"Shine a light" (Musings on what we take for granted & shouldn't)

This month's blog is a 'twofer.' Both parts arose from reading the May issues of AABB's Transfusion and AABB News. The blog's title derives from a Rolling Stones ditty of the same name.

MUSING #1 - On detecting mom's antibodies in babes

The first musing was stimulated by

• Shaikh S, Sloan SR. Clearance of maternal isohemagglutinins from infant circulation. Transfusion 2011 May;51:938-42. e-Pub: 26 Oct 2010.

The paper shows something true about many, if not most, transfusion medicine policies, namely that they are not evidence-based.

During a long teaching career, I'd often discuss with medical laboratory science students that what we do is based on many things, but seldom evidence. Shaikh and Sloan's paper illustrates the point perfectly.

Students are routinely told that newborns do not produce detectable ABO antibodies until about four months of age and, if ABO antibodies (isohemagglutinins) are detected, they are of maternal origin. The corollary is that maternal ABO antibodies can be detected in newborns up to 4 months of age, with implications for transfusion compatibility.

For example, AABB Standards specify that neonates up to 4 months who are not group O require testing for maternal anti-A / anti-B in order to receive ABO-specific RBCs. Instead of testing, most transfusion services simply issue group O RBCs to infants up to 4 months of age.

Shaikh and Sloan's study of ~1309 infants showed that 6.4% of infants up to 1 month of age had detectable maternal isohemagglutinins, while no infants 2-4 months of age had them. The practical implication is that infants who are at least 2 months old can safely receive ABO-specific RBCs without testing for maternal anti-A or anti-B, thus freeing technologist time and increasing the supply of group O RBC.

How refreshing to see some of our long-held assumptions tested and revised based on evidence....

Rh immune globulin (RhIg)
Many other TM policies lack appropriate evidence. One of the classics is the guideline to inject RhIg into Rh negative females within 72 hours of delivering an Rh positive (or weak D positive) newborn.  Like many transfusion-related policies, administering RhIg within 72 hours of delivery arose by happenstance and was not based on evidence:

In the USA initial experiments with Rhig involved ‘volunteers’ from Sing Sing prison. ('volunteers' is used loosely since it is debatable that anyone in prison is truly a volunteer.) Male prisoners were injected with various volumes of D+ red cells and later given different doses of RhIg to see what prevented them from making anti-D. Because researchers were allowed in the prison only from Monday to Friday, there was a subgroup that got a red cell injection on Friday but only received RhIg on Monday. It was from this group that the 72 hour recommendation arose.

Fortunately, the 72 hour guideline for RhIg seems to work. Would 96 hrs. or another number of hrs. work just as well? We do not know.

OTHER GUIDELINES

Similar well established guidelines with minimal evidence include to

(i) Begin transfusion within 30 minutes of removing RBCs from a temperature-controlled environment (4^oC refrigerator)

(ii) Complete transfusion of RBC within 4 hours of removing them from a temperature-controlled environment
.... and many similar guidelines.

My sense is that, if providing a specific number enhances patient safety and helps transfusion professionals rather than handcuffs them with impractical requirements, and, if historical guidelines seem to work, sticking with them makes sense.

Policies that offer simple specifics are especially prudent for staff who may lack the in-depth knowledge and experience often needed to assess individual cases. With increased hiring of casual and part-time staff (nursing and laboratory), increased use of generalist technologists rather than transfusion specialists, and physicians with little transfusion medicine education in charge of rural laboratories (and those ordering blood anywhere), simplified policies are needed and appropriate.

MUSING #2 - On spinning and valentines

Two items caught my eye in the May issue of AABB News:

(1) The Pall advertisement on p. 15 (Take a greener approach to whole blood processing) promotes its transfer bag for cryo pooling. The ad has a lovely photo of lily pads and a frog against a green backdrop but it struck me as spinning the meaning of green almost to what's known as greenwashing.

As elusive as greening is to define, it's generally considered to include a constellation of these practices:

• Reduce consumption, especially reduce use of resources like water and fossil fuels
• Transition to renewable energy sources
• Reduce waste, particularly waste that's not biodegradable, eg., plastic bags
• Minimize pollution

At its essence green means being friendly to the environment and protecting the pale blue dot for future generations.

More efficient use of a product like a plastic transfer bag (even allowing that Pall's transfer bag increases efficiency) doesn't necessarily equate with being green, except in the broadest sense, so as to make the term almost meaningless. The problem with misleading advertising, even when claims are inflated relatively benignly, is that such spinning undermines  customer confidence that the company is transparent in other areas.

(2) The second item was "Mergers and acquisitions on the manufacturing side," a priceless valentine to the manufacturers interviewed for the article (Haemonetics, CaridianBCT, Novartis Diagnostics). The industry reps who were interviewed (top brass like CEOs and VPs) were allowed to spin their mergers without comment and in the process smoothly managed to insert the benefits of their services and products.

According to the piece, in all cases it seems that mergers are good: (my comments in brackets)

• Good for the companies (for their bottom lines due to goodies like economies of scale and bulk purchasing but always kumbaya-ville for the two corporate cultures - I doubt it)
• Good for their employees (at least before staff are let go or vacant positions due to retirement,etc., are not filled forcing remaining staff to do more, often with less)
• Good for customers (until less competition and more oligopolies influence pricing in favour of manufacturers. As an example, has the oligopoly of Immucor and Ortho Clinical Diagnostics, with their razor-blade business models, led to lower reagent prices? )

Mergers create oligopolies. Many outcomes are possible but one is that oligopolies drive prices up. Increased competition is supposed to be advantageous to consumers since it drives prices down and is a major rationale for the benefits of free enterprise. Less competition, by extension, is bad, especially for customers.

The AABB, by allowing industry's rosy win-win claims to go unchallenged and by publishing self-promoting descriptions of products, gave the companies thousands of dollars of free advertising. The organization depends on its industry advertisers, but that's quite the valentine, nonetheless.

The musical ending to this blog and the source of its title is the Rolling Stones' rock-gospel song:

• Shine a light (Amsterdam 1995)

It's worth noting that Shine a light was originally titled Get a line and was about the worsening drug addiction of then band member Brian Jones.

As to Shaikh and Sloan's research on how long mom's antibodies are detectable in babes, how about this Beatles classic?

• Here comes the sun

And just for fun, to give the moon its due, one of my favorite songs:

• Moonlight dancing by the divine Ms. Midler

As always, the views are mine alone. Comments are most welcome BUT, due to excessive spam, please e-mail me personally or use the address in the newsletter notice. 

Goldfinger's filings, a customer's toolkit (Musings on business intelligence)

Updated: 28 Jan. 2017 (Fixed broken links)

This blog's thesis is only slightly tongue in cheek but its title definitively is. The title derives from the ubiquitous toolkits currently found everywhere in transfusion practice, and the 1964 James Bond movie, Goldfinger in which the eponymous character is obsessed with gold, much like private companies are focussed on profits, albeit not usually with the same gleeful fervour as a sinister villain.

As an aside, Goldfinger has special memories for me because I saw the film in Tel Aviv, Israel in 1965. We had to buy tickets ahead of time (none sold at the door) and catch much of the dialogue by reading the French sub-titles (goodness knows why) due to the uproarious cheering of the audience at every Sean Connery feat. We were told that television was only on for a few hours each day and movies were incredibly popular.

By happenstance I came across the SEC Form 10-K Annual report for Immucor, a blood industry supplier of automated instruments and reagents. The Form 10-K reports, which public companies file with the U.S. Securities and Exchange Commission, offer comprehensive business overviews of a registrant's business, such as history, competitors, risk factors, legal proceedings.

Now before your eyes glaze over, if you work in the blood system in any capacity, I highly recommend that you take a peek at these fascinating reports. In a way, it's akin to industrial espionage, i.e., gaining access to information about a company’s plans, products, clients, and trade secrets in order to gain insights and predict their actions, including marketing strategies and sales pitches.

Normally it's competitors who engage in industrial espionage, but if you buy a company's products and services, you can potentially use the information to your advantage. Spying is illegal if the information is private but, since the SEC records are public, it's all above board and fair game.

Donning our sleuth caps, let's examine just a few aspects of the business intelligence that's publicly available in Immucor's July 2010 SEC filing and how it can be used to advantage by potential clients.

The specific information is most relevant to those in the lab but the lessons can be applied to dealing with any sales representative and related marketing, advertising, and selling strategies targetted to your profession.

Immucor's SEC 10-K report merely serves as an example. To all my sales rep friends and colleagues, as they say in the Godfather films, "It's not personal. It's strictly business."

Reality is that companies spend considerable time and effort getting to know potential customers and understand their likes, dislikes, wants and needs. Think of those free wine and cheese parties, dinners, and tour-the-bay cruises you've attended at conferences. They weren't just to create goodwill. Similarly, customers can benefit from knowing how companies think and what tools they will probably use to get you to buy.

Here's a mini-toolkit to get you started. Quoted text is from Immucor's SEC Form 10-K report (23 July 2010).

1. AUTOMATION

"Our strategy is to drive automation in the blood bank."

MUSINGS

Obviously, automation must be strongly promoted, since it is in Immucor's interest to sell its instruments and automated ("capture") reagents. As mentioned in an earlier blog, the latter have one of the highest gross profit margins in the industry, 80.2% in Immucor's 3rd quarter for 2010.

From a client's perspective, profits in the range of 80% may seem excessive. But profits are the primary purpose of private enterprises. From the company's perspective, the higher the profit the more they will be able to

• pay shareholders
• raise additional financing
• survive in hard times
• invest in R&D that can develop new products and lead to continued or increased profits.

However, to drive automation and increase profit, automation must be seen not as a way to increase profits, but as a way for clients to save money while improving safety.

Hence the comapany's sales pitch:

"We believe our customers...benefit from automation. Automation can allow customers to reduce headcount as well as overtime in the blood bank, which can be a benefit given the current shortage of qualified blood bank technologists.

We also believe that automation can improve patient safety, can increase operational efficiency and, for customers such as integrated delivery networks with multiple blood banks, can permit the standardization of best practices.

For Immucor, automation allows us to gain market share and secure a long-term, contractual relationship with our customers."

MUSINGS

On the safety issue, while it may be true (or not), is there published evidence to support a decrease in life-threatening errors and resultant increase in patient safety after Immucor's automated instruments have been introduced in the transfusion service?

Don't ya' love "reduce headcount," an euphemism for eliminate staff, and interesting that it merits first place ahead of "improve patient safety."

About the "current shortage of qualified blood bank technologists", this largely happened because restructuring and regionalization with associated automation led to fewer jobs, which in turn led to closures of medical technology schools. Concurrently, at least in Canada, nurse and physician education programs were also decimated.

In Canada, in response to increased demand, more technologists (nurses and doctors) are now being trained, but a significant number of jobs for technology graduates continue to be part-time.

In a way, automation contributed to a shortage of "qualified blood bank technologists" and now automation is being promoted as a solution to the shortage. Say what?

Fact is that automation allows for less trained staff to perform routine work in the transfusion service and leads to fewer blood bank specialists. Isn't it having it both ways to say that automation now solves the problem that it intrinsically helped create?

In the past, I recall that Immucor promoted its automated instruments to transfusion services as a way to save ~1.5 staff members and to allow remaining staff to concentrate on more 'important stuff' for thinking technologists (i.e., humans) such as identifying antibodies.

In today's economic climate, I imagine that cost saving is still the main mantra of the sales reps, with patient safety tossed in as a 'feel good' justification for eliminating jobs.

With automation, it's worth considering what is actually happening, i.e, a transfer of money from people (staff) residing in a community (people who pay taxes, buy houses, shop and support local businesses, and contribute to community life) to generating profits for a large corporation situated elsewhere. Does this benefit society in the long run? Complicated question but I sometimes wonder.

Obviously those considering automation need to extensively analyse multiple factors between competitors such as

• initial capital costs
• ongoing maintenance and reagent costs
• sensitivity and specificity (as applicable)
• ease of use
• ease of transition and implementation (impact on other processes & procedures)
• redesign of physical layout, etc.
• training requirements, and more

Potential clients should also consider Immucor's huge gross profit margins when negotiating reagent contracts. And it's worth remembering that those long-term contracts for reagents are where the money is. From the NEC submission:

"As of May 31, 2010, we had an instrument backlog of approximately 179 Echos and 43 Galileo/NEOs. This backlog represents instrument orders that have been received but the instruments have either not been installed or the customer validation process has not been completed.

As such, the instruments are not generating recurring reagent revenue at their expected annualized run rates. ....we had not recognized approximately $16.7 million in deferred revenue from instrument sales contracts that had reagent price protection and from extended warranty sales."

Note that Immucor considers extended sales contracts to have built-in reagent price protection. Did they mean protection for themselves or clients or both?.

#2. NEW PRODUCTS

Successful companies must continually innovate to create new products and generate new profits.

" For the fiscal years ended May 31, 2010...we spent approximately $15.4 million...for research and development. Research and development expenses have increased over the past three years due to the acquisition of BioArray...and the subsequent development work on our molecular immunohematology offering."

"In August 2008, we invested in what we believe will be the future of the blood bank – molecular immunohematology....With the goal of improving transfusion medicine, we believe that molecular immunohematology will revolutionize blood bank operations.

In many countries, blood pre-transfusion testing is limited to the prevention of transfusion reactions and not for the prevention of alloimmunization, which occurs when antigens foreign to the patient are inadvertently introduced into the patient’s blood system through transfusions. If alloimmunization occurs, the patient develops new antibodies in response to the foreign antigens, thereby complicating future transfusions.

By using multiplex, cost-effective molecular testing, our molecular technology allows testing to prevent alloimmunization for better patient care."

MUSINGS

In a consumer society, if a real need does not exist, companies try to create one.

So, can we now expect an onslaught of propaganda and industry-funded research to convince us that preventing alloimmunization is where it's at and what we should strive for?

My gut reaction is fuggedaboutit! But the writing is already on the wall:

• Hillyer CD, Shaz BH, Winkler AM, Reid M. Integrating molecular technologies for red blood cell typing and compatibility testing into blood centers and transfusion services. Transfus Med Rev. 2008 Apr;22(2):117-32.

#3. RISKS

Under "Risks", Immucor lists FDA "administrative action", governmental investigations and litigation, fluctuations in foreign currency, and more. Three that stood out:

(i) "A catastrophic event at our Norcross, Georgia facility would prevent us from producing many of our reagent products.

Substantially all our reagent products are produced in our Norcross facility.... and we currently have no plans to develop a third-party reagent manufacturing capability.

Therefore, if a catastrophic event occurred at the Norcross facility, such as a fire or tornado, many of those products could not be produced until the manufacturing portion of the facility was restored and cleared by the FDA.

We maintain a disaster plan to minimize the effects of such a catastrophe, and we have obtained insurance to protect against certain business interruption losses.

However, there can be no assurance that such coverage will be adequate or that such coverage will continue to remain available on acceptable terms, if at all."

MUSINGS: Despite a disaster plan to minimize effects (on clients and the bottom line?) the company's main worry seems to be that its insurance may not cover its losses.

Clients need to include a scenario with a possibly very long delay in obtaining reagents in their disaster plans. Think not only of time to restore production but also time to obtain FDA clearance on a restored facility.

(ii) "Gross margin volatility may negatively impact our profitability."

"Our gross margin may be volatile from period to period due to various factors, including instrument sales, reagent product mix and manufacturing costs....

The higher margins on the Capture reagents used on our instruments may not be enough to offset the lower margins on the instruments themselves...."

MUSINGS: Once again, the importance of Capture reagents to profits is emphasized. Immucor's gross profit margins for these reagents are among the highest in the business. When faced with, "Have I got a deal for you", best to think twice.

(iii) "If customers delay integrating our instruments into their operations, the growth of our business could be negatively impacted."

From time to time in the past, some of our customers have experienced significant delays between the purchase of an instrument and the time at which it has been successfully integrated into the customer’s existing operations and is generating reagent revenue at its expected annualized run rate. 
 
These delays may be due to a number of factors, including staffing and training issues and difficulties interfacing our instruments with the customer’s computer systems.

Because our business operates on a “razor/razorblade” model, such integration delays result in delayed purchases of the reagents used with the instrument.

A number of steps have mitigated these integration delays: improved performance of our field service staff, better instrument instructions, increased use of internet-based remote diagnostic tools, and more efficient scheduling of instrument installations....."

MUSINGS

Potential clients should note the reasons for delayed implementation and acknowledgement of the “razor/razorblade” business model.

A “razor/razorblade” model is the well established business tactic of selling dependent goods for different prices. The one-time product is sold at a discount, while the second dependent one for which repeated purchases are required, is sold at a considerably higher relative price. Think of the practically free razor but expensive replacement razor blades or the low priced video game console and its dependent high priced games.

4. COMPETITORS

"In the U.S. and Canada, Ortho-Clinical Diagnostics (“Ortho”), a Johnson & Johnson company, is our main competitor. In Western Europe, our principal competitors are Bio-Rad Laboratories, Inc. (“Bio-Rad”) and Ortho. Both Ortho and Bio-Rad sell instrumentation as well as reagents. Our principal competitor in Japan is Ortho."

MUSINGS

There is not much competition in transfusion service / immunohematolgy automation, nor for reagents for non-automated testing. Immucor, along with its main US competitor, Ortho-Clinical Diagnostics, is being investigated by the US Department of Justice concerning possible criminal violations of the antitrust laws.

Perhaps not unsurprisingly, both are the subjects of several private civil suits by customers (hospitals) seeking class certification and alleging price fixing.

Anytime you have a market oligopoly, a virtual duopoly, allegations of collusion and price fixing are bound to occur, but they are almost impossible to prove. 

FURTHER BUSINESS INTELLIGENCE
For interest, a few more blood industry companies with SEC Form 10-K reports:

• Johnson & Johnson (1 Mar. 2010) (parent company of Ortho-Clinical Diagnostics)
• Tidbit in report (OCD has many more products besides reagents and automated instruments for pretransfusion blood testing)
• "The Ortho-Clinical Diagnostics franchise achieved sales of $2.0 billion in 2009, a 6.6% increase over the prior year primarily attributable to the recent launch of the VITROS 3600 and 5600 analyzers."
• Bio-Rad Laboratories (26 Feb. 2010)
• Beckman Coulter (22 Feb. 2010)
• Haemonetics (1 June 2010) - One tidbit (and are we surprised?):
• "Our devices use single-use, proprietary consumables, and these consumable sales represent 87% of our total revenues."

BOTTOM LINE
You can discover many useful tidbits in SEC Form 10-K filings. These tidbits can be used to help customers decide on suppliers and to leverage information when negotiating contracts. I hope that this Goldfinger toolkit has given a few ideas.

For fun, here's the theme song from the Bond movie of the same name:

• Goldfinger (by the wonderful Shirley Bassey)

As always, the ideas are mine alone. Comments are most welcome BUT, due to excessive spam, please e-mail me personally or use the address in the newsletter notice.