Quest Diagnostics 2000 Annual Report Download - page 26

6
We maintain a relationship with the academic community through our Academic Associates program, under
which academia and biotechnology firms work directly with our staff scientists to monitor and consult on existing test
procedures and develop new esoteric test methods. In addition, we have entered into licensing arrangements and co-
development agreements with biotechnology companies and academic medical centers.
Clinical Trials Testing
We believe that, as a result of the acquisition of SBCL's clinical trials business, we are one of the world's three
largest providers of clinical laboratory testing performed in connection with clinical research trials on new drugs. Clinical
research trials are required by the FDA to assess the safety and efficacy of new drugs. We have clinical trials testing
centers in the United States and in England. We also provide clinical trials testing in Australia and South Africa through
arrangements with third parties. Clinical trials involving new drugs are increasingly being performed both inside and
outside the United States. Approximately 40% of our net revenues from clinical trials testing represents testing for
SmithKline Beecham. Under a ten-year agreement, we are the primary provider of clinical trials testing services for
SmithKline Beecham worldwide. We believe that this business will not be negatively impacted by the merger of
SmithKline Beecham with Glaxo Welcome which was completed in December 2000.
Medical Information
The demand for comprehensive medical information continues to grow. Using our extensive database as well as
our core medical and analytical expertise, our Quest Informatics division has developed a portfolio of information
products that enable customers to access a wide range of information critical to healthcare and patient care decision
making. These products can be used by managed care organizations and other payers as well as large pharmaceutical
companies. These products maintain patient confidentiality and require patient consent if patient identified information is
provided to a third party.
We continue to explore ways to capitalize on the enormous potential of providing healthcare information
through opportunities ranging from Internet-based health and information services to direct-to-consumer services.
During the second quarter of 2000, we began to provide laboratory results and testing information directly to consumers
who request it over the Internet through Caresoft's consumer web site, TheDailyApple.com, enabling consumers, without
payment of any fee, to download these results into a secured personal medical record. We believe that by providing
customers with an easy-to-use and rapid way to comprehensively analyze medical information, our customers will
increasingly want to use our services as both a testing company and information provider. As more and more clinical
laboratory customers continue to use comprehensive medical information in their decision making, we are not only
positioned to become the information provider of choice, but to do so through the most technologically advanced and
customer friendly means.
Other Services and Products
We manufacture and market diagnostic test kits and systems primarily for esoteric testing under the Nichols
Institute Diagnostics brand name. These are sold principally to hospital and clinical laboratories, both domestically and
internationally.
Payers and Customers
We provide testing services to a broad range of healthcare providers. We consider a "payer" as the party that
pays for the test. Depending on the billing arrangement and applicable law, the payer may be (1) the physician or other
party (such as another laboratory or an employer) who referred the testing to us, (2) the patient, or (3) a third party who
pays the bill for the patient, such as an insurance company, Medicare or Medicaid. Some states, including New York,
New Jersey and Rhode Island, prohibit us from billing physician clients. We generally consider a "customer" to be the
party who refers tests to us. We also consider a managed care organization that contracts with us on an exclusive or semi-
exclusive basis on behalf of its patients as both our customer and payer.
During 2000, no single customer or affiliated group of customers accounted for more than 5% of our net
revenues. We believe that the loss of any one of our customers would not have a material adverse effect on our financial
condition, results of operations, or cash flow.