Charles Strom on the Diagnostics Industry

scratch the surface of his mark. I didn't get to the sixty Minutes episode he appeared on, or or his appearances on Oprah, but we did talk about COVID testing and why we're not looking at antibodies. Dr Strom thinks we should be. If you want to decide whether you need a booster or a second booster, wouldn't it be helpful to know if you're actually at a high level

of antibodies or a low level of anybodies. When we talk about that early detection for certain types of lung cancers and how the world of genetics is just rapidly changing the way we not only detect potentially dangerous diseases, but some of the treatments we do, it's really quite fascinating. So, with no further ado, my conversation with Liquid Diagnostics Dr Charles Strom. This is Mesters in Business with very renaults on Bloomberg Radio. I'm Barry Hults. You're listening to Masters

in Business on Bloomberg Radio. My special guest this week is Dr Charles Strom. He is the CEO and co founder of Liquid Diagnostics. Dr Strom has pioneered the use of DNA testing for forensic and paternity applications before joining Quest Diagnostics, where he was the medical director for genetic testing. His work has led him to appearances on such shows as Sixty Minutes and Oprah. Dr buck Strom, Welcome to Bloomberg. Thank you for having me, Baron my pleasure. So let's

start a little bit with your educational background. You graduate University of Chicago with both a PhD in biology and a medical degree. Was the plan always to work in genetics. Yes, from the time I was in seventh grade, I knew I wanted to be a scientist, and as an undergraduate I became interested in prenatal diagnosis in particular. And when I was an undergraduate, I did research and found that one of the centers to do that research was at

University of Chicago. In one of my early mentors. Albert Dorfman had published paper on prenatal diagnosis for Hunter syndrome. So I actually sent him a letter. Uh, typed it out on my Smith Corona electric typewriter, send it to him, and lo and behold. A month later, I got a packet of information saying how would you like to come work on my lab over the summer, and uh, that led to my entering an m D pH d program

that was called the Medical Scientist Training Program. Was a federally funded program paid for my tuition and gave me a living stipend as a six year program turned my m D and PhD. So yeah, I was always my plan to be a medical scientist. And you worked under biochemical geneticist William Nihan, who's kind of legendary in that field. Tell us a little bit about working with Dr Nihan and what you learned from him and what that experience was like, Yeah, well that was fabulous. So again this

was a cold call. I started out in between my freshman and stophmore year of college, and um, my advisor and the master of my college was a scientist named Richard Goldslee, and UH said, Hey, I have a buddy, Dr William Ihan out in San Diego. Uh, maybe I could send a letter and you could go out and work for him over the summer between your freshman sophomore year in college. And it was like, you know, somebody asking me if if I wanted to work for the pope, and I said, yes, sure of course I do. And

same thing. He welcomed me. He had me in the laboratory and he and and his partner Larry Sweetman got me hooked on biochemical genetics. And then after I you know, went to medical school got my MDI got my PhD. Uh. The obvious choice for me to do a residency was at University of California, San Diego, where Dr and I had had become the chairman of the department. So that

was just the no brainers. So I ended up doing my residency there and for the three years of my residency and fellowship, I worked with William Nihan, who has an encyclopedic knowledge of biochemical genetics, and it was just a fabulous experience for me. Yeah, I can imagine. So tell us about some of the grants to pursue genetics of growth disorders that you were working on at the

University of Chicago. They seem really quite fascinating. So from a very early age, I was interested in developmental biology, which is the science studying the mechanisms by which we go from UM an embryo in which all cells are identical UH, to an adult where we have hundreds of difference of specialized cells. And Albert Dorfan my mentor University

of Chicago, was working on the differentiation of cartilage in chickens. UH. So I was cutting off them buds from nine dozen chickens a week UH and growing up in tissue culture and UH they would differentiate into mature contraslits, into mature cartage cells and tissue culture. And so I worked on that. And then when that was all before DNA sequencing DNA

analysis was available. And then when cloning started, gene cloning UM, I got a grant to UH to clone the gene for humans cartless specific collagen and to see how that got turned on during development. It was very exciting. So how does that lead to pioneering DNA testing for forensic and paternity applications? So I've always been what I call an applied scientist. You know, the scientists out there really

come in two forms. One is the basic scientists, the person that really wants to delve incredibly deeply, UH into one particular problem. UH. There used to be a thing about the medical practitioners that the general practitioner knows nothing about everything, that the specialist knows everything about nothing, and the pathologist knows everything about everything, but it's too late to do any good. So the basic scientists delves very

deeply into a single subject. I always was more interested in how are we going to use these developments to help people, in particular the medical aspects. Now they would call it translational medicine, but how are we going to take what we learned at the lab bench and put it into practice? So I was the professor at University of Chicago. DNA testing for forensics was just in its infancy.

There was the Blooding I don't know if you remember that, where an entire village was genotyped UH in England to find a rapist, and forensics DNA had not yet been admitted into courts in UH. In Illinois, I was approached by several different prosecutors who had very difficult cases and asked if I could you know, if I could do DNA testing to support their cases, and being in academics and having some academic freedom, I I said yes and did the did some DNA testing and UH in UH

in legal in Illinois. I don't know if this is around the United States. There's something called a fry hearing where before UH laboratory evidence can be introduced in court, it has to pass a certain amount of standards, um, whether it's generally accepted in the scientific community, whether it's reliable, those sorts of things. And so I participated in several pry hearings in Illinois to allow the admission of DNA

testing and forensics. And my famous case, the one I published about, was a gentleman who had actually murdered his wife and then burned her body to UH near completion in the steel drum in his garage. UH. Then he went to the police station and decided to confess, and then when he got an attorney, he withdrew his confession. So the prosecutors kind of knew that he had done it, but I had no way. There was nobody to h

to be identified. So we were able to actually to identify his wife from the charred remains in UH the steel drum. UH and you know, the pry evidence was accepted and he was convicted. So that was basically my my moment in the sun in forensics, and I never really did anything after that. Quite fascinating. So you work at QUESTS for a couple of years where you're head of the research labs, and eventually, um you're working with Dr David Wang tell us about Imperial technology and what

Dr Wang had created. So I had worked in QUEST Diagnostics or sixteen years basically running all the genetic laboratories. And after I left, I took a temporary position to be the director of the molecular pathology laboratories at u c l A. This was because of they were trying to recruit a permanent director. I was in semi retirement and so you know, I took a temporary job working out for u C l A for a couple of

days a week. Then one day my boss calls me in and she says, um, buck, we have a problem. There is a dentist in the dental school by the name of David Wong who has just gotten a grant, and part of the grant was that our laboratory would validate the test. As a laboratory developed test so it could be offered clinically. Um, the pathologist who had co written that Grant had left the left the institution, and so she says, you've got to go up and see

what's going on and see what we can do. So I take the elevator up to the seventh floor the Basic Science Building at U C l A. And I go up to meet with Dr Long and it was like, oh my god, that's the guy, because I had met him about ten years previously when he had given a talk at Quest Diagnostic and he had dedicated his life to saliva based diagnostics. And when he gave a talk, I was blown away and said to myself and came home and said to my wife, you know, this guy's

a visionary. And we had lunch afterwards and we had a wonderful talk and it was like you know, a rom com. We saw each other in the hallway and it was Bucked. It was David Uh and he said, let me show you what I got here. And Um.

He had developed a platform which at that time was called e Firm we now call it Imperial, which could do UH diagnostics of anti biomolecule including d n A, including antibodies including protein on saliva UH as an open platform UH, and he had used this UH to actually UH demonstrate that he could UH detect circulating tumor DNA in patients with early stage lung cancer, something that had

never been done before successfully. UM and I looked at this data and it knocked my socks off, and I said, you know, baby, I want to work with you here. So it began a wonderful collaboration UM and I became blown away by the potential of this platform. The problem is that Dr Long is an academic. He had no idea of how to commercialize anything. I had come from sixteen years in the diagnostic industry, so my expertise was

it was complimentary to his. I knew how to make essays that could be used hundreds of thousands of times and give accurate results. So I was very excited. But in order to commercialize the intellectual property has to be in order. There has to be an organization, there has to be funding. And then I reached out to friends of mine who were also UH leaders in their deal Bob AGNERN, who was an executive in Amaco for many years.

I was a lawyer and ran businesses for Amaco, Jeff Weisberg, who started uh Atina Diagnostics, one of the major neurology diagnostics companies and was a financial guy. And my friend Rich Bender, who was a medical oncologist. All of these people I knew from from past life. Bob, where I knew from from little e Um, and the other two I admit a quest diagnosis and full disclosure. I met you through Bob Agdern, who is my brother UM, and I was so intrigued by the work you guys have

been doing. We've been talking about this for a couple of years. Before we move on to COVID, I have to you know, you kinda buried the lead about the lung cancer. The key thing about those early indicators is that this is very difficult to diagnose, and if you catch it early, it's very treatable, and if you catch it late, it tends to have a very bad outcome. Is that a fair way to describe it. Absolutely, About eight lung cancer now is diagnosed. That stage is three

to four where it's not curable. Um, you know, you can be treated, it can prolong your life, but basically you're going to die. A lung cancer stage one and two, which is what we call early stage lung cancer. It is still potentially curable with both surgery and chemotherapy or a combination of both, and that's why it's so important to diagnose this early. But eight percent of the time it's not. There is a screening test now that's available, which is a spiral CT scan for people who have

long histories of smoking and UM. The problem with with spiral CT scanning is that you get these things called terminate nodules. So some people have you do the CT scan and it's, oh, this has got to be cancer. Sometimes you do the CT scan and it's negative. But about thirty of the time you do the CT scan and there's something there, but you don't know whether it's

cancer or not. UH. And we have an NIH funded study to use our platform to look at these patients within determinate nodules using either saliva or plasma or both to see if we can inform the decision about who needs a biopsy UH and who doesn't need a biopsy, and how the results have been so far, we're in the middle of it. We have not yet done any of the data analysis we're right now. We're collecting, we're

collecting samples and they'll be analyzed actually next year. So I can't tell you how it's going, uh, but we're hoping that it's it's going to give us positive results. So that was the original plan. When you form liquid diagnostics and then you know COVID and the pandemic starts and we go into lockdown, how did you guys pivot to using this technology to either detect COVID or look at antibodies or both. So interesting story. So, Uh, doctor Wong is a dentist and he had an incredible interest

in a disease called Schogrin syndrome. Schogrin syndrome is an autoimmune disease where the body attacks itself and it causes dry mouth and dry eyes. Uh. There's actually four million people who present to their physicians every year with that complaint, either dry mouth, dry eyes or false um. It was known that some of these patients who present with dry mouth and dry eyes actually have a disorder called chogrin syndrome, which is where the salivary glands make anna where antibodies

are made that attack the salivary glands. UM. The the diagnosis of chagrin syndrome was incredibly difficult because the blood based antibodies, UH, we're not particularly sensitive or specific for the disease, so people often had to have biopsies UH, and most people didn't want to have a biopsy of a salivary gland. UH. So he began to use our platform, Imperial platform, to look for antibody in saliva. And it turns out that that is a much better way of

diagnosing chagrin syndrome than in blood. So we knew that we could use this platform for antibodies. So I remember it was mid February and the beginning of the pandemic, and I said to our group at Liquid Diagnostics, you know, I think we could use this to measure covid antibody. And I remember Bob said, well, you know, how much is that going to cost? And they said, well, you know, maybe you know, five or ten thousand dollars to buy the re agents or things, um, and the rest they

say is history. We were able to make a saliva based diagnostic, which is quantitative, which is very different from almost all other antibody measuring tests available that can measure your unoglobulin g R I d T levels to U Sorrow's c O G two which is the virus that causes UH COVID nineteen. So so let me interrupt you and just translate that into English for a second. Most of the tests, either the rapid test or the PCR test is going to give you thumbs up thumbs downy,

either you're showing this or you don't. You're able to do a measurement that quantifies shows you your levels of COVID. Anybody's am I saying that? Right? That's correct. They'll very PCR doesn't measure antibodies. PCR measures viruses. But yes, most most of the well all of the home tests are qualitative. They're not quantitative, which means they tell you positive or negative. The laboratory tests are what's called semi quantitative. They give

you a number that's pretty meaningless. It says, you know, three point one or three point two, and you don't really know what to do about it. Our test actually gives you the level of your antibody, and then we also tell you how you stand with respect to you know, several thousand samples that we have from individuals who have been vaccinated. So they'll say, Barry, your level is four point two. An anagrams per m L when you say

what does that mean? Then we tell you you're in the eightieth percentile for all patients who have been vaccinated against COVID, so you know you've got good, healthy levels. On the other hand, you could get a level that says, you know, it's ten managrams per m L and this is at the tenth percentile, which means you know that you are you're low on the scale. UH. The other beauty of this test is because it's saliva base, you don't have to have your blood drawn, and it's relatively inexpensive.

You can have multiple tests. So, for example, we have a clinical trial going which I'm a participant, where we looked at people's levels every two weeks UH for for six months. And when we looked at that, we could see that that most people's levels went up after their second vaccination, but then they slowly came down so that by from four to six months they were almost back down the baseline, which would mean that we could have probably predicted that you're going to need a booster after

six months. That that sounds like it's really useful given that there's been a pretty big push to not only get people to get boosted, but then to get a second booster. So I'm vaccinated, I'm boosted. I would like to know if I should get a booster now heading into the summer or in the fall, when I usually get my flu shot, because that's when when we move indoors. These viruses seem to be spread around the most in at least in the cooler areas of the country. Yeah. Right,

that's a great point. So you know, the issue is, you know, I know now that after my third booster, the third shot, so the first booster, that my levels now eight months out are the same as they were, uh two weeks after my third booster. So I don't feel that at this moment I need a fourth booster. And you know, there's no dated to say that that's good or bad. Unfortunately, FDA says that a person of my age could get a fourth shot if I wanted, But there's no reasonable way for me to make that

decision right now. A lot of my friends that said I'm going to take I'm going to take the fourth shot. Um. Your point is is well taken that if you take the fourth shot, who knows if you're gonna be able to get a tip shot. UM or when? So you know, we have that luxury of those who have participated in our trial of knowing that our levels are stable over time.

Um again, you know this is this is the personal decision that I'm making, you know, with myself and my position, and I can't say that you know that there's a recommendation about this sort of thing, But this is the kind of data that we need. The beauty of our tests is that we could actually get the data that

would inform these kinds of decisions. So we could look at a whole bunch of people, say, you know, everybody in a city, or everybody in a large company, and we could test people every month for their quantitative antibody levels, and then we can follow them and see who gets COVID, who doesn't get COVID, who goes into the hospital, who gets long COVID, you know, who dies, and then correlate that with our antibody levels and see if our hypothesis

are correct. The problem is, as far as I know, nobody is doing these sorts of tests because the blood tests are only semi quantitive at quantitative At the moment, the quantitative tests are expensive to do, and this study would be very expensive to perform. So it frustrates me. Is I believe we have a tool we published on this Imperaview Publications where we could do these sorts of studies. We could get the information because COVID is not going away.

That's the one thing that's sure. Uh this is going to be part of our lives for the foreseeable future, and we need to start getting information that will allow physicians and people to make informed decisions about things like vaccines. For example, what if your vaccine level, your your antibody level is very low, and you've already gotten your four uh M R and a booster as well. Now there's gonna be a new vaccine this summer. I hear that's

based on the old technology of antagine technology. So maybe that would be someone who would want to get that vaccine because they're not responding very well to the m RNA vaccines. Now, one of the issues, you know, in public health, everybody is treated like they're the same, and what we're finding in terms of antibody production and antibody

affinity is that everybody is not the same. Um. For example, with all macron, some people's i g G antibodies that were made with the the original visor M dinner vaccines. They cross react, you know, nearly, so that the antibodies that these people make are just as good against A macron as they were against the original virus. On the other hand, some of the people their antibodies have less than fifty of the affinity. Uh, then thanking for the wild type. So sort of uh. And we're able to

make that assett because it's an open platform. We can make an asset for O macron within weeks of when O macron is first identifying. So I think that these sorts of these sorts of studies could really help inform on what's going on. Some of the you know, critics of antibody testing say, well, we don't want people doing

risky behavior because they know they have antibodies. My response to that is, well, if you don't you have antibody and you've been vaccinated, you should feel free to do everything that the CDC says a vaccinated person should do. But I'm looking at the flip side. What if your antibodies are low, Uh, then maybe you should not do everything that a vaccinated person could do, or you should and you should talk to your doctor about maybe doing something.

Either a booster with the same vaccine or a different vaccine, uh, to try to get those levels up. So again, there's not enough data to make any real recommendations at the moment. And I would like to, you know, I would like people to think about using our tests to um to either do the research or or to make their own informed decisions. So you mentioned the c d C, Um, what are they doing about the entire space of anybody's?

Is this something that they're just not paying attention to do they really think people with high anybody's are going to go out and be reckless? What does the CDC say about knowing what your anybody levels are? Yeah, well, the CDC and FDA boats have made public statements that they don't think that measuring antibody levels have any role in the pandemic. Uh. And you know, I can see the point, you know, to them, as I said in public,

tell everybody is a human being and everybody is the same. Uh. So you know that's been their position, and we're gonna we're gonna make recommendations, you know, for everybody, and and it will work for most people. So the issue about whether or not to be vaccinated or not, that's a political issue about whether you can force vaccinations on people.

I think a more interesting question is that, certainly internationally, Uh, there is the problem with vaccine card counterfeiting, right, so that there are people who have not been vaccinated who present, you know, and you know what your vaccine card looks like. I mean, how difficult would that be to cornerway? Uh. Yeah, it's it's ridiculous. And there's no centralized database, you know,

in this modern age. That's ridiculous. The fact and when I went to uh, the tennis tournament out in the desert, the b NB Puribous Open, Uh, they made a big deal of how everyone would be vaccinated. And there was an app. An the app you know, proved that you were vaccinated. But the way the app proved you were vaccinated and you took a picture of your vaccine card, you took a picture of your your driver's license, and

they you know, validated that you've been vaccinated. Well that's not really because if I had a fake vaccine card, that would not establish anything. Again, with a saliva based quantitative test, you could actually make sure that people had antibodies who you're hiring again in Florida, that would be legal most likely, But as I said, that's a political decision, that's not a medical decision. And the saliva test seems

to be far less invasive than the swab. How does it compare in terms of the time for the turnaround and the cost relative to other forms of testing. The cost to do the test is similar to what you'd have in a blood test. But the thing about alo a test is that there is a cost associated withdrawing the blood. People don't really calculate that that in the ease of testing is amazing. You just put plastic wand with a sponge on the end of it into your

mouth between your cheek and gums for two minutes. Uh. So it can be done in the office, it can be done at all. That can be done in a nurse's office, and then it can be mailed in using the appropriate biohazard containers. So cost is is low. Um, obviously we're a company where you know there will be some markup, but certainly the cost is reasonable and you know, we feel that people may want to know. Let's talk a little bit about the work you did as med

director at QUEST. They're a big fortune. What sort of work do they do and tell us a little bit about your role there. Okay. I arrived at QUEST in a year two thousand. It was, as you said, a large commercial laboratory, actually the largest libortary in the United States, and I believe ester was true, and they were just

beginning to do DNA tests. And when I got there in two thousand, they were using technologies that you know, I had been using at the University of Chicago that we're really designed you know, to do ten or twenty tests at the time. They were not designed to do thousands of tests at the time. And so when I got there, I made it my business to try to find other ways of doing this test thing that would be you know, one high throughput, two extremely high accuracy,

and three cost efficient. Because Quest Diagnostics was a business and we were able to do that. We found initially what was interesting is that we invented something called a one thousand sample comparison and that before we would introduce a new platform, we would look at a thousand samples

with the old technology and the new technology. Uh, if there were any discrepancies, we would resolve that discrepancy with a third technology to see what we were doing, which would be the best platform and because a lot of people were using a hundred samples. Well, what we found is a lot of times for the hundred samples there was complete agreement, but as you got to a thousand samples, there would be three, four or five discrepancies between the

two platforms. No one had ever shown that before, and we were able to show actually that the old technology was not as good as the new technology. And so with a lot of confidence and we published about this, we were able to move from the older technologies to the newer technologies. Then we were able to to start really doing high through foot high quality testing, and then

we just started increasing our menu. Uh So, because a lot of people when I was practicing genetics, a lot of the frustration was that people couldn't get the genetic tests that I wanted them to get because often these tests were done in specialty laboratories, They were expensive laboratories did not have a relationship with the insurance companies, and so basically people had to either pay out of their pocket or not have the tests. And it was very, very,

very frustrating. I remember there would be people who had drive their portion into my office and I'd say, you know, you really need to have cystic fibrosis carrier testing and they say, does insurance coverment? And I'd say, well, let's check and know your insurance doesn't cover it. And they say, well, then I don't want to have it. And you know, I felt like shaking them, saying, you know, get the tests.

You know. One of the reasons I went the Quest Diagnostics because of the Quest Diagnostics had relationships with all the major insurance companies, and so what I wanted to do is make these tests available to the general public. And I very proud that I was able to accomplish that. And we moved to sequencing, and we moved to uh, you know, all the major platforms, and uh. It was

a great experience. I I learned pathologists. You know, in general, it's interesting there there have been wars between pathologists and geneticist because pathologists feel that they own the rights to all testing that's done on humans. Uh. Geneticists said, hey, you guys don't know how to do the specialized things that we do. And so every hospital had this kind of give and take between who is going to do carriatypes, kicking of chromosomes, who is going to do DNA testing?

Was it going to be the pathology department wasn't going to be the genetics department. And when I got the Quest Diagnostic, which is the pathology company, I learned from them. I learned about quality assurance, quality control, how to what you have to do to UH to do hundreds of thousands of tests in an accurate way, and how you need to have methods in place to make sure that nothing has gone wrong. So for me, it was an eye opening experience. And the last thing I learned was

that this is a business. How do you make a business decision? How do you try to balance health of the nation versus business? For example, what if I want to do a test that you know won't make a profit, but that could help people. How are we going to make those decisions? Do we make those decisions those kinds of very difficult situations? You know? I learned a lot. Let's stick with the issue of of both the test

menu and the cost benefit analysis of these testings. I have to imagine that cystic fibrosis is an expensive, complix headed disease to test, Isn't it in the insurer's interest to anyone who is indicated to test for this to pay for that rather than you know, a later stage treatment after it's going to be further developed, more complicated, and more expensive to treat. But one of the great

ironies of modern medicine and healthcare is informatics. And I've had discussions with with insurers about about aspects like this, and some insurers will say, well, we know that people change insurance companies every two and a half to three years, so why should I do this task if it's going to prevent a heart attack in a patient five or ten years down the line, which is incredibly shortsighted, I have to say, and not all insurance companies have this

kind of attitude. But I would also say that in publicly traded companies, one of the things that I've seen is they're pretty myopic. They're looking at the next quarterly earnings report, they're looking at the stock price. UH, they're not necessarily looking at the long term. And in this country, insurance companies are for the most part profit. UH, they're not nonprofit, and they have to deliver value to their shareholders,

and so sometimes they make short sighted decisions. In the early days of DNA tests that the real problem was that the insurance companies didn't have relationships with companies that did it, and those UH tests were very expensive, so it's easier for them to say this is research, we're

not going to cover it. In terms of system fibrosis, the Emertant College of Etcentrics and Gynecology and the Emertant College of Medical Genetics both came to a to a recommendation that you know, every want at certain races should be tested for assistic fibrosis carrier status when the woman became pregnant, when we knew, and and we had been given fair warning for that when I was a Quest Diagnostics, so we knew that volume was going to increase, and

the business people in Quest Diagnostics knew that it would become profitable because insurers would have a difficult time saying its research if the professional societies had recommended it. So that was kind of a no brainer decision. Some of the other decisions that we had to make were not

so easy. Pardon my naivete and asking this, but if people are changing insurers every two and a half three years, then the flip side of we don't want to test because this person is going to end up elsewhere is what about the person who wasn't tested? Five years ago, who shows up as you're insured and has that expensive heart attack. Wouldn't you want a uniform approach across all the insurers so that the preventative, less expensive treatment and

testing was taking place before. Yeah, this guy is leaving your insurance company, but someone else who wasn't tested is going to end up at your company. It seems like the better approach would be to agree on a uniform testing process. Verry, it's so logical, you don't think I didn't scream that. But the problem is two things about that. Is, first of all, if all the insurance companies are gonna get together and decide that they're gonna do something like that,

that would probably be considered collusion. What if it comes from the medical community, or the research community, or or god forbid, actual legislation that says you should have to pay for these sort of testing. Yeah. Well, interestingly enough, just because the professional organization say that this is standard of care and should be done, does not mean that insurance companies will pay for it. Basically, insurance companies role

in life is to not pay for things. Our new CEO of Quest Diagnostics you used to say, you know what other business do you have where you give your services a way for free and then you hope and pray that you're going to get paid for it. And that's what lab testing is all about. The test is sent in, we send out the results, and then we hope that insurance is going to reimburse us for those It's not a great system. Um, you can be denied for a whole bunch of reasons because the ordering physician

put the wrong diagnosis code. Even though a person needed the test, the test was sent, the test was pre authorized, and the test was performed, a result was given, and then all of a sudden you're told you're not going to get paid for this because the doctor coded this as a routine office visit and not as a office

visit because there was a breast lump found. So you know, there is a huge part of the industry which you know basically has to take into account to fact that you're not going to get paid for a certain percentage of what you do, and they're actually when I was a quest there were, um, there were people who are trying to work on just improving the percentage because you know, you didn't have to do any more testing if you could improve your percentage of reimbursement, you know, from to

or whatever it was. And so you know, obviously in a single payer system you don't have those kinds of issues. You can make those decisions easily. Uh. And that's you know, in in Canada, that's it's a much easier thing to do. You can simply say the public health and system is going to be paying for this testing, and then pretty

much everybody gets it covered and paid for. Here you could say, yeah, I think we need that everybody should be paid for this testing, but insurance companies don't have to Listen, let's talk a little bit about the work you're doing at the children's hospital. Tell me the sort of patients you focus on and what do you try

and do for them? So very you know, I was in semi retirement and I got a call from a children's hospital Los Angeles saying, you know, we have such a backlog of patients that need to see clinical geneticists, and especially my subspecialty, which is biochemical genetics. Back from the days with with William nine hand, you know, could you please, you know, come work for us at least part time. And this was actually right before the pandemic and Dr Randolph, the chair in of the department, is

such a wonderful woman, you know that. I said, yes, um, because you know, if somebody asked you to help out, you help out. And I was really dreading it because I was going to have to drive up to Los Angeles and I live in the South Orange County. And then COVID hit. And one of the interesting things that happened with with the COVID epidemic, there's been you know,

can you say, have there been any positive things? Well, one of the positive things that's actually we now have mRNA vaccines, where before COVID they asked me it was it was going to be five to seven years before we had mRNA vaccines. But the other thing interesting thing that's happened is that telemedicine has become reimbursable two reasonable levels. So when COVID hit, I said, you know, I'm of an age I don't really feel comfortable driving up and uh,

you know, working in a hospital. And they said, wow, would you see patients, uh remotely by tele medicine? And I said sure, And it's surprisingly good. You know, yes, I cannot touch patients, but I can see patients. And I've been seeing patients UM in clinical genetics that very tremendously. Most states have what's called newborn screening. Newborn screening is one of the most amazing phenomenon for disease identification and

early treatment that nobody knows about. It's the heel stick that all your children, grandchildren and great grandchildren have when they're born. And this is analyzed in California for about fifty different what we call inborn errors in the tables, and so these children are identified, and these children need to be cared for by physicians who know how to care for these children with these extremely rare genetic diseases.

But it's been phenomenal. For example, there's a disease called who terrag aciduria type one where every patient I ever saw back when I was working with Dr Nihan was horribly, horribly brain damage. Uh. These kids were almost in vegetative states. I now have a child in my practice who is identified by newborn screening, who is placed on a specialized diet, is now three years old and completely normal. Every time I see this kid, I want to scream, how wonderful. Uh.

Newborn screening is started out with general keaton nuria. Again, these are children who would have been horribly horribly mentally deficient, deficient who are put on specialized diets and they're normal. So these are the kind of kids I see. I also see children who have autism, children who have other

forms of birth defects. You know, now we can get specialized DNA sequencing tests for these children UH to identify their disorders and perhaps treat Now we have these been called the whole x own sequence, which allows where the laboratory basically looks at every gene UH known in the body and compares that with both parents to see about

whether or not a child has a disease. Well, I did a test like that on a child that was hypotonic, who couldn't walk, he was eighteen months old, had spastic movements, had been diagnosed with cerebral palsy. I did that test. It turned out he had a treatable inborn error metabolism called congenital disorder of like constellation, and we started to treat him and he's getting better. So you know, it's these kinds of things were used to be very very rare.

It's almost like a revival meeting are becoming you know, pretty common. But in order to do that, you have to be able to get the testing done. And that's the great frustration you had mentioned previously that the insurers are sometimes none too keen about paying for some of these um screening tests or preliminary tests. The heel stick is that best practice was that mandated by law? How did that come about? And and what sort of headaches do you run into when you want to test in

The insurers says, um, we're not interested. Yeah, well, there's there are two questions in there. The first is newborn screening is legislatively mandated in all fifty days, and the beauty of the legislative mandate is that the follow up is covered. So these children who you know, test posit for newborn screening, their treatments are covered. Any follow up genetic testing is covered. So that's at least in California,

is a great system. When people that kids that fall through the cracks are the kids that don't have one of the diseases that is screened for in the newborn screening program. And these are children who for example, Medical which is the state sponsored health insurance, doesn't cover whole excellent sequence. So the kids who are covered by medical can't have the task which might identify a treatable cause

of their illness, and that is extraordinarily frustrating. And sometimes even private insurance will say, you know, I don't want to cover this test, even though you know, I want to scream at them, this kid needs this test. And that's the greatest frustration in medicine right now, at least in genetics, uh, for me, is not being able to get the tests I need for my patients. Um. And again that's because there's no uniformity and insurance coverage for

these sorts of genetic testing. I can see the you know, the position of the insurance companies are these are expensive tests and um, you know again error they want to be profitable, and if they their fear is that if they start having to pay for these very expensive tests, that's going to eat into their profits. So I mean, I do understand it, but it is extremely frustrating for

our practitioner. I can imagine and you sort of see the medical industry, both the practice and the commercialization from both ends of the business, both as a doctor who is a practitioner and someone who's working in what's essentially a biotech start up looking at it from the complete opposite end. How do we get this through the CDC, through an I H, through f DA, How do we get this approved? How do we get insurance to start paying for this? How do we get practitioners to start

using it? How does that sort of unique perspective of seeing both ends of the elephant affect how you view the practice of medicine and the United States. Wow, what a question. We could probably talk for an hour about that, I think. Um, you know, the short answer is it has become amazingly complicated to introduce anything new in medicine. So back in the day, somebody would find something, they would publish it, and then if it was good, it would be reproduced, and then everybody would do it, and

medicine progressed that way. Nowadays it's completely different. So you make a discovery, you talk to the Technology Transfer office at your university, they patented, uh. Then you spin off a biotech company. Then you have to get venture capital funding for your biotech funding company. Then you shop it around and then nobody trust what you're doing because you're a private company. And then you have to get people to will interact with the governmental players, people who will

interact with private payers. People who will work on the CPT codes. It is amazing complex process. I have a talk, actually a power point that I can and I talk about somebody who invents the best test. I call it TBT. So somebody invents a test that can use your blood and decide with sensitivity and specificity whether or not you've got prostate cancer, for example, and I I lead the people through the person who invents that test to the point where a quest diagnostics is no, no, thank you,

we don't want this test. And it is perfectly plausible. And that's because the whether or not a test will be profitable depends on so many different interchangeable parts, and if the parts don't all fit together correctly, it won't be a profitable test. So that's the way the industry is now. It's frustrating as a to be a physician in the system can get extremely frustrating because of course we feel we know everything so that if I say, if I say it must be so, it must be so.

But seriously, uh it can. It can be extremely frustrating. And my problem is that I have started a company. I believe I have a game changing technology, but the chances of it actually changing the game are pretty small, and one of the problems that my company has is, you know, we're underfunded. I don't have the ability to go out and hire a marketer, or to hire a sale at salesforce, to hire people, uh, to deal with

insurance companies. So I felt if I built a better mouse trap, that the world would come to my door. But that has not happened. And so now you know, I'm sitting trying to figure out what we're going to do with this technology. You know, I know it's good, I know it works. You know, I just need to figure out how to do it from a business standpoint.

So that's been my frustration. So we've seen over the years a lot of large either pharma or diagnostic companies go through a series of acquisitions and roll ups and mergers. It seems like scale is something that's really significant in this space. Is that just a function of how unique and somewhat backwards the U S system is. Between the hospitals and the insurers and the practitioners, everybody seems to be operating at a cross purpose, to say nothing of

the patient and the outcome of their visits. Is this a uniquely American problem? Or do we see other issues like this elsewhere. What happens here is evolutionary and the way we evolved, of course, you know, the way evolution occurs as with natural selection. So we're in a completely capitalist system here in the United States. And the way the laboratory industry evolved is it started out with I guess you'd call a mom and pop started out that

every hospital had a laboratory. That laboratory was run by the local pathologists. They drove the fanciest cars I can tell you. You You know, they were charging two and three for tests that cost them two or three dollars to run, and they were happy. The insurance industry didn't know any better. They were reasonably happy, and then a revolution occurred. Revolution occurred firstly with a laboratory called net path that decided

that they were going to be a commercial laboratory. They were going to compete with the mom and pop local pathologists, and so they started buying up laboratories. Then Corning, who was making Corning wear but also fiber Optics, was also making laboratory flasks in pirates. They were making graduated cylinders, they're making flasks. So they decided that they were going to diversify and get into the laboratory industry, and they spun off and they started with Corning Clinical Labs and

then they spun it off as Quest Diagnostics. Quest Diagnostics with their original CEO, who was a visionary, decided that he was going to consolid try to consolidate the laboratory and industry, so he bought met Death, he bought other laboratories UH and basically got to a point where they were close to eight percent of the total laboratory market share.

But it's still a very fragmented market. You have the huge players, the lab corps, the Quest bioreference people, but still the majority of laboratory testing is done by in the dual hospitals. So then how did individual hospitals No longer could they's charge two hun or fifty dollars for tests that they uh then only took them four hours to make. So they had to come down with pricing.

And so now hospitals are working with among themselves. So now you have hospital chains buying up other hospitals running the laboratories from the central laboratory. So you have that going on, and then insurance companies love that because now there's competition. So they can say, well, I can get this from Quest Diagnostic, or should I tell you this? And then you all know the story about United Healthcare, and they went from quests the lab corps and now

they're in both. But insurance companies began to wield an increasing amount of power over healthcare and they still wield that amazing kind of power because in many ways, your insurance company decides what tests your doctor can order and from what laboratory. Right in the early days of when pap smears went to something called thin prep, you know, there was no question that the thin prep was better

in terms of of what it could do. But in when patients would come to our clinic, there was a big boltin board saying if the patient had this insurance, they could get thin Prep. But the patient had that insurance, they could only get a regular PAP smear. So what people don't understand is that their insurance companies in many ways are determining what they you know, what kind of testing they can have, what kind of medical care they will get. And most people don't pay any attention to that.

They don't pay any attention to whether or not holds excellent coverage. Is you know, is covered by their insurance until they have a child that has autism, or until they have a child that, uh, you know, that has developmental delay, and now all of a sudden, their geneticists wants to order that test and their insurance company doesn't come. But one of the problems is that you would really want an informed consumer, But in healthcare are consumers are

not informed? You know, you look at these things when there's open enrollment, and mostly everybody's looking at what the code pay is, what this is, what that is. And it's not reasonable for people to understand whether or not, you know, they can have a cardiac authorization, or whether or not they can have a treadmill for certain indications, you know, because you don't know what the future is

going to hold. So the paradigm of, you know, an informed consumer in a capitalist system with free enterprise, I think doesn't work very well for healthcare. But the centralized systems, you know, are not that great in some places too.

I mean, everybody points to Canada as being the best a good example of a single party pair, but I know a physician in Canada and he needed his wisdom teeth out, and he had waited two and a half years to have his wisdom team, and a lot of people in Canada actually drive over to Buffalo to have CT scans because you know, the whole city of Toronto

has two CT scanners or something and something. You know there there's a limited number of you know, CT scanners for population, and so there's a long waiting list for those kinds of things. So it's not like single party payer is the panacea. Then if you ask, how are you going to fix the system as it currently exists, it's a nightmare and I have no idea of how I would fix it. So I know I only have

you for a couple more minutes. Let's jump from our medical discussion to our favorite questions that we ask all of our guests. I wanted to start with something like, tell us what you've been streaming over the past couple of years. What what has kept you entertained during the pandemic lockdown? Well, yeah, I stream a lot. I guess I can also combine, and so I during the pandemic

started reading Michael connelly novels Ronymous Bos The Detective. He's written over twenty novels, and of course then I streamed a Lincoln lawyer which is also from Michael Connolly, and I will be streaming The Bush Legacy right now. I'm watching Judy Queen of Jerusalem, which is an incredibly interesting Israeli film about the early days of in Jerusalem. Watching gas Lit with Martha Martha Mitchell Uh and a real cool one is Servant of the People. I don't know

if you've been seeing that. Barry Uh, that's uh the President of Ukraine, his original comedy show. Do you know about that? You know, I've I've heard all about it, and it's supposed to be tremendous, um fantastic. Yeah, I mean, and first of all, it's you talk about art imitating life and life imitating art. I mean, you know, he's President of Ukraine, and you know, the whole the whole TV series is based on, you know, him going off on a rant about the corruption and government and getting

elected to be President of Ukraine. I would highly recommend that. That's on my let's on my list. Let's talk a little bit about some of your mentors we mentioned them earlier. Tell us who helped to shape your career. You know, I was very lucky that whenever I needed somebody, they were there. The first one was, of course Albert Dorfman, who was my doctor advisor. He was an m D, PhD. He worked on on inborn eraism, metabolism, and he taught

me one very important thing. He called me in one day and he said, you know, when I designed an experiment and I think I know what the results should be, and I get that result, I don't trust it. You know, what he was basically saying is that that science and discovery is about what you're not expecting. Just as Alexander Fleming discovered penicillan not looking for penicillin. He discovered penicillin because of an accident that mold started growing on his plates.

And we've lost that in science. I'm afraid we've lost that. You know. Right now science has managed it as a business. You know, we're gonna make a vaccine. We're gonna do this step, this step, this steps, this step, and make a vaccine. No one is saying, let's look at how he anybodies are formed. Let's look at what's going on and see if there's anything anomalous, something that we don't understand. My next mentor was Dr Sam Specter. Dr Sam Specter, I guess you could call you know, was one of

the fathers of modern pediatrics. He worked with Benjamin's Bock writing h writing the famous book on childcare um and I was fortunate enough to have him as a professor at the University of Chicago Medical School, and then he moved to University of California, San Diego. So when I went to do my residency, he was there for me too. And what he taught me is that the best way to be a pediatrician is to be with the child.

He said, I want you to go hold babies. You know, if you if you're not an older brother and older sister, hold babies, walking around with babies, see how they feel. And you can tell simply by being with a baby, by holding a child, whether this is a child who's just fussy and can be discharged, where this is someone who is seriously ill. And those were the days afford the meningitis vaccine, and we were really concerned about meningitis.

Then my boss and my chairman of my department I was at a community hospital in Chicago's name was John Barton, and he was a cowboy, and he taught me two things. He first taught me that to be a leader, you have to want what's best for your people more than you want what's best for you. He got such joy in our successes, and he did everything possible so that we could be successful, even though sometimes that made him

unpopular with the management. And the last one was William Nihan uh And and Bill taught me that you have to know the basic science if you're going to treat patients. For example, he could give a lecture on diarrhea where you learned about what causes the diarrhea, not just how to treat the diarrhea. And so those are my mentors, and I thank god that I had. Sounds like a hack of a list. Let's talk about books. You mentioned some already. Tell us what you've been reading lately and

what are some of your favorites. Okay, well, my favorite book is Field of Dreams. My father was a baseball catcher, and it's one of the only books I've ever cried while reading. I think it's a better book than it is a movie, but I love the movie. Also, there's also a fabulous book called The Goldbug Variations by Richard Powers. I don't know if you've heard of it, but he combines genetics, music, and a couple of love stories together.

More recently, as I told you, I've been reading all the detective Runo Sposh novels by Michael Connolly, and that's what I do for recreation. Sounds like fun. Our final two questions starting with what sort of advice would you give a recent college grad who was interested in a career in either medicine or genetics. Well, I would say that there's been a sea change from in just the past ten years in genetics. Uh, and it's going to be in medicine too, And that is you need to understand. Informatic.

When I was even a quest diagnostics, my expertise and what we call wet work, it was in making essays, you know, making methods to detect things and doing it in a better way. We talked about that a little earlier. Now pretty much everything goes on the DNA sequencer, on the next generation sequencers, and so the wet work is almost irrelevant. But what isn't irrelevant is the analysis of the tremendous, the humongous amount of data that comes off

those sequencers. And so I would say to someone who wants to go into genetic you have to get a handle on the informatics. Whether or not you need to be, you know, a computer major or whether you're not to need to be a programmer that I don't know, but you need to be able to because the computer folks know the medicine and you need to know where the weaknesses are in the computer algorithms or else you're going to start, you know, being let off on blind alley.

So that would be my advice to anyone who's getting into modern medicine is to understand the informatics, Understand how these algorithms work, understand where their strengths are, where their weaknesses, or even become involved in the analysis because it's incredibly powerful. I mean, there's an algorithm that basically looks at sales of kleenex in um in pharmacies that predicts blue epidemics

better than anything else. It's the same kind of algorithm that they use to map the craters of the moon. So you know, this is you know, we live in an age where basically privacy has gone. But the up the other side of it is there is so much data out there that could be used for good. You know, people are always worried about how it could be used for the bad. But you know, people are listening to our phone conversations. They're paying attention to what we buy.

You know, that's the negative part. But on the other hand, I just turned on my computer and on Google there was something that I wanted, you know. It was like, I think, how did you know? How did the algorithm know that this would be something that I would be looking for because it wasn't obvious. Uh and yet there it was. So it can be used for good um as well as for for bad and uh So I think that that, yes, there there is reason for concerns

about privacy. I would also say that the kids today they don't care about privacy, right They put everything on Facebook as soon as it happened, So maybe we're moving into a different era. Quite interesting. And our final question, what do you know about the world of genetics and testing in medicine today that you wish you knew forty years ago when you were first getting started. I guess what I'd say is one of the most important things

that I've learned is unintended consequences. So I lived through the original Medicare guidance when the diagnostic related groups were formed, So this was in probably the seventies or eighties, probably the eighties, and basically the way that medicine was reimbursed was changed inalterably. So hospitals were paid not by what was done to a patient or for a patient. They were paid a single amount based on the diagnosis of

that patient when they entered the hospital. So you would get the same amount of money for admitting a patients with down syndrome for pneumonia, whether or not did two hundred thousand dollars worth of work on them or whether it did twenty dollars worth of work on him. So that changed medicine incredibly. And you say, well, you know Medicare was Medicare, but then you know the insurance company used Medicare as a model, and that that irremically altered

the way medicine was practiced. The other thing about those Medicare regulations is they had better reimbursement for procedures. So specialties which did a lot of procedures, colon oscarpies, cardiac cathorizations became more powerful because the reimbursement was better and basically you could make more money in that era of the general practitioners, the pediatricians, you know, all got less reimbursement, and it became harder for them to make a living.

Then all of a sudden, somebody says, well, these primary care people are not doing well. So then they changed reimburse sent to favor primary care, and that, again, you know, changes the equation. So I guess what I would say is be careful when you legislate anything that has to do with medicine. I don't know if I would become a physician if I were uh a young person today. Um, it's much harder. So, you know, let me tell you what you know. One way that costs is being controlled

in medicine is with scheduling. So our hospital was purchased by another hospital, they introduce a scheduling program. Well, I noticed that they were going to schedule me fifteen minutes to see every patient. And I said, wait a second, I'm a geneticist. I can spend an hour with the patient. I can spend an hour and a half of the patients. They said, Tosh, They said, you know, if you do that, then your patients are gonna be waiting in the waiting room.

They're not going to be happy. So, you know, a simple thing like a scheduling program from someone who you know has done an analysis and says that you know, we want doctors to see patients every fifteen minutes and get a ten minute break for coffee and and that sort of thing has made you know, being a doctor, being a physician less enjoyable, You have less freedom, Your people are feeling more like they're they're just employees, uh

than they have a vocation. Really quite interesting. Thanks back for being so generous with your time. We have been speaking with Dr buck Strom. He is the CEO and founder of Liquid Diagnostics. If you enjoy this conversation, well, be sure and check out any of the previous four hundred such discussions we've add. You can find those at iTunes, Spotify, or wherever you regularly get your podcasts. We love your comments, feedback and suggestions right to us at m IB podcast

at Bloomberg dot net. Sign up from my daily reading list at Ridolts dot com. Follow me on Twitter at rid Halts. I would be remiss if I did not thank our crack team who helps put these conversations together each week. Mohammed Rumaui is my audio engineer. Paris Wald is my producer. Sean Russo is my director of research ATKO. Valberon is our project manager. I'm Barry Rihalts. You've been listening to Master Some Business on Bloomberg Radio.