Roche sees more sales success with penny-pinching hospitals

The future of U.S. health care will be about precision and parsimony. And Roche Diagnostics Corp. think it has just what the doctor ordered.

The Swiss giant, which manages its North American sales out of Indianapolis, hopes to keep its U.S. sales surging by introducing a new generation of genetic testing machines this year.

Roche plans to introduce its latest testing machines—the cobas 6800 and 8800—into the United States this year, if it is able to get approval from the U.S. Food and Drug Administration, the company disclosed in its annual financial presentation to investors. Those machines, which went on sale in Europe in December, are designed to help medical labs run larger numbers of tests in shorter time spans with fewer personnel than ever before.

That’s Roche’s answer to the two major trends in health care—growing financial pressures on health care providers and growing opportunities to use DNA-level analysis of patients’ blood and tissues to tailor medical treatments to their needs.

That latter trend got a big focus from President Obama in his State of the Union address, when he asked Congress for $215 million in funding to launch a Precision Medicine Initiative.

Roche calls this area molecular diagnostics. It sells its cobas machines to large medical labs and to hospital systems, which are increasingly molecular diagnostics to perform tests that identify which patients will benefit from a medicine and which will be harmed by it, to perform broad-scale cancer screenings and detect hospital-acquired infections that could extend a patient's stay in the hopsital or even lead to a patient death.

Doing that testing and doing it economically is key for doctors and hsoptials now because health insurers, including the federal Medicare program, are rewarding health care providers to keep patients healthier and out of the hospital.

“We believe this has the potential to literally transform the way molecular diagnostics is performed,” Roland Diggelmann, Roche Diagnostics’ chief operating officer, said of the cobas 6800 and 8800 machines, during a presentation to investors Jan. 28. “There is a much higher throughput than everything that's available on the market on one hand. And on the other hand, these systems have a higher degree of automation.”

Roche does not publicly disclose the price of its moledular diagnostic machines. But its existing cobas 4800 machines have been reported to cost more then $200,000 apiece.

Roche’s sales of what it calls “molecular diagnostics” grew 10 percent in North America last year to 579 million Swiss francs, or $636 million.

Sales of its other products to health care providers also grew nicely, surging 6 percent to 1.65 billion Swiss francs, or more than $1.8 billion.

That growth more than offset the continual decline in sales Roche has seen in its diabetes devices, blood glucose monitors and insulin pumps. Revenue from those products fell 6 percent last year to 442 million Swiss francs, or nearly $486 million.

The weakness in diabetes, which is due to severe competition and reimbursement cuts from the federal Medicare program, did hamper the North American business overall. Whereas Roche’s diagnostic sales worldwide grew 6 percent last year, North American diagnostics revenue grew 4 percent. It totaled 2.67 billion Swiss francs, or more than $2.9 billion.

“Overall, it was a very good year for diagnostics, it was a good year from a sales perspective, it was also a good year from an innovation and product launch perspective,” Diggelmann said.

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