the pandemic has been far from smooth sailing. Because private labs are paid by the volume of tests they process, they have little incentive to turn away tests even when they know they will not be able to process them in a timely manner. Quest reported a backlog of over 160,000 tests in April despite promises from to health care providers that the turnaround would be only a day or two (the company now reports that tests may take a week or more to process). As Alexis C. Madrigal and Robinson Meyer pointed out in an investigation for The Atlantic, long wait times aren’t just a problem for anxious patients and their families––it’s also a major issue for hospital staff, who until test results come in must operate under the assumption that suspected Covid patients are positive. That means suiting up in full PPE for even the smallest interaction; the longer patients are in lab work limbo, the more safety equipment medical professionals must burn through––aggravating an already severe PPE shortage and putting the lives of hospital staff at further risk of infection.

The reliance on private labs to shoulder coronavirus testing is in many ways the continuation of historical trends in U.S. public health. Particularly since the 1990s, states around the country have made increasing moves to privatize public diagnostic infrastructure in a bid to cut funding and thin out bureaucracy. The country’s first public health labs had been opened almost a century before, applying then-new knowledge of bacteriology in the service of combating urban outbreaks of typhoid, yellow fever, cholera, and other infectious diseases. In the 1890s, the New York City Health Department distributed and processed newly developed diphtheria tests for free at a time when the disease was a major cause of death for children. Circa 1919, every state had established its own health department, which in addition to handling diagnostic tests also monitored food quality, tested water for contaminants, and manufactured antitoxins to counter tetanus and other infections.

But less than a century later, as the new millennium approached, calls for increased efficiency meant that the work of processing TB screenings and conducting immunization outreach was farmed out to the private sector. Despite claims to the contrary, this shift was often grounded in anti-government ideology rather than practical assessment of the specific case at hand. A 2012 study of lab testing privatization in Canada, for instance, found that outsourcing resulted in lowered transparency, higher costs, and greater difficulty coordinating between different parts of the health care sector. Other research has noted that, despite the neoliberal mantra of increased competition upon which proponents of lab privatization lean, these services tend strongly towards monopolies.

Indeed, for many working in public health, outsourcing has raised concerns about how the different incentives between private and public labs might adversely affect the very thing privatization was supposed to be streamlining. As George Avery of the Arkansas Department of Health noted in an article warning against the uncritical embrace of privatization, one issue with relying on private labs is that they are unlikely to accommodate testing for less common diseases, as the number of affected patients is too small to make an investment of resources profitable, even if the risk the disease poses is potentially great. Another problem is that in the case of disease epidemics, private labs have no incentive to conduct deeper analysis and thereby incur more costs, even though that analysis might benefit the health system as a whole. Understanding specific genotypic information, for example, would help epidemiologists track the movement and mutations of a virus like Covid-19, but the sequencing required to glean such information detracts from a lab’s bottom line. Ultimately, private labs are structured to consider individual cases and individual diagnoses––anathema to a public health emergency, where a much broader way of thinking (as well as a focus on prevention rather than merely diagnosis) is necessary to combat the crisis.

Private labs have no incentive to conduct deeper analysis and thereby incur more costs, even though that analysis might benefit the health system as a whole.

These are not merely theoretical considerations. Both Pennsylvania and New Jersey witnessed failed attempts to outsource public health diagnostic work in the 1990s, the former owing to vendor instability and the latter due to quality breakdown. The costs are not merely financial in nature: in 2008, in an effort to cut costs and turnaround time for its national cervical cancer screening program, the Irish government outsourced test processing to Quest and CPL Labs despite warnings from medical professionals that a mismatch between the Irish health system and American screening methodologies would cause a spike in false negatives. Ten years later, the seeds of this money-saving scheme bore bitter fruit in the form of the revelation that hundreds of cancer cases had gone undiagnosed. Cases like this one provide a grim warning to wholesale advocates of privatization and deregulation in the health care sector––yet these are precisely the kinds of individuals Trump has surrounded himself with.

Undergirding all of this is the power that large private labs have to shape health policy in their favor. Ross Sutherland writes that the revolving door between government and corporate realms allows these companies to participate in “drafting legislation, undermining government non-profit initiatives, and negotiating for the closure of non-profit competitors in pursuit of their own private interests.” Denise M. Morrison, a Quest board member, served on Obama’s Export Council and Trump’s Manufacturing Jobs Initiative; both LabCorp and Quest engage in extensive lobbying efforts, supporting the likes of Mitch McConnell, Marco Rubio, and Lindsey Graham.

In May, as states around the country began eying an end to lockdown measures, both Quest and LabCorp announced that they would offer special back-to-work testing packages for employers: businesses hoping to open back up could order a custom pop-up testing site at a location of their choosing, like some kind of Black Mirror version of an office pizza party. If such announcements are intended to show a commitment to strengthening America’s workforce, the uncritical aiding and abetting of the country’s disastrous “reopening,” which has already been walked back in several states, sends a different message: that life, death, and disease exist on the market.