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Exiqon subsidiary Oncotech goes out of business — irresponsibly

Posted on: 10/21/2010

Source: a blog post on

Exiqon subsidiary Oncotech goes out of business — irresponsibly

June 12th, 2010

Oncotech is — or was — an American laboratory providing individualized tumor response testing (ITRT) as a service to patients and physicians since the mid-1980s.  It was co-founded by Robert Nagourney and I. We each left the company in the early 1990s, over disagreements with the controlling investors (4 venture capital companies) over the management and directions of the company.  I remained supportive of the company, over the years, and played an important role in securing and, later, retaining reimbursement by Medicare for their services.  Robert and I each started our own small private laboratories to offer related cell culture testing services.

Oncotech continued operations as a privately-held, venture-capital controlled company until February of 2008, when it was acquired (purchased) by a Danish biotechnology company called Exiqon, Inc. for $45 million (US) in Exiqon securities.

Exiqon replaced the Oncotech CEO and installed its own management team, continuing to operate Oncotech as a wholly-owned subsidiary, with a business model centered around providing ITRT on a (US) national basis — importantly to Medicare patients.

In the case of my own laboratory, we opted out of Medicare, effective July 1. 2008, because the reimbursements received from Medicare did not cover our costs of providing our services.

Exiqon Oncotech, however, depended on Medicare reimbursement to support its business model.  In the USA, Medicare coverage decisions for many types of medical services are made at the regional level, by the private insurance companies with which Medicare contracts to administer services to Medicare beneficiaries (most prominently, patients 65 years of age and older). Previous Medicare contractors for California made the determination that ITRT qualified as a Medicare covered service.  These included the TransAmerica and National Heritage Insurance companies. Most recently, an insurance company called Palmetto was awarded the contract to administer Medicare services for California.  Palmetto made the decision to discontinue Medicare payment for ITRT in California.

Last week, Exiqon Oncotech announced that it was discontinuing operations, because of the withdrawal of Medicare reimbursement for its services.  This was an entirely understandable, if regrettable, decision.  What was in no way understandable — or defendable, for that matter — was the way that they ceased operations.

Exiqon Oncotech sent out notifications to its client physicians that it was ceasing operations, virtually immediately.  On a single day this past week, they received two dozen specimens from human tumor biopsies via FedEx and other couriers.  All of these specimens were simply sent back to the hospitals and clinics which sent the specimens. Physicians were told that there were no other laboratories who could perform the tests requested.

While it is true that no other American laboratories have chosen to utilize Exiqon Oncotech’s non-proprietary technology for ITRT, it was well known to Exiqon Oncotech that there are a number of highly experienced, well qualified, well-published American laboratories which provide this service, utilizing different, but at least comparably valid, technologies.

In my long experience in this field, I well remember two previous, investor-backed, clinical laboratory companies which provided ITRT as a service to patients, only to make the decision that their business models were no longer viable. These companies were (1) Analytical Biosystems and (2) NuOncology Laboratories. When these latter companies ceased operations they (a) did so in an orderly fashion, giving their clients adequate advance warning and winding down operations at a pace which enabled them to provide testing for those patients and physicians who had already planned and depended upon receiving these services, and (b) these companies were open and helpful in providing their former client physicians with contact information for other laboratories within the US which continued to provide ITRT services.

In the case of Exiqon Oncotech’s two dozen tumor specimens simply marked “return to sender,” I can scarcely imagine anything more irresponsible. In many of those cases, doubtless the physicians and/or surgeons discussed in advance with their patients the importance of sending their biopsies for ITRT. In some cases, the surgical procedure may have been performed primarily for the purpose of ITRT. In other cases, the patients were doubtless comforted by knowing that this testing was to be performed.

Business is business, but, at a certain point, business is also about people, and cancer business is, or should be, about cancer patients.

I am saddened by the shuttering of Oncotech’s doors, 25 years after its founding, and I am ashamed at the way in which those doors were apparently shuttered.

It should be noted that the Medicare contractor for the state of Pennsylvania continues to provide coverage for ITRT and that there is an experienced laboratory in Pennsylvania (Precision Therapeutics) which both provides ITRT and accepts Medicare reimbursement as payment in full.  California laboratories continuing to provide ITRT (without Medicare reimbursement, possibly requiring patient payment for services) include Rational TherapeuticsAnticancer, Inc., and my own laboratory.

- Larry Weisenthal 12-June-2010

Follow-up: an earlier blogpost by an Exiqon Oncotech employee provides independent confirmation of the above.


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