Busting the reagent monopoly: a life or death struggle?

When Tellgen announced victory in a lawsuit against Abbott for anti-competitive practices, an old debate over the monopoly of Big Pharma in reagent development resurfaced.

By JIN Miao


The legal fight between Tellgen and Abbott over unauthorized reagent development has reignited an old debate:  how to break the monopoly of Big Pharma, boost innovation and lower prices.

In late October, Shanghai Tellgen Life Science (Tellgen) issued a statement announcing victory in a lawsuit against Abbott Laboratories (Abbott), a 130-year-old medical device maker. It’s been a bitter fight over reagents used in Abbott’s ARCHITECT i2000SR immunoassay analyzer, a diagnostic device. Abbott, according to the ruling, engaged in anti-competitive practices by disabling reagents developed by Tellgen in its devices. Abbott has been ordered to retract and apologize for defamatory statements and pay Tellgen a token 211,800 yuan (US$32,000) for losses and other damages.

This is only a partial victory for Tellgen. The company’s request to restore functionality for its reagent was dismissed. It’s s complex and highly technical area, but only reagents authorized by the device manufacturer can be used on immunoassay analyzers.  Unauthorized production or sales (technically impossible without breaking the manufacturer’s encryption) are ruthlessly stamped out on the grounds of intellectual property infringement.

Closed system, closed market

Tellgen’s reagents apparently function perfectly well on Abbott devices. Aghast, Abbott hastily reconfigured its analyzers to disable them, triggering the lawsuit. No one knows for sure how Tellgen cracked Abbott’s code or whether they broke the law in doing so. Before this to become clear, the legal fight is likely to go on.

The ruling has chucked a hand grenade into the diagnostics industry. For years, the monopoly held by a handful of companies, Abbott among them, has been under question. A “closed system” business model secures market power for the lifetime of the equipment. Some medical practitioners argue that independent reagent producers would boost innovation and lower costs. But the balance between market forces and intellectual property protection is a very fine one.

Immunoassay analyzers identify concentrations of specific substances in fluid samples. Abbott’s ARCHITECT i2000SR uses the widespread chemiluminescence immunoassay (CLIA) system.  CLIA market analyzers, reagents and accessories comprise the largest subsector in the diagnostics market, worth 30 billion yuan in China alone, according to Haitong Securities. It is dominated by four multinationals (Roche, Abbott, Beckman Coulter, and Siemens: “The Big Four”). One way they maintain their monopoly is through “closed systems,” which only allow the use of their proprietary reagents.

The arrangement gives manufacturers control over reagent quality and secures their income and market share long after the devices are sold. Reverse engineering the devices to produce alternative reagents somehow constitutes intellectual property infringement.

Tellgen claimed that all CLIA diagnostic reagents involved were approved by the State Food and Drug Administration, but intellectual property is outside the SFDA remit. If a drug or procedure works, it gets approval.

Income for life

“The question is, how was Tellgen ever able to develop and test its reagent without Abbott even knowing?” a biomedicine developer said in an interview. “Abbott’s devices do not support open-source development. So how Tellgen cracked the code is something of a mystery.”

Third-party reagent development entails decrypting analyzers, which can only be done through official partnerships or illicitly. Manufacturers occasionally work with independent producers to develop reagents for new tests on existing devices but none of Tellgen’s reagents seem to have been developed in that way.

Closed systems are secured behind an encryption process. Reagents are typically encoded with identification information that is decrypted by algorithms in the analyzer.  Likewise, the algorithms can make certain reagents incompatible “just because,” as was the case with Tellgen’s reagents.

No one is sure exactly how Tellgen cracked Abbott’s code. There is no solid evidence it hacked Abbott’s software – a severe intellectual property breach. Further confounding the case, Tellgen has been highly vocal throughout.

It’s an open secret that there are companies making reagents, but no one would shout it from the rooftops. A handful of analyzer decryption businesses have been quietly going about their questionable business in a legal grey area for some time. But these smalltime operators are unlikely to bring, or even want, any seismic changes to the market. In many ways, the monopoly is their friend.

For Tellgen to actually go so far as to sue Abbott when its products were finally banned appears to be an act of extreme selflessness or shocking self-harm.

While everyone seems to be accusing Tellgen of various wrongdoings, the industry may be finally pushed into finally opening up closed systems; closed systems that the Big Four vociferously claim keep us all safe. A sea change in the diagnostics industry may mean independent producers openly competing in the reagent market.

For a long time, analyzers have been bundled with reagent contracts. Manufacturers sell analyzers to hospitals and clinics below-market price or even give them away for free – often to considerable fanfare – as a means of securing eternal reagent sales, at whatever price they want to charge.  The model guarantees a steady income after a one-off sale, but is widely criticized and keeps the price of diagnostic tests high.

Time to open up

Since prices for diagnostic tests are dictated by the government, hospitals and clinics would obviously choose adequate reagents with lower prices. Changes in hematological testing, previously tightly controlled by Sysmex and Toshiba, have shown that more competition means lower costs.

It is widely believed that opening up the closed systems would bring in competitors offering affordable reagent, but until now, no matter what regulators have attempted, loopholes have always been found and nothing has changed.

Neither Abbot nor Tellgen responded to our inquiries.