Fifteen Per Cent a Year: How the Price Schedule Decides Diagnostic Growth

A test does not have a price. It has an entry on a schedule.

The most consequential document in molecular diagnostics is not a validation study. It is a fee schedule. A laboratory can develop a test with flawless analytical performance and still never earn a return on it, because the question that decides commercial outcome is not whether the test works but whether a payer has assigned it a code, a rate and a rule about who may order it.

For most of the last decade, that fact sat underneath the industry rather than in front of it. In the 2025-2026 window it moved to the surface, and three separate mechanisms started moving at once: the United States finally settled what it will do about laboratory-developed tests, the clinical laboratory fee schedule acquired a glide path of scheduled cuts, and the European Union’s in vitro diagnostics regime began its staggered application dates. Each one changes the same variable: the revenue a laboratory is permitted to collect.

The rule that was written, vacated and replaced

The sequence matters because it is frequently misreported as a single event. The US Food and Drug Administration published a final rule on 6 May 2024 asserting that laboratory-developed tests are devices. On 31 March 2025 the United States District Court for the Eastern District of Texas vacated it in ACLA v. FDA, on the ground that the agency had exceeded its statutory authority. On 19 September 2025 the FDA published a further final rule that returned the framework to the posture that had applied before 2024, with enforcement discretion intact for the categories it had previously covered.

The practical consequence is not that the question is settled. It is that the question has been moved back to Congress and to coverage policy, which is a slower and less visible venue. A laboratory director reading the sequence correctly concludes something uncomfortable: the regulatory risk on a laboratory-developed test did not disappear, it was deferred, and the deferral is not under the laboratory’s control. What did not move at all is the coverage decision, which was always the binding gate.

This is the same conclusion the diagnostic tests market report reaches from the commercial side. Approval is a permission to sell; coverage is a permission to be paid; and in a market where the buyer and the payer are different parties, the second is the one that determines volume. The sequencing market report makes the same point with a harder number attached, which is why the two reports share a spine.

Fifteen per cent a year, compounded against you

The clinical laboratory fee schedule has entered a phase in which the direction of travel is legislated rather than negotiated. Under the current framework there is no reduction in 2026, followed by a cap on reductions of 15 percent a year for 2027 through 2029. Read as policy, that is a softening: the cuts that were previously scheduled to arrive at once are now spread and capped.

Read as a business, it is a compounder working in the wrong direction. A 15 percent annual reduction applied to a test menu that is not growing in volume destroys roughly half its unit economics in four years. A laboratory cannot respond by raising price, because the price is set administratively. It can respond only by shifting mix toward tests that sit outside the schedule, by cutting the cost per reportable result far enough to protect margin at the lower rate, or by exiting the menu entirely.

All three responses are visible in the 2025 filings, and that is why the market’s forecast rate is what it is. The category is forecast at 6.60 percent from USD 118.60 billion to USD 197.85 billion, and a schedule that ratchets downward is one of the two reasons that number is not higher. The other is that volume in mature markets is not growing fast enough to outrun it.

Europe is running the same film on a delay

Regulation (EU) 2024/1860 amended the in vitro diagnostics regulation to extend transition periods, and the dates are now separated by risk class: class D devices on 31 December 2027, class C on 31 December 2028, and class B and sterile class A on 31 December 2029. The extension is a relief to manufacturers. It is also a three-stage cliff, and a cliff is a worse problem than a slope for anyone who has to hold a certified menu across it.

The asymmetry that matters commercially is not the date but the cost of the dossier. Notified-body capacity was the binding constraint in the original regime and it has not stopped being one. A laboratory or manufacturer with a small menu faces a fixed conformity assessment cost against a variable revenue base, which is the same arithmetic that drives consolidation in the United States for different reasons. In both jurisdictions the regulatory structure selects for scale, and it does so before any competitive consideration.

What a payer actually buys

The cleanest illustration of payer power in this market is small and specific. When a state Medicaid programme pays a sequencing CPT code at USD 2,716 with no prior authorisation requirement, two things happen simultaneously. The test becomes accessible to a population that could not previously reach it, and the price of the test stops being a vendor decision and becomes a schedule entry that can be revised in an administrative cycle.

That is the mechanism the sequencing article identifies as the reason volume growth and revenue growth have decoupled. It is also why the industry’s investment in health economics is not marketing. A health-economic dossier is the instrument by which a test earns a code, and the code is the product’s real price.

The adoption gap nobody wants to price

There is a second constraint that operates inside the laboratory rather than at the payer. Survey work by the American Society for Clinical Pathology found that automation is the top driver in addressing staffing shortages, cited by 56.3 percent of respondents, while actual adoption of artificial intelligence in the laboratory sat at 17.4 percent. The gap between the two numbers is the honest state of operational readiness in a sector being asked to absorb new test menus while losing staff.

That gap has a direct commercial consequence. A test that requires more hands-on time than the laboratory can supply will not scale regardless of what it is paid, which is precisely why instrument placements that reduce labour per result are valued by buyers even when the capital cost is high. It is also why the reagent-annuity economics described in the companion piece on instrument placements hold: the laboratory is not buying a box, it is buying hours.

The forecast is a policy forecast

Put the three mechanisms together and the shape of the next eight years becomes legible. New test categories will be created faster than payers will price them, because the science moves faster than the schedule. Existing categories will be repriced downward on a legislated glide path, capped but compounding. And the European regime will impose a fixed compliance cost that selects for scale.

Under those conditions, the growth in this market is not primarily a technology forecast. It is a coverage forecast with a technology input. The companies that deliver it will be the ones that treat reimbursement strategy as product design, build the health-economic evidence before the launch rather than after it, and choose menus on the basis of what will be paid for rather than what can be measured. The ones that do not will keep producing excellent tests that nobody can afford to order.