−Removed: Fulgent is a growing technology company offering comprehensive genetic testing and providing physicians with clinically actionable diagnostic information they can use to improve the quality of patient care.
+Added: Fulgent Genetics, Inc., together with its subsidiaries, collectively referred to as the Company, is a technology company offering large-scale COVID-19 testing services and comprehensive genetic testing to provide physicians with clinically actionable diagnostic information they can use to improve the quality of patient care.
We have developed a proprietary technology platform that allows us to offer a broad and flexible test menu and continually expand and improve our proprietary genetic reference library, while maintaining accessible pricing, high accuracy and competitive turnaround times.
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We believe our test menu offers more genes for testing than our competitors in today’s market, which enables us to provide expansive options for test customization and clinically actionable results.
−Removed: After launching our first commercial genetic tests in 2013, we have expanded our test menu to include approximately 18,000 single-gene tests and more than 900 panels that collectively test for approximately 5,700 genetic conditions, including various cancers, cardiovascular diseases, neurological disorders and pediatric conditions.
+Added: After launching our first commercial genetic tests in 2013, we have expanded our genetic test menu to include more than 18,000 single-gene tests and more than 900 panels that collectively test for more than 5,700 genetic conditions, including various cancers, cardiovascular diseases, neurological disorders and pediatric conditions.
A cornerstone of our business is our ability to provide expansive options and flexibility for all clients’ unique genetic testing needs.
−Removed: Genetic testing offers the possibility of early identification of a disease or a genetic predisposition to a disease and enhanced disease treatment and prognosis.
−Removed: As a result, we believe widespread genetic testing could enable significant health improvements and healthcare cost reductions by providing patients and clinicians with more advanced kno wledge and options for personal health management plans.
−Removed: Due to these and other potential benefits, genetic testing has experienced significant growth in recent years.
−Removed: If this growth trend continues, we believe genetic testing will become part of standard medical care and the knowledge of a person’s unique genetic makeup could play a more important role in the practice of medicine.
−Removed: We believe this growth has been tempered in prior years, however, because many tests are prohibitively expensive, are produced through inefficient processes and often do not result in clinically actionable data.
−Removed: Through our technology platform, we have developed an offering that we believe addresses these industry challenges and provides a sustainable competitive advantage, both in today’s genetic testing market and as we seek to implement new diagnostic tools in the future.
Our technology platform, which integrates sophisticated data comparison and suppression algorithms, adaptive learning software, advanced genetic diagnostics tools and integrated laboratory processes, allows us to offer a test menu with expansive genetic coverage.
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As a result, our efforts to build and continually enhance our technology platform allow us to deliver comprehensive, adaptable, clinically actionable and affordable genetic analysis while maintaining a low cost per billable test, enabling us to efficiently meet the needs of our growing base of customers.
−Removed: These features of our offering have resulted in rapid volume growth since our commercial launch, with 58,573 billable tests delivered in 2019, compared to 22,298 billable tests delivered in 2018, and an aggregate of over 117,774 billable tests delivered to approximately 1,100 customers from inception through December 31, 2019 .
+Added: Since March 2020, we have offered several tests for the detection of SARS-CoV-2, the virus that causes the novel coronavirus disease, or COVID-19, including NGS and reverse transcription polymerase chain reaction – based tests, or RT-PCR-based tests.
+Added: To date, we have processed orders for our COVID-19 tests from a variety of customers, including governmental bodies, municipalities, and large corporations .
+Added: In 2020, we established and operated COVID-19 testing sites for certain customers including the County of Los Angeles and New York City public school system.
+Added: We also offer at-home COVID-19 testing services through our Picture Genetics platform that is used by the New York City Test and Trace program.
+Added: We have experienced rapid volume growth since our commercial launch, with 4.4 million billable tests delivered in 2020, compared to 59,000 billable tests delivered in 2019, and an aggregate of over 4.5 million billable tests delivered to over 1,300 customers from inception through December 31, 2020.
Genetic Testing Industry
−Removed: Genetic testing identifies mutations in genes or chromosomal abnormalities.
−Removed: The results of genetic tests can be used to confirm or rule out a diagnosis of a suspected genetic condition, to predict a person’s likelihood of developing a genetic condition, and to improve the selection and implementation of drug treatment programs targeting specific diseases.
−Removed: The availability and accessibility of genetic testing has grown significantly in recent years, due in large part to improvements in testing technologies, particularly next generation sequencing.
−Removed: NGS technology, a genetic testing technique that enables millions of DNA fragments to be sequenced in parallel, has dramatically lowered the cost and improved the quality of genetic testing.
−Removed: As technology advances continue to drive costs down and improve testing quality, the availability and accessibility of genetic tests is expected to continue to accelerate.
+Added: Genetic testing offers the possibility of early identification of a disease or a genetic predisposition to a disease and enhanced disease treatment and prognosis.
+Added: Recent improvements in testing technologies, including NGS technology, have dramatically lowered the cost and improved the quality and availability of genetic testing.
+Added: We believe widespread genetic testing could enable significant health improvements and healthcare cost reductions by providing patients and clinicians with more advanced knowledge and options for personal health management plans.
This expansion of testing availability and accessibility, as well as a growing and aging population;
−Removed: increa sing overall incidence of disease;
+Added: increasing overall incidence of disease;
innovations in genomic medicine that enable the selection and implementation of drug treatment programs based on genetic information, or pharmacogenomics;
−Removed: and other factors all contribute to expectations of continued growth in the global market for genetic testing.
+Added: and other factors contributed to the growth in the global market for genetic testing in recent years.
+Added: If this growth trend continues, we believe genetic testing will become part of standard medical care and the knowledge of a person’s unique genetic makeup could play a more important role in the practice of medicine.
While adoption of genetic testing has increased in recent years, we believe widespread utilization has been tempered because of certain challenges and barriers to adoption that exist in today’s market.
−Removed: These in dustry challenges include:
−Removed: the continued high prices of some genetic tests, in spite of declining prices in recent periods;
−Removed: largely inadequate reimbursement options, due to third-party payors’ restrictions on reimbursement to only a narrow subset of geneti c tests and certain patients who meet specific criteria;
−Removed: the limited scope of some genetic analysis, which may test only a small portion of the genes in the human genome and thus may fail to diagnose or identify a predisposition to a condition that is link ed to mutations in untested genes;
−Removed: inefficient testing processes, which often involve sequential retesting from multiple different laboratories in order to obtain comprehensive results;
−Removed: and the cumbersome and time-consuming nature of test results interpret ation, which requires significant expertise and time to review proprietary and publicly available information about individual genetic disorders, genes and variants and understand the implications of genetic mutations that are identified in a genetic test.
−Removed: In addition, the increased competition in our industry in recent years, due in large part to the growth of genetic testing, as well as the cost-saving initiatives on the part of government entities and other third-party payors, have resulted in downward p ressure on the price for genetic analysis and interpretation, which have posed challenges to genetic testing laboratories as they seek to maintain both competitive pricing and acceptable revenue levels and margins on test sales.
−Removed: We have approached these co mpetitive and operational industry challenges by building and continually advancing a multi-faceted, scalable technology platform that we believe will facilitate our ability to address many of these challenges.
+Added: Among these industry challenges are that genetic testing can be prohibitively expensive, only a limited number of genetic tests are currently reimbursable, certain genetic conditions cannot be diagnosed due to the limited scope of some genetic analysis, genetic testing can be an inefficient process and the interpretation of genetic results can be cumbersome and time-consuming.
+Added: Through our technology platform, we have developed an offering that we believe addresses these industry challenges and provides a sustainable competitive advantage, both in today’s genetic testing market and as we seek to implement new diagnostic tools in the future.
+Added: COVID-19 Diagnostic Testing
+Added: Events surrounding the emergence of SARS-CoV-2 in Wuhan, China in late 2019 and the ensuing COVID-19 pandemic in 2020 and continuing today have dramatically affected populations and global industry.
+Added: Demand for accurate COVID-19 testing with rapid turn-around times correspondingly emerged as private businesses, municipalities and healthcare providers began to increasingly rely on diagnostic testing to continue operations and as a tool to aide containment efforts.
+Added: While the duration of the ongoing COVID-19 pandemic and continuing market for COVID-19 diagnostic tests remains subject to a number of uncertainties, including uncertainties regarding the effectiveness of disease containment efforts, speed and effectiveness of global COVID-19 vaccine distributions, newly emerging viral variants, continuing government actions in response to the pandemic and regulatory requirements or preferences that may emerge following the pandemic, a robust market for COVID-19 diagnostic testing persists to present day.
+Added: Currently available diagnostic tests for the detection of SARS-CoV-2 are based on a variety of technologies and formats, including conventional antigen-based tests for detecting viral proteins and nucleic acid amplification tests which include RT-PCR-based tests.
+Added: While antigen-based diagnostic tests are relatively inexpensive and can be used at the point of care, antigen-based diagnostic tests for the detection of SARS-CoV-2 have been observed to be less sensitive than genetic and RT-PCR-based tests.
+Added: Centers for Disease Control guidelines indicate that the “gold standard” for clinical diagnostic detection of SARS-CoV-2 is nucleic acid amplification which includes RT-PCR-based tests.
+Added: We believe our ability to provide COVID-19 NGS and RT-PCR-based diagnostic testing services with expedited turn-around times makes us competitive in this new market.
Our Technology Platform
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We have developed software that automatically incorporates the data from each completed test into our expansive genetic reference library, enabling it to continuously evolve with each set of genes we analyze.
−Removed: This adaptive learning software supports the continuous improvement of our proprietary gene probes and leverages the capabilities of these gene probes to improve the speed and effectiveness of curation and reporting.
−Removed: Our adaptive learning software also communicates with our integrated laboratory systems, which leads to increasing automation processes and other operating efficiencies.
+Added: This adaptive learning software supports the continuous improvement of our proprietary gene probes and leverages the capabilities of these gene probes to improve the speed and
+Added: effectiveness of curation and reporting.
+Added: Our adaptive learning software also communicates with our integrated laboratory systems, which leads to increas ed automation processes and other operating efficiencies.
Proprietary Laboratory Information Management Systems
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This technology platform enables us to perform each test and deliver its results at a lower internal cost than many of our competitors, averaging approximately $20 per billable test delivered in 2020.
−Removed: This low cost per billable test allows us to maintain affordable pricing for our customers, averaging approximately $555 per billable test delivered in 2019, which we believe encourages repeat ordering from existing customers an d attracts new customers.
+Added: This low cost per billable test allows us to maintain affordable pricing for our customers, averaging approximately $96 per billable test delivered in 2020 , which we believe encourages repeat ordering from existing customers and attracts new customers.
We believe our low cost per billable test could also facilitate the process for establishing coverage and reimbursement from third-party payors at a level adequate for us to achieve profitability with this payor group.
Broad and Flexible Test Menu
−Removed: We currently offer single-gene tests on approximately 18,000 genes, which we believe is thousands more than most of our competitors’ portfolios.
+Added: We currently offer single-gene tests on more than 18,000 genes, which we believe is thousands more than most of our competitors’ portfolios.
Based on the results of a retrospective study of individuals with a personal or family history of cancer, described below, we believe the breadth of genes in our portfolio allows us to provide more comprehensive genetic information and improves our variant detection rate, which can increase the clinical actionability of the data we produce.
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We also offer our customers access to our highly qualified genetic counselors and laboratory experts to assist in interpreting the data we provide, which further increases the utility of our test results for ordering physicians.
−Removed: The benefit of including multiple genes on a single panel was discussed in a study published in 2016 by the University of Southern California, or USC, Norris Comprehensive Cancer Center in Cancer Genetics .
−Removed: The study retrospectively evaluated 475 individuals with a personal or family history of cancer who had undergone a clinically indicated multi-gene panel test of six to 110 genes from one of the following six commercial laboratories:
−Removed: Myriad Genetics (n=354), Ambry Genetics (n=100), Fulgent (n=17), University of Washington Genetics Laboratory (n=2), City of Hope Molecular Diagnostics (n=1) and Baylor Genetics Laboratory (n=1).
−Removed: The study concluded that multi-gene panel testing increases the yield of mutations detected and adds to the capability of providing individualized cancer risk assessment.
−Removed: More specifically, the study reported that deleterious mutations were identified in 15.6% of patients tested on a variety of multi-gene panels, which included 8.6% of patients who would not have a mutation detected if a targeted gene-by-gene-approach had been used.
−Removed: The study also presented evidence that, as the number of genes on a panel increased, a higher proportion of panels identified a mutation.
−Removed: The Fulgent panels evaluated in the study contained over 100 genes compared to less than 30 genes in the next largest panel.
−Removed: Additionally, approximately 35% of our panels identified a genetic mutation, and in comparison, the test with the next highest percentage of detected mutations identified mutations in approximately 17% of its tests.
Expansive and Growing Genetic Library
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As a result, our integrated technology systems allow us to leverage publicly available information from the broader scientific community with our internally developed reference library to develop what we believe is a more reliable catalog of genetic information and to accelerate, standardize and improve our curation and reporting process.
−Removed: Our Genetic Tests
+Added: Our Genetic Tests and COVID-19 Tests
Our offering consists of a wide variety of tests and test types, and our customers have a high degree of choice when selecting a test from our menu.
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We can perform full-gene sequencing with deletion/duplication analysis in all of these tests.
−Removed: In addition, we continually seek to expand our test menu with new genes and panel tests, including our plans to expand our reproductive testing options, including preimplantation genetic testing, or PGT, and preimplantation genetic diagnosis, or PGD.
−Removed: We also plan to increase the genes available on our expanded Beacon carrier screening panel, which, along with preimplantation genetic testing options and newborn genetic analysis options, will round out our family planning testing options.
−Removed: Our test offerings also included Solid Tumor Molecular Profiling for somatic cancer testing, Rapid Whole Genome testing developed for children in neonatal intensive care units, or NICU, or pediatric intensive care units, or PICU, our Newborn Genetic Analysis panel, and a single front-line test designed to comprehensively detect ataxia-related variants and repeat expansions via sequencing.
−Removed: New test offerings in 2019 included Picture Genetics, a patient-initiated genetic testing offering aimed at individual consumers and which we advertise directly to consumers through a variety of methods including social media and other digital avenues .
+Added: In addition, we continually seek to expand our test menu with new genes and panel tests.
+Added: Our test offerings also include Solid Tumor Molecular Profiling for somatic cancer testing, Rapid Whole Genome testing developed for children in neonatal intensive care units, or NICU, or pediatric intensive care units, or PICU, our Newborn Genetic Analysis panel, and a single front-line test designed to comprehensively detect ataxia-related variants and repeat expansions via sequencing.
+Added: In 2019, we launched Picture Genetics, a patient-initiated genetic testing offering aimed at individual consumers and which we advertise directly to consumers through a variety of methods including social media and other digital avenues .
+Added: New test offerings in 2020 included several COVID-19 tests and Pharmacogenetics testing, the use of genetic data to guide drug therapy decisions, or PGx testing.
We also offer certain research service tests, which we refer to as “sequencing as a service” and which are primarily ordered by research institutions and other similar institutional customers.
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To further increase test option flexibility, as well as to reduce the complexity of ordering tests, we consistently strive to innovate our pricing structure and features for our available tests.
−Removed: We have upgraded many our pre-set panels with additional genes.
−Removed: In addition, if a variant is reported in a proband for whom duo or trio testing was not originally ordered, the ordering physician is given the option of adding complementary familial known mutation testing, or FKMT, for any variant reported by Fulgent in the proband’s final report, for up to two first-degree relatives.
+Added: We have upgraded many of our pre-set panels with additional genes.
+Added: In addition, if a variant is reported in a proband for whom duo or trio testing was not originally ordered for, the ordering physician is given the option of adding complementary familial known mutation testing, or FKMT, for any variant reported by Fulgent in the proband’s final report, for up to two first-degree relatives.
We believe these options represent competitive pricing features that will streamline the test ordering process, give customers more flexibility with added value, and reduce barriers to trio and familial testing, which can both increase the clinical utility of genetic testing for a single proband.
−Removed: Our Customer s
−Removed: Since inception, we have sold our tests to approximately 1,100 total customers.
−Removed: We consider each single billing and paying unit to be an individual customer, even though a unit may represent multiple physicians and healthcare providers ordering tests.
−Removed: Aggregating customers that are under common control or are affiliates, one of our customers contributed 28% of our total revenue in 2019, and one of our customers contributed 13% of our total revenue in 2018.
−Removed: We have primarily sold our tests to hospitals and medical institutions.
+Added: Since March 2020, and as noted above, we have commercially launched several tests for the detection of SARS-CoV-2, the virus that causes COVID-19, including NGS and RT-PCR-based tests.
+Added: We have received an Emergency Use Authorization, or EUA, from the U.S.
+Added: Food and Drug Administration, or the FDA, that authorizes the use of our RT-PCR-based tests for the detection of SARS-CoV-2 using upper respiratory specimens (nasal, nasopharyngeal, and oropharyngeal swabs) and in conjunction with at-home specimen collection kits that are offered as a service through Picture Genetics.
+Added: Our at-home testing service for COVID-19 and RT-PCR-based test are authorized for emergency use by the FDA only for the detection of nucleic acid from SARS-CoV-2, not for any other viruses or pathogens.
+Added: We are currently accepting patient samples directly to our Biosafety Level 2, or BSL-2, certified laboratories where we have the capacity to accept and process thousands of samples per day with a typical turn-around time of 24-48 hours from the time a sample is received and accepted.
+Added: To date, we have processed orders for our COVID-19 tests from a variety of customers, including governmental bodies, municipalities, and large corporations.
+Added: Our Customers
+Added: Historically, we primarily sold our tests to hospitals and medical institutions.
We have approached the genetic testing market with a focus on these customers in part because they are frequent and high-volume users of genetic tests.
We believe this customer base provides a meaningful opportunity for further growth by acquiring additional hospital and medical institution customers and by deepening our relationships with existing customers to drive increased ordering.
−Removed: Additionally, collection of billings from these institutional customers is generally more attainable than from other types of customers in today’s reimbursement environment, as approximately 87% of our test billings that were generated and due in 2019 were paid during that period.
+Added: Additionally, collection of billings from these institutional customers is generally more attainable than from other types of customers in today’s reimbursement environment.
In addition, we believe hospitals and medical institutions are early adopters of NGS technology and could influence broader clinical acceptance of genetic testing.
−Removed: We are also seeking to expand our customer base to include new customer groups.
−Removed: To this end, we have contracted directly with national health insurance companies to become an in-network provider and enrolled as a supplier with the Medicare program and some state Medicaid programs, in an effort to obtain coverage and reimbursement for our tests to make them accessible to more individual physicians.
−Removed: In addition, we are building relationships with research institutions and other similar institutional customers, national clinical laboratories, regional medical networks and various other organizations to facilitate access to physicians, practitioners and other new customer groups, including certain U.S.
−Removed: military and other government agencies.
−Removed: Generally, when we establish these new customer relationships, we agree with the applicable payor, laboratory or other customer to provide certain of our tests at negotiated rates, but, subject to limited exceptions, these relationships do not obligate any party to order our tests.
−Removed: Much of our business to date has been from non-U.S.
−Removed: customers, with approximately $7.5 million and $8.8 million of our revenue coming from non-U.S.
−Removed: sources in 2019 and 2018 , respectively.
−Removed: These customers are located in a variety of geographic markets, including Canada, where we have historically focused much of our international efforts, and other regions, such as Australia, Europe and the Middle East.
−Removed: In addition, we have worked with one of our large stockholders to establish a joint venture to offer genetic testing to customers in the PRC, which was formed in April 2017 and which we refer to as FF Gene Biotech.
−Removed: We believe FF Gene Biotech could expand our long-term opportunities to address the genetic testing market in Asia.
−Removed: Our customers can generally be divided into three categories based on the party from which we receive payment for our tests:
−Removed: hospitals, medical and other institutions;
−Removed: patients and third-party payors.
−Removed: Hospitals, medical and other institutions are responsible for paying for the vast majority of the tests we have delivered since our inception.
−Removed: We bill these organizations for our tests and they are responsible for paying us directly and either billing their patients separately or obtaining reimbursement from third-party payors in connection with a patient’s diagnosis related group, or DRG.
−Removed: A small percentage of our custome rs are patients, who elect to pay for tests themselves with out-of-pocket payments after their physicians have ordered our tests.
−Removed: Third-party payors, which consist of private health insurers, the Centers for Medicare and Medicaid Services, or CMS, and certain state Medicaid agencies, have been responsible for paying for a small number of the tests we have delivered to date;
−Removed: however, as we seek to expand our customer base to include more individual practitioners, we expect this category of payors would be responsible for many of the tests we deliver to these customers.
−Removed: Third-party payors require us to identify the test for which we are seeking reimbursement using a Current Procedural Terminology, or CPT, code set maintained by the American Medical Association, or AMA.
+Added: Beginning in March 2020, we also began processing orders for our COVID-19 tests from a variety of customers, including governmental bodies, municipalities, and large corporations.
+Added: Since inception, we have sold our tests to over 1,300 total customers.
+Added: We consider each single billing and paying unit to be an individual customer, even though a unit may represent multiple physicians and healthcare providers ordering tests.
+Added: Aggregating customers that are under common control or are affiliates, two of our customers, the County of Los Angeles and San Bernardino County, contributed 28% and 10%, respectively, of our total revenue in 2020, and one of our customers contributed 28% of our total revenue in 2019.
+Added: We currently classify our customers into three payor types:
+Added: (i) Insurance, (ii) Institutional, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities and large corporations or (iii) Patients who pay directly.
+Added: Typically, we bill our Institutional customers for our tests and they are responsible for paying us directly and billing their patients separately or obtaining reimbursement from third-party payors, in connection with a patient’s diagnosis related group, or DRG .
+Added: A small percentage of our customers are patients, who elect to pay for tests themselves with out-of-pocket payments after their physicians have ordered our tests.
+Added: Third-party payors, which consist of private health insurers and government health care programs, including Medicare and Medicaid, require us to identify the test for which we are seeking reimbursement using a Current Procedural Terminology, or CPT, code set maintained by the American Medical Association, or AMA.
Where we offer a multi-gene panel and there is no CPT code for the full panel but the panel includes a gene for which the AMA has an established CPT code, we identify the test provided under that CPT code when billing a third-party payor for that test.
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Given the changing CPT coding environment and our development of relationships with third-party payors, we expect that our practices regarding billing these payors will evolve in the future.
+Added: We are making efforts to diversify our customer market, including building relationships with research institutions and other similar institutional customers, national clinical laboratories, governmental bodies, municipalities and large corporations in need of regular COVID-19 testing for large populations and various other organizations to facilitate access to physicians, practitioners and other new customer groups, including certain U.S.
+Added: government agencies.
+Added: We are also pursuing relationships with payors, including Medicare, some state Medicaid programs and commercial payors, in an effort to obtain coverage and reimbursement for our tests to make them accessible to more individual physicians.
+Added: Generally, when we establish these new customer relationships, we agree with the applicable payor, laboratory or other customer to provide certain of our tests at negotiated rates but, subject to limited exceptions, most of these relationships do not obligate any party to order our tests at any agreed volume or frequency or at all.
+Added: Further, any relationships we may develop with any government agencies are subject to unique risks associated with government contracts, including cancellation if adequate appropriations for subsequent performance periods are not made and modification or termination at the government’s convenience without prior notice.
+Added: Our efforts to pursue individual consumers under our Picture Genetics platform, new payor or institutional customers, new COVID-19 testing customers or other new customer markets could fail, and even if we are able to develop relationships with new customers in these or any other new customer groups, these relationships may not lead to meaningful or any increases in our customer base, the number of billable tests we deliver or our revenue, and may not improve our ability to achieve or sustain profitability.
Sales and Marketing
−Removed: Our sales and marketing force currently consists of two lean internal teams of sales and marketing experts, respectively, with deep experience in our industry, as well as a network of independent sales representatives who are knowledgeable about our tests.
+Added: Our sales and marketing force currently consists of two internal teams of sales and marketing experts, respectively, with deep experience in our industry, as well as a network of independent sales representatives who are knowledgeable about our tests.
Historically, we have significantly relied on organic growth and word-of-mouth among our customers to generate interest in our tests, which we believe demonstrates the value of our offering.
−Removed: In recent periods, we have invested significant time and capital to strengthen our sales and marketing efforts, including increasing the size and restructuring the organization of our internal team, re-focusing our initiatives and strategies, and increasing the overall scope of our marketing activities.
+Added: In recent years, we have invested significant time and capital to strengthen our sales and marketing efforts, including increasing the size and restructuring the organization of our internal team, re-focusing our initiatives and strategies, and increasing the overall scope of our marketing activities.
Our sales and marketing strategy is designed to expand our brand awareness, grow our customer base and further penetrate our relationships with existing customers.
−Removed: We aim to achieve these objectives by providing education about the benefits and full scale of our offering, both to the medical community in general and to our targeted customer and geographic markets.
−Removed: We plan to expand our presence and test volume in international markets through our own direct sales team, which includes sales people dedicated to international markets, a number of independent contractor sales representatives, and, if opportunities arise, by engaging distributors or establishing other types of arrangements, such as joint ventures or other relationships, to manage or assist with sales, logistics, education and customer support in certain territories.
−Removed: Our marketing activities also include targeted initiatives, including working with medical professional societies to promote awareness of the benefits of our tests and genetic testing in general, presenting at medical, scientific or industry exhibitions and conferences and pursuing or supporting scientific studies of our tests and publication of results in medical or scientific journals, such as the USC Norris Comprehensive Cancer Center study published in 2016 and discussed above and an evaluation of the clinical utility of proactive genetic screening for healthy individuals, which was presented at the 2018 American Society of Human Genetics conference.
+Added: We aim to achieve these objectives by providing education about the benefits and full scale of our offerings, both to the medical community in general and to our targeted customer and geographic markets.
+Added: We plan to expand our presence and test volume in international markets through our own direct sales team, which includes sales people dedicated to international markets, a number of independent contractor sales representatives, and, if and as opportunities arise, by engaging distributors or establishing other types of arrangements, such as joint ventures or other relationships, to manage or assist with sales, logistics, education and customer support in certain territories.
+Added: Our marketing activities also include targeted initiatives, including working with medical professional societies to promote awareness of the benefits of our tests and genetic testing in general;
+Added: presenting at medical, scientific or industry exhibitions and conferences, such as an evaluation of the clinical utility of proactive genetic screening for healthy individuals that was presented at the 2018 American Society of Human Genetics Conference;
+Added: and pursuing or supporting scientific studies of our tests and publication of results in medical or scientific journals.
In addition, we conduct email advertising campaigns and social media awareness campaigns to existing and potential future customers when we want to send a specific message about our company and our brand, including, for instance, when we launch new tests or new test options and when we add new genes to our test menu.
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Our sales and marketing teams also explore strategic collaboration opportunities with various research and medical institutions.
−Removed: New partnerships formed in 2019 include partnering with the Parkinson’s Foundation on a new genetic testing initiative for individuals living with Parkinson’s Disease.
−Removed: Genetic testing can help determine whether an individual’s genetic makeup indicates a potential genetic cause for Parkinson’s disease.
−Removed: This knowledge can assist patients and physicians in better understanding each case and can help to identify whether a patient qualifies for enrollment in certain clinical trials.
−Removed: Participants will also be able to better understand their genetic test results through free genetic counseling provided by Indiana University and on-site clinicians.
−Removed: Raw data accumulated through the initiative will be captured for future research by scientists to develop improved treatments and precision medicine options for Parkinson’s Disease.
+Added: New partnerships formed in 2020 include partnering with governmental bodies, municipalities, and large corporations for providing COVID-19 services to citizens, employees, and students.
Our Suppliers
−Removed: We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into our processes, which we refer to as reagents, as well as for the sequencers and various other equipment and materials we use in our laboratory operations.
+Added: We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into our processes, which we refer to as reagents, as well as for the sequencers, collection kits, and various other equipment and materials we use in our laboratory operations.
In particular, we rely on Illumina, Inc.
as the sole supplier of the next generation sequencers and associated reagents we use to perform our genetic tests and as the sole provider of maintenance and repair services for these sequencers.
−Removed: Our laboratory operations would be interrupted if we encounter delays or difficulties securing these reagents, sequencers, other equipment or materials or maintenance and repair services, which could occur for a variety of reasons, including if we need a replacement or temporary substitute for any of our limited or sole suppliers and are not able to locate and make arrangements with an acceptable replacement or temporary substitute.
−Removed: Our competitors include dozens of companies focused on molecular genetic testing services, including specialty and reference laboratories that offer traditional single-gene and multi-gene tests.
+Added: In addition, we rely on a limited number of suppliers for COVID-19 test collection kits.
+Added: Our laboratory operations would be interrupted if we encounter delays or difficulties securing these reagents, collection kits, sequencers, other equipment or materials or maintenance and repair services, which could occur for a variety of reasons, including if we need a replacement or temporary substitute for any of our limited or sole suppliers and are not able to locate and make arrangements with an acceptable replacement or temporary substitute.
+Added: Our competitors include dozens of companies focused on molecular genetic testing services, including specialty and reference laboratories that offer traditional single-gene and multi-gene tests and other COVID-19 diagnostic test providers.
Principal competitors include companies such as Ambry Genetics, a subsidiary of Konica Minolta Inc.;
−Removed: Athena Diagnostics, a subsidiary of Quest Diagnostics Incorporated;
Baylor Genetics;
−Removed: Blueprint Genetics, Inc.;
Centogene AG;
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We believe the principal competitive factors in our market are:
−Removed: breadt h and depth of genetic content;
+Added: breadth and depth of genetic content;
flexibility of test customization;
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Research and Development
−Removed: We have assembled a highly-qualified team with expertise in a number of fields important to our business, such as bioinformatics, genetics, software engineering, laboratory management an d sales and marketing.
+Added: We have assembled a highly-qualified team with expertise in a number of fields important to our business, such as bioinformatics, genetics, software engineering, laboratory management and sales and marketing.
We rely on this team to conduct all of our research and development activities, including efforts to develop and curate our expansive library of genetic information and further expand our technology platform.
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As a clinical laboratory, we are required to hold certain federal licenses, certifications and permits to conduct our business.
−Removed: In 1988, Congress passed the Clinical Laboratory Improvement Amendments of 1988, or CLIA, which establishes quality standards for all laboratory testing designed to ensure the accuracy, reliability and timeliness of patient test results.
−Removed: Our laboratory is CLIA-certified and accredited by the College of American Pathologists, or CAP, a CMS-approved accrediting organization.
−Removed: Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, p revention or treatment of disease or the impairment or assessment of health.
+Added: Congress passed the Clinical Laboratory Improvement Amendments of 1988, or CLIA, which establishes quality standards for all laboratory testing designed to ensure the accuracy, reliability and timeliness of patient test results.
+Added: Our laboratories located in California and Texas are CLIA-certified and accredited by the College of American Pathologists, or CAP, a CMS-approved accrediting organization.
+Added: Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease or the impairment or assessment of health.
CLIA requires that we hold a certificate applicable to the type of laboratory examinations we perform and that we comply with various standards with respect to personnel qualifications, facility administration, proficiency testing, quality control and assurance and inspections.
−Removed: Laboratories must register and list their tests with CMS, the agency that oversees CLIA, and CLIA compliance and certification is a prerequisite to be eligible to bill government payors and many private payors for our tests.
+Added: Laboratories must register and list their tests with Centers for Medicare & Medicaid Services , or CMS, the agency that oversees CLIA, and CLIA compliance and certification is a prerequisite to be eligible to bill government payors and many private payors for our tests.
We are subject to survey and inspection every two years to assess compliance with CLIA’s program standards, and we may be subject to additional unannounced inspections.
−Removed: Our CLIA certification was last renewed October 23, 2019 and is valid for two years.
−Removed: If our clinical reference laboratory is found to be out of compliance with CLIA requirements at any of these inspections, we may be subject to sanctions such as suspension, limitation or revocation of our CLIA certificate, a directed plan of correction, on-site monitoring, civil monetary penalties, civil injunctive suits, criminal penalties, exclusion from the Medicare and Medicaid programs and significant adverse publicity.
−Removed: In addition, w e elect to participate in the accreditation program of CAP.
+Added: Our CLIA certification for the laboratory located in California was last renewed October 23, 2019, and our CLIA certification for the laboratory located in Texas was initially received on July 27, 2020, and each of them is valid for two years from the date of issuance .
+Added: If our clinical reference laboratories are found to be out of compliance with CLIA requirements at any of these inspections, we may be subject to sanctions such as suspension, limitation or revocation of our CLIA certificate, a directed plan of correction, on-site monitoring, civil monetary penalties, civil injunctive suits, criminal penalties, exclusion from the Medicare and Medicaid programs and significant adverse publicity.
+Added: In addition, we elect to participate in the accreditation program of CAP.
CMS has deemed CAP standards to be equally or more stringent than CLIA regulations and has approved CAP as a recognized accrediting organization.
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State and Foreign Laboratory Licensure
−Removed: Our laboratory is located in Temple City, California.
−Removed: As a result, we are required to maintain a license to conduct testing in the State of California.
+Added: Our laboratories are located in Temple City, California and Houston, Texas.
+Added: Our Temple City, California laboratory is required to maintain a license to conduct testing in the State of California.
California laws establish standards for day-to-day operations of our laboratory, including with respect to the training and skills required of personnel, quality control and proficiency testing requirements.
−Removed: If our clinical reference laboratory is out of compliance with California standards, the State of California Department of Public Health, or CA DPH, may suspend, restrict or revoke our license to operate our clinical reference laboratory, assess substantial civil money penalties or impose specific corrective action plans.
+Added: If our clinical reference laboratory is out of compliance with California standards, the State of California Department of Public Health, or CA DPH, may suspend, restrict or revoke our license to operate our clinical reference laboratory, assess substantial civil money
+Added: penalties or impose specific corrective action plans.
Any such actions could materially affect our business.
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Additionally, several states require the licensure of out-of-state laboratories that accept specimens from those states and/or receive specimens from laboratories in those states.
−Removed: Our laboratory holds the required out-of-sta te laboratory licenses to perform testing on specimens from Maryland , Rhode Island and Pennsylvania.
−Removed: In addition to having a laboratory license in New York, our laboratory is required to obtain approval on a test-specific basis by the New York State Depart ment of Health , or DOH, before specific testing is performed on specimens from New York.
−Removed: In 2019, we obtained a state laboratory permit for our Temple City laboratory from the New York DOH.
−Removed: The New York state laboratory laws, regulations and rules are equa l to or more stringent than the CLIA regulations and establish standards for the operation of a clinical laboratory and performance of test services, including education and experience requirements for laboratory directors and personnel;
−Removed: physical requireme nts of a laboratory facility;
+Added: Our Temple City, California laboratory holds the required out-of-state laboratory licenses to perform testing on specimens from Maryland, Rhode Island and Pennsylvania.
+Added: The laboratory director must also maintain a Certificate of Qualification issued by New York’s Department of Health, or DOH, in permitted categories.
+Added: Our Houston, Texas laboratory holds the required out-of-state licenses to perform testing on specimens from California.
+Added: We obtained a state laboratory permit for our Temple City, California laboratory from the New York DOH in 2019.
+Added: The New York state laboratory laws, regulations and rules are equal to or more stringent than the CLIA regulations and establish standards for the operation of a clinical laboratory and performance of test services, including education and experience requirements for laboratory directors and personnel;
+Added: physical requirements of a laboratory facility;
equipment validations;
and quality management practices.
−Removed: The laboratory director must also maintain a Certificate of Qualification issued by New York’s DOH in permitted categories.
+Added: In addition to having a laboratory license in New York, our Temple City, California laboratory is required to obtain approval on a test-specific basis by the New York DOH before specific testing is performed on specimens from New York, and our Houston, Texas laboratory received temporary exemption from New York to perform tests on specimens from New York for COVID-19 tests.
Other states may adopt similar licensure requirements in the future, which could require us to modify, delay or discontinue our operations in such jurisdictions.
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Foreign licensure requirements could require review and modification of our tests in order to offer them in certain jurisdictions or could impose other limitations, such as restrictions on the transport of human blood or other tissue necessary for us to perform our tests that may limit our ability to make our tests available outside of the United States on a broad scale.
−Removed: Pursuant to its authority under the Federal Foo d, Drug, and Cosmetic Act, or FDC Act, the U.S.
+Added: Pursuant to its authority under the Federal Food, Drug, and Cosmetic Act, or FDC Act, the U.S.
Food and Drug Administration, or FDA, has jurisdiction over medical devices, which are defined to include, among other things, in vitro diagnostic products, or IVDs, used for clinical purposes.
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These include:
−Removed: the Quality System Regulation, which requires manufacturers to follow elaborate design, testing, control, documentation an d other quality assurance procedures during the manufacturing process;
+Added: the Quality System Regulation, which requires manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process;
labeling regulations;
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We believe our tests fall within the definition of an LDT.
−Removed: As a result, we believe our diagn ostic tests are not currently subject to the FDA’s enforcement of its medical device regulations and the applicable FDC Act provisions.
+Added: As a result, we believe our diagnostic tests are not currently subject to the FDA’s enforcement of its medical device regulations and the applicable FDC Act provisions.
Even though we commercialize our tests as LDTs, our tests may in the future become subject to more onerous regulation by the FDA.
−Removed: In October 2014, the FDA issued a draft Framework Guidance and Notification Guidance for comment following notice to Congress that it would be doing so .
−Removed: The Framework Guidance stated that the FDA intends to modify its policy of enforcement discretion with respect to LDTs in a risk-based manner consistent with the existing classification of medical de vices.
−Removed: The draft guidances resulted in a large number of public comments from interested parties.
−Removed: The FDA subsequently announced in November 2016 that it would not issue a final guidance to allow for further public discussion on an appropriate LDT oversig ht approach and to give congressional committees the opportunity to develop a legislative solution.
−Removed: In January 2017, the FDA published a Discussion Paper on Laboratory Developed Tests, which provided a synthesis of the feedback the agency had received and which outlined, as part of the synthesis, a new possible approach to LDT oversight.
−Removed: The Discussion Paper noted that the synthesis does not represent the formal position of the FDA, nor is it enforceable.
−Removed: The FDA has not issued any proposed rules, revised p roposals, or draft guidance relating to LDTs since January 2017.
−Removed: In December 2018, members of Congress released a discussion draft of a possible bill to regulate in vitro clinical tests including LDTs, which incorporated suggestions from the FDA and other industry stakeholders.
−Removed: The new bill is called the Verifying Accurate, Leading-edge IVCT Development (VALID) Act and would codify into law the term “in vitro clinical test” (IVCT), a new medical product category separate from medical devices and that includes products currently regulated as IVDs as well as LDTs.
−Removed: One especially notable feature in the discussion draft of the VALID Act is a precertification program that would enable a IVCT developer to be certified by FDA (or potentially by an FDA-accredited body) as having sufficient skill at developing IVCTs as to not require premarket review for each individual test developed and for which marketing is sought.
−Removed: This program would significantly streamline IVCT review but likely would take years to establish following congressional enactment of the VALID Act, the timing of which is subject to the often-unpredictable political process.
−Removed: Moreover, to date the VALID Act has not been formally introduced in Congress and, even if passed by Congress, it would need to be signed by the President in order to become law.
−Removed: If and when the FDA finalizes its position on regulation of LDTs through formal guidance, or new legislation is passed, or if the FDA disagrees with our assessment that our tests fall within the definition of an LDT, we could for the first time be subject to enforcement of regulatory requirements such as registration and listing requirements, medical device reporting requirements and quality control requirements (although the possible approach outlined in the Discussion Paper – as well as in the draft VALID Act – would exempt certain previously marketed LDTs from many requirements, in other words, “grandfather” many existing LDTs).
−Removed: Any new FDA enforcement policies affecting LDTs may result in increased regulatory burdens on our ability to continue marketing our tests and to develop and introduce new tests in the future.
−Removed: Additionally, if and when the FDA begins to actively enforce its premarket submission regulations with respect to LDTs generally or our tests in particular, we may be required to obtain premarket clearance for our tests under Section 510(k) of the FDC Act or approval of a PMA.
+Added: For example, in 2017, the FDA published a Discussion Paper on Laboratory Developed Tests to further public discussion about an appropriate LDT oversight approach and to give congressional committees the opportunity to develop a legislative solution to the competing interests of ensuring the public health and promoting innovation in the clinical testing industry .
+Added: However, on August 19, 2020, the United States Department of Health and Human Services, or HHS, published a policy announcement that FDA must go through the formal notice-and-comment rulemaking process before requiring premarket review of LDTs rather than making such changes through guidance documents, compliance manuals, or other informal policy statements.
+Added: Laboratories may still voluntarily submit LDTs to FDA for premarket review, although the agency does not appear to be prioritizing such applications for review at the present time, in light of the HHS announcement.
+Added: Although the ultimate impact of HHS’s policy statement on FDA’s plans for regulating LDTs and its current thinking relating to such diagnostic testing products is unclear, the August 2020 announcement appears to confirm that laboratories may commercialize LDTs for clinical use without submitting such tests for FDA review and marketing authorization, including emergency use authorization during the ongoing COVID-19 pandemic.
+Added: HHS’s policy statement does not affect proposed legislation for the regulation of LDTs, which is discussed below.
+Added: It is also unclear whether the Biden Administration, which assumed control of the executive branch on January 20, 2021, would take the same position as the former administration or seek to revoke or revise the HHS policy announcement from August 2020.
+Added: In December 2018, members of Congress released a discussion draft of a possible bill to regulate in vitro clinical tests including LDTs, and provided opportunities for additional stakeholders to also provide input on the proposed reform legislation.
+Added: On March 5, 2020, U.S.
+Added: Representatives Diana DeGette (D-CO) and Dr.
+Added: Larry Bucshon (R-IN) formally introduced the long-awaited legislation, called the Verifying Accurate, Leading-edge IVCT Development, or VALID Act.
+Added: An identical version of the bill was introduced concurrently in the Senate, demonstrating both bicameral and bipartisan support for the effort to overhaul how the FDA reviews and approves diagnostic tests going forward.
+Added: The VALID Act would codify into law the term “in vitro clinical test”, or IVCT, to create a new medical product category separate from medical devices that includes products currently regulated as IVDs as well as LDTs.
+Added: The VALID Act would also create a new system for labs and hospitals to use to submit their tests electronically to the FDA for approval, which is aimed at reducing the amount of time it takes for the agency to approve such tests, and establish a new program to expedite the development of diagnostic tests that can be used to address a current unmet need for patients.
+Added: It is unclear whether the VALID Act would be passed by Congress in its current form or signed into law by the President.
+Added: Until the FDA finalizes its position on regulation of LDTs through formal notice-and-comment rulemaking, or the VALID Act or other federal legislation is passed reforming the government’s regulation of LDTs, or alternatively, if the FDA disagrees with our assessment that our tests fall within the definition of an LDT, we could for the first time be subject to enforcement of regulatory requirements such as registration and listing requirements, medical device reporting requirements and quality control requirements.
+Added: Any new legislation or formal FDA regulations affecting LDTs may result in increased regulatory burdens on our ability to continue marketing our tests and to develop and introduce new tests in the future.
+Added: Additionally, if and when the FDA begins to actively enforce its premarket submission regulations with respect to LDTs generally or our tests in particular, whether as a result of new legislative authority or following formal notice-and-comment rulemaking, we may be required to obtain premarket clearance for our tests under Section 510(k) of the FDC Act or approval of a PMA .
The process for submitting a 510(k) premarket notification and receiving FDA clearance usually takes from three to 12 months, but it can take significantly longer and clearance is never guaranteed.
The process for submitting and obtaining FDA approval of a PMA generally takes from one to three years or even longer and approval is not guaranteed.
−Removed: PMA approval typically require s extensive clinical data and can be significantly longer, more expensive and more uncertain than the 510(k) clearance process.
−Removed: If premarket review is required for some or all of our tests, the FDA could require that we stop selling our products pending cl earance or approval and conduct clinical testing prior to making submissions to FDA to obtain premarket clearance or approval.
+Added: PMA approval typically requires extensive clinical data and can be significantly longer, more expensive and more uncertain than the 510(k) clearance process.
+Added: If premarket review is required for some or all of our tests, the FDA could require that we stop selling our products pending clearance or approval and conduct clinical testing prior to making submissions to FDA to obtain premarket clearance or approval.
The FDA could also require that we label our tests as investigational or limit the labeling claims we are permitted to make.
−Removed: Whi le there is also the risk that the FDA does not consider our tests to be LDTs, the draft Framework Guidance stated that, in the interest of ensuring continuity in the testing market and avoiding disruption of access to tests marketed as LDTs that do not me et the FDA’s definition of LDTs, the FDA intends to apply the same risk-based framework described in the Framework Guidance to any IVD that is offered as an LDT by a CLIA-certified laboratory.
−Removed: We would expect the FDA to take the same or similar approach in any new program for the regulation of LDTs.
−Removed: If Congress passes legislation regulating LDTs, then the terms of such legislation would control, subject to FDA’s administration of any such new law.
−Removed: Additionally, the FDA has recently solicited public input and published two draft guidance documents relating to FDA oversight of NGS-based tests.
+Added: Additionally, the FDA previously solicited public input and published two draft guidance documents relating to FDA oversight of NGS-based tests.
The two draft guidance documents on NGS-based tests describe the FDA’s current thinking and proposed approach regarding the possible use of FDA-recognized standards to support analytical validity, and public human genetic variant databases to support clinical validity, of these tests.
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While it appears that the FDA is striving to provide a flexible pathway to device clearance or approval for manufacturers seeking to market NGS-based tests, it is unknown how the FDA may regulate such tests in the future and what testing and data may be required to support such clearance or approval.
−Removed: If premarket review is required for so me or all of our tests and the FDA requires more extensive testing such as clinical trials, for example, we could experience significantly increased development costs and delay.
+Added: If premarket review is required for some or all of our tests and the FDA requires more extensive testing such as clinical trials, for example, we could experience significantly increased development costs and delay.
The FDA enforces its medical device requirements by various means, including inspection and market surveillance.
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and criminal prosecution.
−Removed: Legislative proposals addressing the FDA’s oversight of LDTs have been introduced by Congress in the past and we expect that new le gislative proposals may be introduced from time to time in the future.
−Removed: The likelihood that Congress will pass such legislation and the extent to which such legislation may affect the FDA’s plans to enforce its medical device requirements with respect to ce rtain LDTs is difficult to predict at this time.
−Removed: If the FDA ultimately lifts its policy of enforcement discretion over LDTs and begins to enforce its medical device requirements with respect to LDTs, our tests may be subject to additional regulatory requir ements imposed by the FDA, the nature and extent of which would depend upon applicable final guidance or regulation by the FDA or instruction by Congress.
−Removed: Failure to comply with any applicable FDA requirements could trigger a range of enforcement actions b y the FDA, including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations and denial of or challenges to applications for clearance or ap proval, as well as significant adverse publicity.
+Added: Failure to comply with any applicable FDA requirements could trigger a range of enforcement actions by the FDA, including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
Advertising of Laboratory Services or LDTs
−Removed: Whether regulated by FDA as a Class I or Class II device or subject to FDA’s enforcement discretion as an LDT, our advertising for laboratory services and genetic tests is subject to federal truth-in-advertising laws enforced by the Federal Trade Commission, or FTC, as well as comparable state consumer protection laws.
−Removed: Under the Federal Trade Commission Act (“FTC Act”), the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce;
+Added: Whether regulated by FDA as a Class I or Class II device or not directly subject to FDA’s device requirements as an LDT, our advertising for laboratory services and genetic tests is subject to federal truth-in-advertising laws enforced by the Federal Trade Commission, or FTC, as well as comparable state consumer protection laws.
+Added: Under the Federal Trade Commission Act, or the FTC Act, the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce;
(b) seek monetary redress and other relief for conduct injurious to consumers;
2 unchanged sentences
Reimbursement
−Removed: We bill third-party payors, both commercial and government, using Current Procedural Terminology (CPT) codes, which are published by the American Medical Association (AMA).
+Added: We bill third-party payors, both commercial and government, using Current Procedural Terminology, or CPT, codes, which are published by the American Medical Association, or AMA.
CPT codes in their current form are not readily applied to many of the genetic tests we conduct.
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Under PAMA, laboratories that receive the majority of their Medicare revenue from payments made under the CLFS or the Physician Fee Schedule are required to report to CMS, beginning in 2017 and every three years thereafter (or annually for an advanced diagnostic laboratory test, or ADLT ), private payor payment rates and volumes for clinical diagnostic laboratory tests, or CDLTs .
−Removed: Laboratories that fail to report the required payment information may be subject to substantial civil mo netary penalties.
+Added: Laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties.
We do not believe that any of our tests meet the current definition of ADLTs.
We therefore report private payor rates for our tests every three years.
−Removed: As required under PAMA, CMS use s the data reported by laboratories to develop Medicare payment rates for laboratory tests equal to the volume-weighted median of the private payor payment rates .
+Added: As required under PAMA, CMS uses the data reported by laboratories to develop Medicare payment rates for laboratory tests equal to the volume-weighted median of the private payor payment rates.
For tests furnished on or after January 1, 2019, Medicare payments for CDLTs are based upon reported private payor rates.
−Removed: For a CDLT that is assigne d a new or substantially revised CPT code, the initial payment rate is assigned using the gap-fill methodology, as under prior law .
−Removed: On December 20, 2019, the President signed the Further Consolidated Appropriations Act, which included the Laboratory Access for Beneficiaries Act (LAB Act).
−Removed: The LAB Act delays by one year the reporting of payment data under PAMA f or CDLTs that are not ADLTs.
−Removed: CDLT data for the collection period of January 1, 2019 through June 30, 2019, which was supposed to be reported in 2020, must now be reported between January 1, 2021 and March 31, 2021.
−Removed: Data reporting will then resume on a three-year cycle, beginning in 2024.
−Removed: Under PAMA, as amended by the LAB Act, any reduction to a particular payment rate resulting from the new methodology is limited to 10% per test per year in 2020 and to 15% per test per year in each of the years 2021 through 2023.
+Added: For a CDLT that is assigned a new or substantially revised CPT code, the initial payment rate is assigned using the gap-fill methodology, as under prior law.
+Added: On December 20, 2019, President Trump signed the Further Consolidated Appropriations Act, which included the Laboratory Access for Beneficiaries Act, or LAB Act.
+Added: The LAB Act delayed by one year the reporting of payment data under PAMA f or CDLTs that are not ADLTs until the first quarter of 2021.
+Added: The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was signed into law on March 27, 2020, delayed the reporting period by an additional year, until the first quarter of 2022.
+Added: As a result, Medicare payment rates determined by data reported in 2017 will continue through December 31, 2022.
+Added: In addition, under PAMA, as amended by the LAB Act, any reduction to a particular payment rate resulting from the new methodology is limited to 10% per test per year in 2020 and to 15% per test per year in each of the years 2021 through 2023.
+Added: The CARES Act delayed the 15% cut scheduled to take effect on January 1, 2021, for one year.
Privacy and Security Laws
HIPAA and HITECH
−Removed: Under the Administrative Simplification provisions of the fede ral Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the federal Health Information Technology for Economic and Clinical Health Act, or HITECH, the U.S.
−Removed: Department of Health and Human Services, or HHS, has issued regulat ions that establish uniform standards governing the conduct of certain electronic healthcare transactions and requirements for protecting the privacy and security of protected health information, or PHI, used or disclosed by healthcare providers, health plans, and healthcare clearinghouses that conduct certain healthcare transactions electronically, known as covered entities.
+Added: Under the Administrative Simplification provisions of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the federal Health Information Technology for Economic and Clinical Health Act, or HITECH, the U.S.
+Added: Department of Health and Human Services, or HHS, has issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and requirements for protecting the privacy and security of protected health information, or PHI, used or disclosed by healthcare providers, health plans, and healthcare clearinghouses that conduct certain healthcare transactions electronically, known as covered entities.
The following four principal regulations with which we are required to comply have been issued in final form under HIPAA and HITECH:
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A covered entity or business associate is liable for civil monetary penalties for a violation that is based on an act or omission of any of its agents, including a downstream business associate, as determined according to the federal common law of agency.
−Removed: Penalties for failure to comply with a requirem ent of HIPAA and HITECH vary significantly depending on the failure and include civil monetary penalties of up to $1.5 million per violation of the same requirement per calendar year.
+Added: Penalties for failure to comply with a requirement of HIPAA and HITECH vary significantly depending on the failure and include civil monetary penalties of up to $1.5 million per violation of the same requirement per calendar year.
A single breach incident can violate multiple requirements, resulting in potential penalties in excess of $1.5 million.
Additionally, a person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 and up to one year of imprisonment.
−Removed: Th ese criminal penalties increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain or malicious harm.
+Added: These criminal penalties increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain or malicious harm.
Covered entities are also subject to enforcement by state attorneys general who were given authority to enforce HIPAA under HITECH.
Further, to the extent that we submit electronic healthcare claims and payment transactions that do not comply with the electronic data transmission standards established under HIPAA and HITECH, payments to us may be delayed or denied.
−Removed: The HIPAA privacy, security, and breach notification regulations establish a uniform federal “floor” but do not supersede state laws that are more stringent or provide individuals with gre ater rights with respect to the privacy or security of, and access to, their records containing PHI or insofar as such state laws apply to personal information that is broader in scope than PHI as defined under HIPAA.
−Removed: The compliance requirements of these l aws , including additional breach reporting requirements, and the penalties for violation vary widely and new privacy and security laws in this area are evolving.
−Removed: For example, several states, such as California, have implemented comprehensive privacy laws a nd regulations.
+Added: The HIPAA privacy, security, and breach notification regulations establish a uniform federal “floor” but do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI or insofar as such state laws apply to personal information that is broader in scope than PHI as defined under HIPAA.
+Added: The compliance requirements of these laws, including additional breach reporting requirements, and the penalties for violation vary widely and new privacy and security laws in this area are evolving.
+Added: For example, several states, such as California, have implemented comprehensive privacy laws and regulations.
The California Confidentiality of Medical Information Act imposes restrictive requirements regulating the use and disclosure of health information and other personally identifiable information.
−Removed: In addition to fines and penalties imposed upo n violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused.
−Removed: California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured pa rties to sue for damages.
+Added: In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused.
+Added: California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages.
In addition to the California Confidentiality of Medical Information Act, California recently adopted the California Consumer Privacy Act of 2018, or CCPA, which came into effect on January 1, 2020.
−Removed: The CCPA establishes a new pr ivacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California, imposing special rules on the collection of consumer data from minors, and cre ating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
−Removed: There is uncertainty surrounding the application of t he CCPA to parts of our business, and amendments to the law before its effective data may have impact on operations.
+Added: The CCPA establishes a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
+Added: There is uncertainty surrounding the application of the CCPA to parts of our business, and amendments to the law before its effective data may have impact on operations.
In addition to the CCPA, other states are introducing similar legislation which will impact compliance obligations and increase complexity and cost of compliance.
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Congress has also been considering similar federal legislation relating to data privacy and data protection.
−Removed: The Federal Trade Commission and states’ Attorneys General have also brought enforcement actions and prosecuted some data breach cases as unfair and/or deceptive acts or practices under the FTC Act and comparable state laws.
+Added: The FTC and states’ Attorneys General have also brought enforcement actions and prosecuted some data breach cases as unfair and/or deceptive acts or practices under the FTC Act and comparable state laws.
In addition to data breach notification laws, some states have enacted statutes and rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information.
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We are also subject to foreign privacy laws in the jurisdictions in which we sell our tests.
−Removed: The interpretation, application and interplay of consumer and health-related data protection laws in the United States, Europe and elsewhere are often uncertain, c ontradictory and in flux.
+Added: The interpretation, application and interplay of consumer and health-related data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory and in flux.
For example, the new General Data Protection Regulation, or GDPR, and Cybersecurity Directive have been enacted in the European Union and became effective in May 2018 .
1 unchanged sentence
The interpretation of some rules is still unclear, and some requirements may be completed by national legislation.
−Removed: This m akes it difficult to assess the impact of these new data protection laws on our business at this time.
−Removed: More generally, foreign laws and interpretations governing data privacy and security are constantly evolving and it is possible that laws may be interpre ted and applied in a manner that is inconsistent with our current practices, in which case we could be subject to government-imposed fines or orders requiring that we change our practices.
+Added: This makes it difficult to assess the impact of these new data protection laws on our business at this time.
+Added: More generally, foreign laws and interpretations governing data privacy and security are constantly evolving and it is possible that laws may be interpreted and applied in a manner that is inconsistent with our current practices , in which case we could be subject to government-imposed fines or orders requiring that we change our practices.
These fines can be very high.
−Removed: For instance, the GDPR introduces fin es of up to approximately $22 million or 4% of a group’s worldwide annual turnover for certain infringements.
+Added: For instance, the GDPR introduces fines of up to approximately $22 million or 4% of a group’s worldwide annual turnover for certain infringements.
In addition, privacy regulations differ widely from country to country.
−Removed: In many activities, including the conduct of clinical trials, we are subj ect to laws and regulations governing data privacy and the protection of health-related and other personal information.
−Removed: These laws and regulations govern our processing of personal data, including the collection, access, use, analysis, modification, storag e, transfer, security breach notification, destruction and disposal of personal data.
−Removed: We must comply with laws and regulations associated with the international transfer of personal data based on the location in which the personal data originates and the l ocation in which it is processed.
+Added: In many activities, including the conduct of clinical trials, we are subject to laws and regulations governing data privacy and the protection of health-related and other personal information.
+Added: These laws and regulations govern our processing of personal data, including the collection, access, use, analysis, modification, storage, transfer, security breach notification, destruction and disposal of personal data.
+Added: We must comply with laws and regulations associated with the international transfer of personal data based on the location in which the personal data originates and the location in which it is processed.
If we or our vendors fail to comply with applicable data privacy laws, or if the legal mechanisms we or our vendors rely upon to allow for the transfer of personal data from the European Union to the United States (or other countries not considered by the European Commission to provide an adequate level of data protection) are not considered adequate, we could be subject to government enforcement actions and significant penalties against us, and our business could be adversely impacted if our ability to transfer personal data outside of the European Union is restricted, which could adversely impact our operating results.
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However, our ongoing efforts related to compliance with the GDPR may not be successful and could increase our cost of doing business.
−Removed: In addition, data protection authorities of the different European Union member states may interpret the GDPR, and guidance on implementation and compliance practices are often updated or otherwise revised, which adds to the complexity of processing personal data in the European Union.
+Added: In addition, data protection authorities of the different European Union member states may interpret the GDPR differently, and guidance on implementation and compliance practices are often updated or otherwise revised, which adds to the complexity of processing personal data in the European Union.
In addition to the GDPR, other countries have enacted data protection legislation which increase the complexity of doing international business and transferring sensitive personal information from those countries to the United States.
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Anti-Kickback and Fraud Statutes
−Removed: In the United States, the federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, pay ing, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in order to induce or in return for the referral of an individual for the furnishing of, or the recommending or arranging for the furnishing of, purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering of any good, facility, service or item for which payment may be made in whole or in part by a federal healthcare program.
+Added: In the United States, the federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in order to induce or in return for the referral of an individual for the furnishing of, or the recommending or arranging for the furnishing of, purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering of any good, facility, service or item for which payment may be made in whole or in part by a federal healthcare program.
Courts have stated that a financial arrangement may violate the Anti-Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other legitimate purposes for the arrangement.
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Many states also have anti-kickback statutes, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
−Removed: In addition, in October 2018, the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) was enacted as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act).
+Added: In addition, in October 2018, the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, was enacted as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act.
EKRA is an all-payer anti-kickback law that makes it a criminal offense to pay any remuneration to induce referrals to, or in exchange for, patients using the services of a recovery home, a substance use clinical treatment facility, or laboratory.
−Removed: However, unlike the federal Anti-Kickback Statute, EKRA is not limited to services covered by federal or state health care programs but applies more broadly to services covered by “health care benefit programs,” including commercial insurers.
−Removed: Although it appears that EKRA was intended to
−Removed: reach patient brokering and similar arrangements to induce patron age of substance use recovery and treatment, the language in EKRA is broadly written.
−Removed: Further, certain of EKRA’s exceptions, such as the exception applicable to relationships with employees that effectively prohibits incentive compensation, are inconsiste nt with the federal anti-kickback statute and regulations, which permit payment of employee incentive compensation, a practice that is common in the industry.
+Added: However, unlike the federal Anti-
+Added: Kickback Statute, EKRA is not limited to services covered by federal or state health care programs but applies more broadly to services covered by “health care benefit programs,” including commercial insurers.
+Added: Although it appears that EKRA was intended to reach patient brokering and similar arrangements to induce patronage of substance use recovery and treatment, the language in EKRA is broadly written.
+Added: Further, certain of EKRA’s exceptions, such as the exception applicable to relationships with employees that effectively prohibits incentive compensation, are inconsistent with the federal anti-kickback statute and regulations, which permit payment of employee incentive compensation, a practice that is common in the industry.
Significantly, EKRA permits the U.S.
Department of Justice to issue regulations clarifying EKRA’s exceptions or adding additional exceptions, but such regulations have not yet been issued.
−Removed: Laboratory industry stakeholders are reportedly seeking clarification regarding EKRA’s scope and/or amendments to its language .
−Removed: Because EKRA is a new law, there is no agency guidance or court precedent to indicate how and to what extent it will be applied and enforced.
−Removed: We cannot assure you that our relationships with physicians, sales representatives, hospitals, customers, or any other party will not be subject to sc rutiny or will survive regulatory challenge under such laws.
+Added: Laboratory industry stakeholders are reportedly seeking clarification or correction regarding EKRA’s scop e .
There are also U.S.
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The qui tam provisions of the False Claims Act allow a private individual to bring an action under the False Claims Act on behalf of the federal government and permit such an individual to share in any amounts paid by the entity to the government in fines or settlement.
−Removed: In addition, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, which we collectively refer to as the Affordable Care Act, establishes a requirement for providers and suppliers to report and return any overpa yments received from government payors under the Medicare and Medicaid programs within 60 days of identification.
+Added: In addition, providers and suppliers must report and return any overpayments received from the Medicare and Medicaid programs within 60 days of identification.
Failure to identify and return such overpayments exposes the provider or supplier to False Claims Act liability.
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However, the civil penalty amounts are adjusted annually for inflation.
−Removed: For civil penalties assessed after January 29, 2018, whose associated violations occurred after November 2, 2015, the civil penalty amount ranges between $11,181 and $22,363 per claim .
+Added: For civil penalties assessed after June 19, 2020, whose associated violations occurred after November 2, 2015, the civil penalty amount ranges between $11,665 and $23,331 per claim .
In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any third-party payor and not merely a government payor program.
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Physician Referral Prohibitions
−Removed: federal law directed at “self-referrals,” commonly known as the “Stark Law,” prohibits a physician from making referrals for certain designated health services, including laboratory services, that are covered by the Medicare program, to an entity with which the physician or an immediate family member has a direct or indirect financial relationship, unle ss an exception applies.
+Added: federal law directed at “self-referrals,” commonly known as the “Stark Law,” prohibits a physician from making referrals for certain designated health services, including laboratory services, that are covered by the Medicare program, to an entity with which the physician or an immediate family member has a direct or indirect financial relationship , unless an exception applies.
Violation of the Stark Law results in a denial of payment for any services provided pursuant to a prohibited referral.
−Removed: A physician or entity that engages in a scheme to circumvent the Stark Law’s referral prohibition may be fined up to $169,153 (which reflects the annual adjustment for inflation effective as of November 5, 2019) for each such arrangement or scheme.
−Removed: In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $ 23,372 per service (which reflects the annual inflation adjustment effective as of November 5, 2019), an assessment of up to three times the amount claimed and possible exclusion from participation in federal healthcare programs.
−Removed: The Stark Law is a strict liability statute, meaning that a physician’s financial relationship with a laboratory must meet an exception under the Stark Law or the referrals are prohibited.
−Removed: Thus, unlike the Anti-Kickback Statu te’s safe harbors, if a laboratory’s financial relationship with a referring physician does not meet the requirements of a Stark Law exception, then the physician is prohibited from making Medicare and Medicaid referrals to the laboratory and any such refe rrals will result in overpayments to the laboratory and subject the laboratory to the Stark Law’s penalties.
+Added: A physician or entity that engages in a scheme to circumvent the Stark Law’s referral prohibition may be fined up to $172,137 (which reflects the annual adjustment for inflation effective as of January 17, 2020) for each such arrangement or scheme.
+Added: In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $ 25,820 per service (which reflects the annual inflation adjustment effective as of January 17, 2020), an assessment of up to three times the amount claimed and possible exclusion from participation in federal healthcare programs.
+Added: The Stark Law is a strict liability statute, meaning that a physician’s financial relationship with a laboratory must meet an exception under the Stark Law or the
+Added: referrals are prohibited.
+Added: Thus, unlike the Anti-Kickback Statute’s safe harbors, if a laboratory’s financial relationship with a referring physician does not meet the requirements of a Stark Law exception, then the physician is prohibited from making Medicare and Medicaid referrals to the laboratory and any such referrals will result in overpayments to the laboratory and subject the laboratory to the Stark Law’s penalties .
A violation of the Stark Law can serve as a basis of liability under the federal False Claims Act.
−Removed: Many states , including California, have comparab le laws that are not limited to Medicare referrals.
−Removed: The Stark Law also prohibits state receipt of federal Medicaid matching funds for services furnished pursuant to a prohibited referral, but this provision of the Stark Law has not been implemented by regu lations.
+Added: Many states, including California, have comparable laws that are not limited to Medicare referrals.
+Added: The Stark Law also prohibits state receipt of federal Medicaid matching funds for services furnished pursuant to a prohibited referral, but this provision of the Stark Law has not been implemented by regulations.
Physician Sunshine Laws
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Because we manufacture our own LDTs solely for use by or within our own laboratory, we believe we are exempt from these reporting requirements.
−Removed: We may become subject to such reporting requirements under the terms of current CMS regulations, however, if the FDA requires us to obtain premarket clearance or approval for our tests.
+Added: We may become subject to such reporting requirements under the terms of current CMS regulations, however, if the VALID Act or other legislation renders our tests regulated by FDA or if FDA engages in notice-and-comment rulemaking to exercise authority over LDTs or otherwise requires us to obtain premarket clearance or approval for our tests.
Anti-Bribery Laws
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government officials for the purpose of obtaining or retaining business or securing any other improper advantage.
−Removed: The sale of our tests internationally demands a high degree of vigilance in maintaining, implementing and enforci ng a policy against participation in corrupt activity .
+Added: The sale of our tests internationally demands a high degree of vigilance in maintaining, implementing and enforcing a policy against participation in corrupt activity .
companies in the medical device and pharmaceutical fields have faced substantial monetary fines and criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with non-U.S.
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Healthcare Policy Laws
−Removed: In March 2010, the Affordable Care Act was enacted in the United States.
−Removed: The Affordable Care Act made a number of substantial changes to the way healthcare is financed both by governmental and private payors .
−Removed: Although the Affordable Care Act included a medical device tax, the tax never went into effect and was fully repealed by Congress with enactment of the 2020 federal spending package signed into law by President Trump on December 20, 2019.
−Removed: Since the ACA’s enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act , and we expect there will be additional challenges and amendments to the Affordable Care Act in the future.
−Removed: The current Presidential administration and members of the US Congress have indicated that they may continue to seek to modify, repeal or otherwise invalidate all, or certain provisions of, the ACA.
−Removed: President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act .
−Removed: Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Affordable Care Act .
−Removed: While Congress has not passed comprehensive repeal legislation, at least two bills affecting the implementation of certain taxes under the Affordable Care Act have been signed into law.
−Removed: For example, the Tax Cuts and Jobs Act of 2017 repealed the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In December 2019, the Fifth Circuit Court of Appeals upheld a district court’s finding that the individual mandate in the Affordable Care Act is unconstitutional following removal of the penalty provision from the law.
−Removed: However, the Fifth Circuit reversed and remanded the case to the district court to determine if other reforms enacted as part of the Affordable Care Act but not specifically related to the individual mandate or health insurance could be severed from the rest of the Affordable Care Act so as not to have the law declared invalid in its entirety.
−Removed: It is unclear how this decision, subsequent appeals including potentially to the U.S.
−Removed: Supreme Court, and other efforts to repeal and replace the Affordable Care Act will affect the implementation of that law and our business.
−Removed: We continue to evaluate the potential impact of the Affordable Care Act and its possible repeal or replacement on our business.
+Added: In March 2010, the Affordable Care Act, or ACA, was enacted in the United States.
+Added: The ACA made a number of substantial changes to the way healthcare is financed both by governmental and private payors .
+Added: Although the ACA included a medical device tax, the tax never went into effect and was fully repealed by Congress with enactment of the 2019 federal spending package signed into law by President Trump on December 20, 2019.
+Added: Since the ACA’s enactment, there have been judicial and Congressional challenges to certain aspects of the ACA , and we expect there will be additional challenges and amendments to the ACA in the future.
+Added: Members of the US Congress have indicated that they may continue to seek to modify, repeal or otherwise invalidate all, or certain provisions of, the ACA.
+Added: During his term in office, President Trump signed Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA .
+Added: Concurrently, Congress considered legislation that would repeal or repeal and replace all or part of the ACA .
+Added: While Congress has not passed comprehensive repeal legislation, at least two bills affecting the implementation of certain taxes under the ACA have been signed into law.
+Added: For example, the Tax Cuts and Jobs Act of 2017, or TCJA, repealed the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual
+Added: mandate.” In December 2019 , the Fifth Circuit Court of Appeals upheld a district court’s finding that the individual mandate in the ACA is unconstitutional following removal of the penalty provision from the law.
+Added: However, the Fifth Circuit reversed and remanded the case to the district court to determine if other reforms enacted as part of the ACA but not specifically related to the individual mandate or health insurance could be severed from the rest of the ACA so as not to have the law declared invalid in its entirety.
+Added: On March 2, 2020, the United States Supreme Court, or the Supreme Court, granted the petitions for writs of certiorari to review this case and allocated one hour for oral arguments, which occurred on November 10, 2020 .
+Added: A decision from the Supreme Court is expected to be issued in spring 2021.
+Added: It is unclear how this litigation and other efforts to repeal and replace the ACA will affect the implementation of that law and our business.
+Added: However, the new Democrat-led presidential administration has been taking steps to strengthen the ACA and the 117 th Congress is not expected to have the same interest in repealing the law, in part due to the healthcare economic impacts of the ongoing COVID-19 pandemic on many subsets of the U.S.
+Added: Following his inauguration on January 20, 2021, President Biden also took immediate steps to order a regulatory freeze on all pending substantive executive actions taken by the previous administration, in order to permit incoming department and agency heads to review whether questions of fact, policy, and law may be implicated a nd to determine how to proceed.
+Added: We continue to evaluate the potential impact of the ACA and its possible repeal or replacement on our business.
Corporate Practice of Medicine
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We believe growing and retaining a strong team is crucial to our success.
−Removed: As of March 1, 2020, we had 139 full-time employees, engaged in bioinformatics, genetics, software engineering, laboratory management, sales and marketing and corporate and administrative activities.
+Added: As of March 1, 2021, we had 429 full-time employees, engaged in bioinformatics, genetics and COVID-19 testing , software engineering, laboratory management, sales and marketing and corporate and administrative activities.
None of our employees are represented by a labor union or covered by collective bargaining agreements and we believe our relationship with our employees is good.
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We were incorporated in Delaware on May 13, 2016.
−Removed: We are the holding company of our subsidiaries, including primarily Fulgent LLC, which was initially formed in June 2011.
−Removed: On September 30, 2016, Fulgent LLC became our wholly owned subsidiary in a transaction we refer to as the Reorganization, in which the holders of all equity interests in Fulgent LLC immediately prior to the Reorganization became all of our stockholders immediately following the Reorganization.
−Removed: Our initial operations focused on Fulgent LLC’s former pharmaceutical business, or the Pharma Business, and in 2013 we commenced the genetic testing business we are currently pursuing.
−Removed: In October 2015, we recapitalized Fulgent LLC to establish two series of units, with the Class D units having economic rights based on the genetic testing business we are currently pursuing and the Class P units having economic rights based on the Pharma Business .
−Removed: On April 4, 2016, Fulgent LLC separated the Pharma Business from the genetic testing business we are currently pursuing in a transaction we refer to as the Pharma Split-Off.
+Added: We are the holding company of our subsidiaries, including primarily Fulgent Therapeutics LLC, which was initially formed in June 2011.
+Added: On September 30, 2016, Fulgent Therapeutics LLC became our wholly owned subsidiary in a transaction we refer to as the Reorganization, in which the holders of all equity interests in Fulgent Therapeutics LLC immediately prior to the Reorganization became all of our stockholders immediately following the Reorganization.
+Added: Our initial operations focused on Fulgent Therapeutics LLC’s former pharmaceutical business, or the Pharma Business, and in 2013 we commenced the genetic testing business we are currently pursuing.
+Added: In October 2015, we recapitalized Fulgent Therapeutics LLC to establish two series of units, with the Class D units having economic rights based on the genetic testing business we are currently pursuing and the Class P units having economic rights based on the Pharma Business .
+Added: On April 4, 2016, Fulgent Therapeutics LLC separated the Pharma Business from the genetic testing business we are currently pursuing.
The operating results of the Pharma Business have been reported as discontinued operations for all periods in our consolidated financial statements included in this report.
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As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are applicable generally to other public companies.
−Removed: We will remain an emerging growth company until December 31, 2021, unless our gross revenue exceeds $1.07 billion in any fiscal year before that date, we issue more than $1.0 billion of non-convertible debt in any three-year period before that date or the market value of our common stock held by non-affiliates exceeds $700.0 million as of the last business day of the second fiscal quarter of any fiscal year before that date.
+Added: We expect we will remain an emerging growth company until December 31, 2021.
Available Information
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.