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HomeTradingTranscript: Dr. Charles Strom - The Big Picture

Transcript: Dr. Charles Strom – The Big Picture



The transcript from this week’s, MiB: Dr. Charles Strom on Antibodies & Early Cancer Detection, is below.

You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.


ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest. His name is Dr. Charles Strom, and he is the CEO, and co-founder of Liquid Diagnostics, an advanced testing company. He has several decades of experience in the field of genetic testing. He ran Quest Diagnostics labs for 16 years. And we really just began to scratch the surface of his work.

I didn’t get to the 60 Minutes episode he appeared on or his appearances on Oprah, but we did talk about COVID testing and why we’re not looking at antibodies, Dr. Strom thinks we should be. If you want to decide whether you need a booster or a second booster, wouldn’t it be helpful to know if you’re actually at a high level of antibodies or a low level of antibodies? And we’ll talk about that. Early detection for certain types of lung cancers and how the world of genetics is just rapidly changing the way we not only detect potentially dangerous diseases, but some of the treatments we do. It’s really quite fascinating.

So with no further ado, my conversation with Liquid Diagnostics, Dr. Charles Strom.

ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My special guest this week is Dr. Charles Strom. He is the CEO and co-founder of Liquid Diagnostics. Dr. Strom has pioneered the use of DNA testing for forensic and paternity applications before joining Quest Diagnostics, where he was the medical director for Genetic Testing. His work has led him to appearances on such shows as 60 Minutes and Oprah. Dr. Buck Strom, welcome to Bloomberg.


RITHOLTZ: My pleasure. So let’s start a little bit with your educational background. You graduate at University of Chicago with both a PhD in Biology and a medical degree. Was the plan always to work in genetics?

STROM: Yeah. From the time I was in seventh grade, I knew I wanted to be a scientist. And as an undergraduate, I became interested in prenatal diagnosis, in particular. And when I was an undergraduate, I did research and found that one of the centers to do that research was at University of Chicago. And one of my early mentors, Albert Dorfman had published a paper on prenatal diagnosis for Hunter syndrome. So I actually sent him a letter, typed it out on my Smith-Corona electric typewriter, sent it to him. And lo and behold, a month later, I got a packet of information, saying, “How would you like to come work in my lab over the summer?”

And that led to my entering an MD-PhD program that was called the Medical Scientist Training Program. It was a federally funded program. It paid for my tuition and gave me a living stipend. And the six-year program turned my MD and PhD. So yes, it was always my plan to be a medical scientist.

RITHOLTZ: And you worked under biochemical geneticist William Nyhan, who’s kind of legendary in that field. Tell us a little bit about working with Dr. Nyhan and what you learned from him and what that experience was like.

STROM: Yeah. Well, that was fabulous. So again, this was a cold call. I started out in between my freshman and sophomore year of college. And my advisor and the master of my college was a scientist named Richard Goldstein. And he said, “Hey, I have a buddy, Dr. William Nyhan out in San Diego. Maybe I could send a letter and you could go out and work for him over the summer between your freshman and sophomore year in college.” And it was like, you know, somebody asked me if I wanted to work for the Pope. And I said, “Yes, sure, of course, I do.”

And same thing, he welcomed me. He had me in the laboratory. And he and his partner, Larry Sweetman, got me hooked on biochemical genetics. And then after I, you know, went to medical school, got my MD, got my PhD, the obvious choice for me to do a residency was at University of California, San Diego, where Dr. Nyhan had become the chairman of the department. So that was just a no-brainer, so I ended up doing my residency there. And for the three years of my residency and fellowship, I worked with William Nyhan, who has an encyclopedic knowledge of biochemical genetics. And it was just a fabulous experience for me.

RITHOLTZ: Yeah, I can imagine. So tell us about some of the grants to pursue genetics of growth disorders that you were working on at the University of Chicago. They seem really quite fascinating.

STROM: Yeah. So from a very early age, I was interested in developmental biology, which is the science studying the mechanisms by which we go from an embryo, in which all cells are identical to an adult, where we have hundreds of different specialized cells.

And Albert Dorfman, my mentor in University of Chicago, was working on the differentiation of cartilage in chickens. So I was cutting off limb buds from nine dozen chickens a week, and growing them in tissue culture. And they would differentiate into mature chondrocyte, which are cartilage cells in tissue culture. And so, I worked on that. Then when — that was all before DNA sequencing, DNA analysis was available. And then when cloning started, gene cloning, I got a grant to clone the gene for human cartilage-specific collagen, and to see how that got turned on during development. That was very exciting.

RITHOLTZ: So how does that lead to pioneering DNA testing for forensic and paternity applications?

STROM: So I’ve always been what I call an applied scientist. You know, the scientists out there really come in two forms. One is the basic sciences, the person that really wants to delve incredibly deeply into one particular problem. There used to be a saying about medical practitioners that the general practitioner knows nothing about everything, that the specialist knows everything about nothing, and the pathologist knows everything about everything, but it’s too late to do any good.

So the basic scientist delves very deeply into a single subject. I always was more interested in how are we going to use these developments to help people, in particular. The medical aspect, now they would call it translational medicine. But how are we going to take what we learned at the lab bench and put it into practice

So I was a professor at University of Chicago. DNA testing for forensics was just in its infancy. There was The Blooding, I don’t know if you remember that, where an entire village was genotyped in England to find the rapist. And forensic DNA had not yet been admitted into courts in Illinois. I was approached by several different prosecutors who had very difficult cases and asked if I could — you know, if I could do DNA testing to support their cases. And being an academics and having some academic freedom, I said yes and did some DNA testing.

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

And my famous case, the one I published about was a gentleman who had actually murdered his wife, and then burned her body to near completion in a steel drum in his garage. Then he went to the police station and decided to confess. And then when he got an attorney, he withdrew his confession. So the prosecutors kind of knew that he had done it, but had no way — there was no body to be identified. So we were able actually to identify his wife from the charred remains in the steel drum. And you know, the Frye evidence was accepted and he was convicted. So that was basically my moment in the sun in forensics, and I never really did anything after that.

RITHOLTZ: Quite fascinating. So you worked at Quest for a couple of years where you’re head of the Research Labs. And eventually, you’re working with Dr. David Wong. Tell us about Amperial technology and what Dr. Wong had created.

STROM: So I had worked at Quest Diagnostics for 16 years, basically running all the genetic laboratories. And after I left, I took a temporary position to be the director of the Molecular Pathology Laboratories at UCLA. This was because of they were trying to recruit a permanent director. I was in semi-retirement, and so, you know, I took a temporary job working at UCLA for a couple of days a week.

Then one day, my boss calls me in and she says, “Buck, we have a problem. There is a dentist in a dental school by the name of David Wong, who has just gotten a grant. And part of the grant was that our laboratory would validate the test as a laboratory-developed test so it could be offered clinically.” The pathologist who had COVID in that grant had left the — left the institution. And so she says, “You got to go up, see what’s going on, and see what we can do.”

So I take the elevator up to the 7th floor, the Basic Science building at UCLA, and I go up to meet with Dr. Wong and it was like, “Oh, my God, that’s the guy.” Because I had met him about 10 years previously, when he had given a talk at Quest Diagnostics. And he had dedicated his life to saliva -based diagnostics. And when he gave a talk, I was blown away and said to myself, and came home and said to my wife, “You know, this guy is a visionary.” And we had lunch afterwards, and we had a wonderful talk.

And it was like, you know, a rom com, we saw each other in the hallway, and there was Buck, there was David. And he said, “Let me show you what I got here.” And he has developed a platform, which at that time was called EFIRM. We now call it Amperial, which could do diagnostics of any biomolecule, including DNA, including antibodies, including protein on saliva, as an open platform. And he had used this to actually demonstrate that he could detect circulating tumor DNA in patients with early stage lung cancer, something that had never been done before successfully.

And I looked at this data and it knocked my socks off. And I said, “You know, David, I want to work with you here.” So it began a wonderful collaboration, and I became blown away by the potential of this platform. The problem is that Dr. Wong was in academic, he had no idea of how to commercialize anything. I come from 16 years in the diagnostic industry, so my expertise was complementary to his. I knew how to make assays that could be used hundreds of thousands of times, and give accurate results. So I was very excited.

But in order to commercialize the intellectual property, it has to be in order. There has to be an organization. There has to be funding. And then I reached out to friends of mine, who were also leaders in their field, Bob Agdern and who was an executive in Amoco for many years, and was a lawyer and ran businesses for Amoco. Jeff Weisberg, who started Athena Diagnostics, one of the major neurology diagnostics companies, and was a financial guy. And my friend Rich Bender, who was a medical oncologist. All of these people I knew from past life, Bob, where I knew from (inaudible), and the other two I had met at Quest Diagnostics.

RITHOLTZ: And full disclosure, I met you through Bob Agdern, who is my (oldest) brother.

STROM: Right.

RITHOLTZ: And I was so intrigued by the work you guys have been doing. We’ve been talking about this for a couple of years. Before we move on to COVID, I have to — you know, you kind of bury the lead about the lung cancer. The key thing about those early indicators is that this is very difficult to diagnose. And if you catch it early, it’s very treatable. And if you catch it late, it tends to have a very bad outcome. Is that a fair way to describe it?

STROM: Absolutely. About 80% of lung cancer now is diagnosed, its stages 3 to 4, where it’s not curable.


STROM: You know, you can be treated. It can prolong your life, but basically, you’re going to die in lung cancer. Stage 1 and 2 is what we call early stage lung cancer. It is still potentially curable with both surgery and chemotherapy, or a combination of both. And that’s why it’s so important to diagnose this early. But 80% of the time, it’s not.

There is a screening test now that’s available, which is a spiral CT scan for people who have long histories of smoking. And the problem with the spiral CT scanning is that you get these things called indeterminate nodules. So some people have — you do the CT scan, and it’s, “Oh, this got to be cancer.” Sometimes you do the CT scan and it’s negative. But about 30% of the time you do the CT scan, and there’s something there, but you don’t know whether it’s cancer or not. And we have an NIH-funded study to use our platform to look at these patients with indeterminate nodules, using either saliva or plasma, or both, to see if we can inform the decision about who needs a biopsy and who doesn’t need a biopsy.

RITHOLTZ: And how the results of that have been so far?

STROM: We’re in the middle of it. We have not yet done any of the data analysis. We’re — right now, we’re collecting. We’re collecting samples, and they’ll be analyzed actually next year. So I can’t tell you how it’s going. But we’re hoping that it’s going to give us positive results.

RITHOLTZ: So that was the original plan when you formed Liquid Diagnostics. And then, you know, COVID and the pandemic starts, and we go into lockdown. How did you guys pivot to using this technology to either detect COVID or look at antibodies, or both?

STROM: So interesting story. So Dr. Wong is a dentist and he had an incredible interest in a disease called Sjogrens syndrome. Sjogrens syndrome is an autoimmune disease where the body attacks itself, and it causes dry mouth and dry eyes. There’s actually 4 million people who present to their physicians every year with that complaint, either dry mouth, dry eyes, or both. It was known that some of these patients who present with dry mouth and dry eyes actually have a disorder called Sjogrens syndrome, which is where the salivary glands make — where antibodies are made that attack the salivary glands.

The diagnosis of Sjogrens syndrome was incredibly difficult because the blood-based antibodies were not particularly sensitive or specific for the disease. So people often had to have biopsies, and most people didn’t want to have a biopsy of the salivary gland.


STROM: So he began to use our platform, Amperial platform, to look for antibodies in saliva. And it turns out that that is a much better way of diagnosing Sjogrens syndrome than in blood. So we knew that we could use this platform for antibodies. So I remember it was mid-February and the beginning of the pandemic, and I said to our group at Liquid Diagnostics, “You know, I think we could use this to measure COVID antibody.” And I remember Bob said, “Well, you know, how much is that going to cost?” And I said, “Well, you know, maybe, you know, $5,000 or $10,000 to buy the reagents and things.”

And the rest they say is history. We were able to make a saliva-based diagnostic, which is quantitative, which is very different from almost all other antibody measuring tests available, that can measure your immunoglobulin G or IgG levels to SARS-CoV-2, which is the virus that causes COVID-19.

RITHOLTZ: So — so let me interrupt you and just translate that into English for a second.

STROM: Sure.

RITHOLTZ: Most of the tests either the rapid test or the PCR test is going to give you thumbs up, thumbs down, either you’re showing this or you don’t. You’re able to do a measurement that quantify, shows you your levels of COVID antibodies? Am I saying that right?

STROM: That’s correct. So Barry, a PCR doesn’t measure antibodies. PCR measures viruses.

RITHOLTZ: Got you.

STROM: But, yes, most of the — well, all of the home tests are qualitative. They’re not quantitative, which means they tell you positive or negative. The laboratory tests are what’s called semi-quantitative. They give you a number that’s pretty meaningless that says, you know, 3.1, or 3.2, and you don’t really know what to do about it.

Our test actually gives you the level of your antibody. And then we also tell you how you stand with respect to, you know, several thousand samples that we have from individuals who have been vaccinated. So it will say, “Barry, your level is 4.2 nanograms per ml.” Well, you’ll say, “Well, what does that mean?” Then we tell you, “You’re in the 80th percentile for all patients who have been vaccinated against COVID.” So you know you’ve got good, healthy levels. On the other hand, you could get a level that says, you know, it’s 10 nanograms per ml, and this is at the 10th percentile, which means, you know, that you’re low on the scale.

The other beauty of this test is because it’s saliva based, you don’t have to have your blood drawn. And it’s relatively inexpensive, you can have multiple tests. So for example, we have a clinical trial going, which I’m a participant, where we look at people’s levels every two weeks, for six months. And when we looked at that, we could see that most people’s levels went up after their second vaccination, but then they slowly came down, so that by — from four to six months, they were almost back down to baseline, which would mean that we could have probably predicted that you’re going to need a booster after six months.

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

STROM: Yeah. Barry, that’s a great point. So the issue is, you know, I know now that after my third booster, the third shot, so the first booster, that my levels now, eight months out, are the same as they were two weeks after my third booster. So I don’t feel that at this moment, I need a fourth booster. And then there’s no data to say that that’s good or bad. Unfortunately, FDA says that a person of my age could get a fourth shot if I wanted. But there’s no reasonable way for me to make that decision right now. A lot of my friends that said I’m going to take — I’m going to take the fourth shot. Your point is well taken, that if you take the fourth shot, who knows if you’re going to be able to get a fifth shot —


STROM: — or when. So you know, we have that luxury, those who have participated in our trial, of knowing that our levels are stable over time. Again, you know, this is a personal decision that I’m making with myself and my physician. I can’t say that, you know, that there’s a recommendation about this sort of thing. But this is the kind of data that we need.

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

The problem is, as far as I know, nobody is doing these sorts of tests because the blood tests are only semi-quantitative at the moment. The quantitative tests are expensive to do, and this study would be very expensive to perform. So what frustrates me is I believe we have a tool. We published this in peer-reviewed publications, where we could do these sorts of studies. We could get the information because COVID is not going away.


STROM: That’s the one thing that’s sure. This is going to be part of our lives for the foreseeable future. And we need to start getting information that will allow physicians and people to make informed decisions about things like vaccines. For example, what if your vaccine level is — your antibody level is very low and you’ve already gotten your four mRNA boosters? Well, now there’s going to be a new vaccine this summer, I hear, that’s based on the old technology, advantage in technology. So maybe that would be someone who would want to get that vaccine because they’re not responding very well to the mRNA vaccines.

And one of the issues, you know, in public health, everybody is treated like they’re the same. And what we’re finding in terms of antibody production and antibody affinity is that everybody is not the same. For example, with Omicron, some people’s IgG antibodies that were made with the original Pfizer or Moderna vaccines, they cross-react, you know, nearly a 100%. So that the antibodies that these people make are just as good against Omicron as they were against the original virus.

On the other hand, some of the people, their antibodies have less than 50% of the affinity than they do for the wild type. So this sort of — and we’re able to make that assay because it’s an open platform. We can make an assay for Omicron within weeks of when Omicron is first identified. So I think that these sorts of — these sorts of studies could really help inform on what’s going on.

Some of the, you know, critics of antibody testing say, “Well, we don’t want people doing risky behavior because they know they have antibodies.” My response to that is, “Well, if you don’t even have antibody and you’ve been vaccinated, you should feel free to do everything that the CDC says a vaccinated person should do.” But I’m looking at the flip side, what if your antibodies are low? Then maybe you should not do everything that a vaccinated person could do or you should — and you should talk to your doctor about maybe doing something, either a booster with the same vaccine or a different vaccine to try to get those levels up.

So, again, there’s not enough data to make any real recommendations at the moment. And I would like to — you know, I would like people to think about using our tests to either do the research or to make their own informed decisions.

RITHOLTZ: So you mentioned the CDC, what are they doing about the entire space of antibodies? Is this something that they’re just not paying attention to? Do they really think people with high antibodies are going to go out and be reckless? What does the CDC say about knowing what your antibody levels are?

STROM: Yeah, well, the CDC and FDA both have made public statements that they don’t think that measuring antibody levels have any role in the pandemic. And you know, I can see the point. You know, to them, as I said, in public health, everybody is a human being and everybody is the same. So you know, that’s been their position. And we’re going to — we’re going to make recommendations, you know, for everybody, and it will work for most people.

So the issue about whether or not to be vaccinated or not, that’s a political issue about whether you can force vaccinations on people. I think a more interesting question is that, certainly internationally, there is the problem with vaccine card counterfeiting.


STROM: So that there are people who have not been vaccinated who present, you know — and you know what your vaccine card looks like.


STROM: I mean, how difficult would that be to counterfeit?

RITHOLTZ: Cardboard. Right.

STROM: Yeah. It’s just ridiculous. And there’s no centralized database. You know, in this modern age, that’s ridiculous. The fact — and when I went to the tennis tournament out in the desert, the BNP Paribas Open, they made a big deal about how everyone would be vaccinated. And there was an app and the app, you know, prove that you were vaccinated. But the way the app prove you were vaccinated is if you took a picture of your vaccine card. You took a picture of your driver’s license and they, you know, validated that you’ve been vaccinated. Well, that’s not real because if I had a fake vaccine card —


STROM: — that would not establish anything. Again, with a saliva-based quantitative test, you could actually make sure that people had antibodies, who you’re hiring. Again, in Florida, that would be illegal, most likely. But as I said, that’s a political decision. That’s not a medical decision.

RITHOLTZ: And the saliva test seems to be far less invasive than the swab. How does it compare in terms of the time for the turnaround and the costs relative to other forms of testing?

STROM: The cost to do the test is similar to what you’d have in a blood test. But the thing about a blood test is that there is a cost associated with drawing the blood. People don’t really calculate that in. The ease of testing is amazing. You just put a plastic wand with a sponge on the end of it into your mouth, between your cheek and gums for two minutes. So it can be done in the office. It can be done at home. It can be done in a nurse’s office. And then it can be mailed in using the appropriate biohazard containers. So cost is low.

Obviously, we’re a company where, you know, there will be some markup. But certainly, the cost is reasonable. And you know, we feel that people may want to know.

RITHOLTZ: Let’s talk a little bit about the work you did as med director at Quest. They’re a big Fortune 500 company. What sort of work do they do? And tell us a little bit about your role there.

STROM: Okay. I arrived at Quest in the year 2000. It’s, as you said, a large commercial laboratory, actually the largest commercial laboratory in the United States. I believe that still is true. And they were just beginning to do DNA tests. And when I got there in 2000, they were using technologies that, you know, I had been using at University of Chicago, that were really designed, you know, to do 10 or 20 tests at a time. They were not designed to do thousands of tests at a time.

And so when I got there, I made it my business to try to find other ways of doing this testing that would be, you know, one, high throughput; two, extremely high accuracy; and three, cost efficient. Because Quest Diagnostics was a business and we were able to do that. What we found initially was interesting is that we invented something called the 1,000 sample comparison, that before we would introduce a new platform, we would look at a thousand samples, with the old technology and the new technology.

If there were any discrepancies, we would resolve that discrepancy with a third technology to see what we were doing, which would be the best platform. And because a lot of people were using a hundred samples, well, what we found is a lot of times with a hundred samples, there was complete agreement. But as you got to a thousand samples, there would be three, four or five discrepancies between the two platforms. No one had ever shown that before. And we were able to show actually that the old technology was not as good as the new technology.

And so, with a lot of confidence and we published about this, we were able to move from the older technologies to the newer technologies. Then we were able to start really doing high throughput, high quality testing, and then we just started increasing our menu. So because a lot of people — when I was practicing genetics, a lot of the frustration was that people couldn’t get the genetic tests that I wanted them to get. Because often these tests were done in specialty laboratories, they were expensive. The laboratories did not have a relationship with the insurance companies. And so, basically, people had to either pay out of their pocket, or not have the test.

And it was very, very frustrating. I remember there would be people who drive their Porsche into my office, and I’d say, “You know, you really need to have cystic fibrosis carrier testing.” And they’d say, “Does insurance cover it?” And I’d say, “Well, let’s check and know your insurance doesn’t cover it.” And they’d say, “Well, then I don’t want to have it.” And you know, I felt like shaking them saying, “You know, get the test.”

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

I learned — pathologist, in general, it’s interesting, there have been wars between pathologists and geneticists, because pathologist feel that they own the rights to all testing that’s done on humans. Geneticists said, “Hey, you guys don’t know how to do the specialized things that we do.” And so every hospital had this kind of give and take between who is going to do karyotypes like in your chromosomes? Who is going to do DNA testing? Was it going to be the pathology department? Was it going to be the genetics department?

And when I got the Quest Diagnostics, which is a pathology company, I learned from them. I learned about quality assurance, quality control, how they — what you have to do to do hundreds of thousands of tests in an accurate way, and how you need to have methods in place to make sure that nothing is going wrong. So for me, it was an eye-opening experience.

And the last thing I learned was that this is a business. How do you make a business decision? How do you try to balance health of the nation versus business? For example, what if I want to do a test that, you know, won’t make a profit, but that could help people? How are we going to make those decisions? Do we make those decisions? Those kinds of very difficult situations, you know, I learned a lot.

RITHOLTZ: Let’s stick with the issue of both the test menu and the cost benefit analysis of these testings. I have to imagine that cystic fibrosis is an expensive, complicated disease to test. Isn’t it in the insurers interest, to anyone who is indicated to test for this, to pay for that rather than, you know, a later stage treatment after it’s going to be further developed, more complicated, more expensive to treat?

STROM: Well, one of the great ironies of modern medicine and healthcare is informatics. And I’ve had discussions with insurers about aspects like this. And some insurers will say, “Well, we know that people change insurance companies every two and a half to three years. So why should I do this test if it’s going to prevent a heart attack in a patient 5 or 10 years down the line, which is incredibly short sighted, I have to say, and not all insurance companies have this kind of attitude.

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

In the early days of DNA testing, the real problem was that the insurance companies didn’t have relationships with companies that did it. And those tests were very expensive. So it was easier for them to say, “This is research. We’re not going to cover it.

In terms of cystic fibrosis, the American College of Obstetrics and Gynecology, and the American College of Medical Genetics both came to a recommendation that, you know, everyone of certain races should be tested for cystic fibrosis carrier status, so when the woman became pregnant. When we knew and we had been given fair warning for that when I was at Quest Diagnostics, so we knew that volume was going to increase. And the business people at Quest Diagnostics knew that it would become profitable, because insurers would have a difficult time saying its research if the professional societies had recommended it. So that was kind of a no-brainer decision. Some of the other decisions that we had to make were not so easy.

RITHOLTZ: Pardon my naivete in asking this, but if people are changing insurance every two and a half, three years, then the flip side of we don’t want to test because this person is going to end up elsewhere is what about the person who wasn’t tested five years ago, who shows up as you’re insured and has that expensive heart attack, wouldn’t you want a uniformed approach across all the insurers so that the preventive, less expensive treatment and testing was taking place? Yeah, this guy is leaving your insurance company, but someone else who wasn’t tested is going to end up at your company. It seems like the better approach would be to agree on a uniformed testing process.

STROM: Barry, it’s so logical.

RITHOLTZ: Yeah, I guess.

STROM: And don’t think I didn’t scream that. But the problem is — two things about that is, first of all, if all the insurance companies are going to get together and decide that they’re going to do something like that, that would probably be considered collusion.

RITHOLTZ: What if it comes from the medical community or the research community, or god forbid, actual legislation that says you should have to pay for these sorts of testing?

STROM: Yeah. Well, interestingly enough, just because the professional organizations say that this is standard of care and should be done does not mean that insurance companies will pay for it. Basically, insurance company’s role in life is to not pay for things. Our new CEO of Quest Diagnostics, he used to say, “You know, what other business do you have, where you give your services away for free, and then you hope and pray that you’re going to get paid for it?”

And that’s what lab testing is all about. The test is sent in, we send out the results, and then we hope that insurance is going to reimburse us for those. It’s not a great system. You can be denied for a whole bunch of reasons, because the ordering physician put the wrong diagnosis code. Even though a person needed the test, the test was sent, the test was preauthorized, and the test was performed, a result was given, and then all of a sudden, you’re told, “You’re not going to get paid for this because the doctor coded this as a routine office visit and not as an office visit because there was a breast lump found.”

So you know, there is a huge part of the industry which, you know, basically has to take into account the fact that you’re not going to get paid for certain percentage of what you do. And they’re actually — when I was at Quest, there were — there were people who are trying to work on just improving the percentage because, you know, you didn’t have to do any more testing if you could improve your percentage of reimbursement, you know, from 40% to 50%, or whatever it was.

And so, you know, obviously, in a single payer system, you don’t have those kinds of issues. You can make those decisions easily. And that’s — you know, in Canada, it’s a much easier thing to do. You can simply say the public health system is going to be paying for this testing, and then pretty much everybody gets it covered and paid for. Here, you can say, “Yeah, I think we need — everybody should be paid for this testing, but insurance companies don’t have to listen.”

RITHOLTZ: Let’s talk a little bit about the work you’re doing at the Children’s Hospital. Tell me the sort of patients you focus on, and what do you try and do for them.

STROM: So Barry, you know, I was in semi-retirement and I got a call from Children’s Hospital of Los Angeles, saying, “You know, we have such a backlog of patients that need to see clinical geneticists, and especially my subspecialty, which is biochemical genetics back from the days with William Nyhan. You know, could you please, you know, come work for us, at least part time?” And this was actually right before the pandemic.

And Dr. Randolph, the chairman of the department, is such a wonderful woman, you know, that I said, “Yes.” Because, you know, if somebody asks you to help out, you help out. And I was really dreading it because I was going to have to drive up to Los Angeles and I live in in South Orange County, and then COVID here. And one of the interesting things that happened with the COVID epidemic, there’s been, you know — can you say has there been any positive things? Well, one of the positive things is actually we now have mRNA vaccines, where before COVID, they asked me if it was going to be five to seven years before we had mRNA vaccines.

But the other thing, interesting thing has happened is that telemedicine has become reimbursable to reasonable levels. So in COVID, again, I said, “You know, I’m of an age. I don’t really feel comfortable driving up and you know, working in a hospital.” And they said, “Well, would you see patients remote by telemedicine?” And I said, “Sure,” and it’s surprisingly good. You know, yes, I cannot touch patients, but I can see patients, and I’ve been seeing patients in clinical genetics that vary tremendously.

Most states have what’s called newborn screening. Newborn screening is one of the most amazing phenomenon for disease identification and early treatment that nobody knows about. It’s the heel stick that all your children, grandchildren and great grandchildren have when they’re born. And this is analyzed in California for about 50 different, what we call, inborn errors of metabolism. And so, these children are identified. And these children need to be cared for by physicians who know how to care for these children with these extremely rare genetic diseases.

But it’s been phenomenal. For example, there’s a disease called glutaric aciduria type I, where every patient I ever saw back when I was working with Dr. Nyhan, was horribly, horribly brain damaged. These kids were almost in vegetative states. I now have a child, in my practice, who is identified by newborn screening, who was placed on a specialized diet. He’s now 3 years old and completely normal. Every time I see this kid, I want to scream how wonderful newborn screening is.

It started out with phenylketonuria. Again, these are children who would have been horribly, horribly mentally deficient, who are put on specialized diets, and they’re normal. So these are the kinds of kids I see. I also see children who have autism, children who have other forms of birth defects. You know, now, we can get specialized DNA sequencing tests for these children to identify their disorders and perhaps treat.

Now, we have these thing called a whole exome sequence, which allows — where the laboratory basically looks at every gene known in the body and compares that with both parents to see about whether or not a child has a disease. Well, I did a test like that on a child that was hypotonic, who couldn’t walk. He was 18 months old, had spastic movements, had been diagnosed with cerebral palsy. I did that test, it turned out he had a treatable inborn error of metabolism called congenital disorder of glycosylation. And we started to treat him, and he’s getting better.

So you know, it’s these kinds of things who were used to be very, very rare, it’s almost like a revival meeting, are becoming, you know, pretty common. But in order to do that, you have to be able to get the testing done. And that’s the great frustration.

RITHOLTZ: You had mentioned previously that the insurers are sometimes none too keen about paying for some of these screening tests or preliminary tests. The heel stick, is that best practice? Was that mandated by law? How did that come about? And what sort of headaches do you run into when you want to test and the insurer says, “We’re not interested?”

STROM: Yeah. Well, there are two questions in there. The first is newborn screening is legislatively mandated in all 50 states. And the beauty of the legislative mandate is that the follow-up is covered. So these children who, you know, test positive for newborn screening, their treatments are covered, any follow-up genetic testing is covered. So that’s, at least in California, is a great system.

Well, people that fall or kids that fall through the cracks are the kids that don’t have one of the diseases that is screened for in the newborn screening program. And these are children who, for example, Medi-Cal, which is the state-sponsored health insurance, doesn’t cover whole exome sequence. So the kids who are covered by Medi-Cal can’t have the test, which might identify a treatable cause, so that is extraordinarily frustrating.

And sometimes even private insurance will say, “You know, I don’t want to cover this test,” even though, you know, I want to scream at them, “This kid needs this test.” And that’s the greatest frustration in medicine right now, at least, in genetics, well, for me, is not being able to get the test I need for my patients. And again, that’s because there’s no uniformity in insurance coverage for these sorts of genetic testing. I can see the — you know, the position of the insurance companies is these are expensive tests. And you know, again, they want to be profitable. And if they — their fear is that if they start having to pay for these very expensive tests, that’s going to eat into their profits. So I mean, I do understand it, but it is extremely frustrating for a practitioner.

RITHOLTZ: I can imagine. And you sort of see the medical industry, both the practice and the commercialization from both ends of the business, both as a doctor who is a practitioner and someone who’s working in what’s essentially a biotech startup, looking at it from the complete opposite end. How do we get this through the CDC, through NIH, through FDA? How do we get this approved? How do we get insurers to start paying for this? How do we get practitioners to start using it? How does that sort of unique perspective of seeing both ends of the elephant affect how you view the practice of medicine in the United States?

STROM: Oh, wow, what a question. We could probably talk for an hour about that.


STROM: I think the short answer is, it has become amazingly complicated to introduce anything new in medicine. So back in the day, somebody would find something, they would publish it. And then if it was good, it would be reproduced, and then everybody would do it. And medicine progressed that way.

Nowadays, it’s completely different. So you make a discovery, you talk to the Technology Transfer Office at your university, they patent it. Then you spin off a biotech company, then you have to get venture capital funding for your biotech-funded company. Then you shop it around. And then nobody trusts what you’re doing because you’re a private company. And then you have to get people that will interact with governmental payers, people who interact with private payers, people who will work on the CPT codes. It is an amazing, complex process.

I have a talk actually, a PowerPoint that I’d scan. I talked about somebody who invents the best tests, I call it TBT. So somebody invents a test that can use your blood and decide with 100% sensitivity and specificity, whether or not you got prostate cancer, for example. And I lead the people through the person who invents that test to the point where Quest Diagnostics says, “No. No. Thank you. We don’t want this test.”

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


STROM: So that if I say — if I say, it must be so, it must be so. But seriously, it can — it can be extremely frustrating. And my problem is that I have started a company. I believe I have a game-changing technology. But the chances of it actually changing the game are pretty small. And one of the problems my company has, and you know, we’re underfunded. I don’t have the ability to go out and hire a marketer, to hire sales force, to hire people to deal with insurance companies. So I felt if I build a better mousetrap, that the world would come to my door, but that has not happened.

And so now, you know, I’m sitting trying to figure out what we’re going to do with this technology. You know, I know it’s good. I know it works. You know, I just need to figure out how to do it from a business standpoint. So that’s been my frustration.

RITHOLTZ: So we’ve seen over the years, a lot of large, either pharma or diagnostic companies go through a series of acquisitions and roll-ups and mergers. It seems like scale is something that’s really significant in this space. Is that just a function of how unique and somewhat backwards the U.S. system is between the hospitals and the insurers and the practitioners? Everybody seems to be operating at a cross-purpose, to say nothing of the patient and the outcome of their visits. Is this uniquely American problem, or do we see other issues like this elsewhere?

STROM: What happens here is evolutionary. And the way we evolve, of course, you know, the way evolution occurs is with natural selection. So we’re in a completely capitalist system here in the United States. And the way the laboratory industry evolve is it started out with, I guess, you’d call a mom-and-pop, started out that every hospital had a laboratory. That laboratory was run by the local pathologist. They drove the fanciest cars, I can tell you. You know, they were charging $200 and $300 for a test that cost them $2 or $3 to run. And they were happy. The insurance industry didn’t know any better. They were reasonably happy.

And then a revolution occurred. Revolution occurred firstly with a laboratory called NetPath that decided that they were going to be a commercial laboratory. They were going to compete with the mom-and-pop local pathologists. And so they started buying up laboratories. Then Corning, who was making Corningware, but also fiber optics, was also making laboratory flasks and Pyrex. They were making graduated cylinders. They’re making flasks. So they decided that they were going to diversify, and get into the laboratory industry. And they spun off — and they started with Corning Clinical Labs, and then they spun it off as Quest Diagnostics.

Quest Diagnostics with their original CEO, who was a visionary, decided that he was going to try to consolidate the laboratory industry. So he bought NetPath, he bought other laboratories, and basically got to a point where they were close to 8% of the total laboratory market share. But it’s still a very fragmented market. You have the huge players, the Labcorp, the Quest, BioReference people. But still, the majority of laboratory testing is done by individual hospitals.

So then how did individual hospitals no longer could they charge $250 for tests that they then only took them four hours to make? So they had to come down with pricing. And so, now, hospitals are working with among themselves. So now, you have hospital chains buying up other hospitals, running the laboratories from the central laboratory. So you have that going on. And then insurance companies love that because now there’s competition. So they can say, “Well, I can get this from Quest Diagnostics. Why should I pay you this?”

And then you all know the story about UnitedHealthcare. They went from Quest to LabCorp. And now, they’re in both. But insurance companies began to wield an increasing amount of power over healthcare. And they still wield that amazing kind of power, because in many ways, your insurance company decides what tests your doctor can order and from what laboratory.

In the early days when pap smears went to something called ThinPrep, you know, there was no question that the ThinPrep was better in terms of what it could do. But in — when patients would come to our clinic, there was a big bulletin board saying if the patient had this insurance, they could get ThinPrep. If the patient had that insurance, they could only get a regular pap smear.

So what people don’t understand is that their insurance companies, in many ways, are determining what they — you know, what kind of testing they can have, what kind of medical care they will get. And most people don’t pay any attention to that. They don’t pay any attention to whether or not whole exome coverage, you know, is covered by their insurance until they have a child that has autism, or until they have a child, you know, that has developmental delay. And now all of a sudden, their geneticist wants to order that test, and their insurance company doesn’t cover.

And one of the problems is that you would really want an informed consumer. But in healthcare, our consumers are not informed. You know, you look at these things when there’s open enrollment, and mostly everybody is looking at what the copay is, what this is, what that is. And it’s not reasonable for people to understand whether or not, you know, they can have a cardiac catheterization, or whether or not they can have a treadmill for certain indications, you know, because you don’t know what the future is going to hold. So the paradigm of, you know, an informed consumer in a capitalist system with free enterprise, I think doesn’t work very well for healthcare.

RITHOLTZ: Yeah, that makes — that makes a lot of sense.

STROM: But the centralized systems, you know, are not that great in some places, too. I mean, everybody points to Canada as being the best, a good example of single party payer, but I know a physician in Canada, and he needed his wisdom teeth out. And he had waited two and a half years to have his wisdom teeth out. And a lot of people in Canada actually drive over to Buffalo to have CT scans because, you know, the whole city of Toronto has two CT scanners or something.

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

RITHOLTZ: So I know I only have you for a couple of more minutes. Let’s jump from our medical discussion to our favorite questions that we ask all of our guests. And we’re going to start with something like tell us what you’ve been streaming over the past couple of years, what has kept you entertained during the pandemic lockdown.

STROM: Well, yeah, I stream a lot. I guess I can also combine it. So I, during the pandemic, started reading Michael Connelly novels. Hieronymus Bosch, the detective. He has written over 20 novels. And of course, then I streamed “The Lincoln Lawyer,” which is also from Michael Connelly. Then I will be streaming “The Bush Legacy.” Right now, I’m watching “Beauty Queen of Jerusalem,” which is an incredibly interesting Israeli film, about the early days in Jerusalem. I’m watching “Gaslit” with Martha Mitchell. And a real cool one is “Servant of the People.” I don’t know if you’ve been seeing that, Barry.


STROM: That’s the president of Ukraine, his original comedy show. Do you know about that?

RITHOLTZ: Yeah. No. I’ve heard all about it and it’s supposed to be tremendous.

STROM: Yeah. It’s fantastic.

RITHOLTZ: I’ve been watching it. Really?

STROM: Yeah. I mean — and first of all, he’s talking about art imitating life and life imitating art. I mean, you know, he’s President of Ukraine. And you know, the whole — the whole TV series is based on, you know, him going off on a rant about the corruption in government and getting elected to be President of Ukraine. I would highly recommend that.

RITHOLTZ: That’s on my — that’s on my list. Let’s talk a little bit about some of your mentors. We mentioned them earlier. Tell us who helped to shape your career.

STROM: You know, I was very lucky that whenever I needed somebody, they were there. The first one was, of course, Albert Dorfman, who was my doctor advisor. He was an MD-PhD. He worked on inborn errors of metabolism. And he taught me one very important thing. He called me in one day, and he said, “You know, when I design an experiment, and I think I know what the results should be, and I get that result, I don’t trust it.” What he was basically saying is that science and discovery is about what you’re not expecting, just as Alexander Fleming discovered penicillin, not looking for penicillin. He discovered penicillin because of an accident that mold started growing on his plates. And we’ve lost that in science, I’m afraid. We’ve lost that.

You know, right now, science is measured as a business. You know, we’re going to make a vaccine. We’re going to do this step, this step, these steps, this step and make a vaccine. No one is saying, “Let’s look at how antibodies are formed. Let’s look at what’s going on and see if there’s anything anomalous, something that we don’t understand.”

My next mentor was Dr. Sam Spector. Dr. Sam Spector, I guess you could call, you know, was one of the fathers of modern pediatrics. He worked with Benjamin Spock, writing the famous book on childcare. And I was fortunate enough to have him as a professor at the University of Chicago Medical School. And then he moved to University of California, San Diego. So when I went to do my residency, he was there for me too.

And what he taught me is that the best way to be a pediatrician is to be with the child. He said, “I want you to go hold babies. You know, if you’re not an older brother and older sister, hold babies, walking around with babies, see how they feel. And you can tell simply by being with a baby, by holding a child, whether this is a child who’s just fussy and can be discharged, or whether this is someone who is seriously ill.” And those were the days before the meningitis vaccine, and we were really concerned about meningitis.

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

And the last one was William Nyhan. And Bill taught me that you have to know the basic science if you’re going to treat patients. For example, he could give a lecture on diarrhea, where you learned about what causes the diarrhea, not just how to treat the diarrhea. And so those are my mentors and I thank God that I had.

RITHOLTZ: It sounds like a heck of a list. Let’s talk about books, you mentioned some already. Tell us what you’ve been reading lately and what are some of your favorites?

STROM: Okay. Well, my favorite book is “Field of Dreams.” My father was a baseball catcher, and it’s one of the only books I’ve ever cried while reading. I think it’s a better book than it is a movie, but I love the movie also. There’s also a fabulous book called “The Gold Bug Variations” by Richard Powers.


STROM: I don’t know if you’ve heard of it.


STROM: But he combines genetics, music, and a couple of love stories together. More recently, as I told you, I’ve been reading all the detective Hieronymus Bosch novels by Michael Connelly. And that’s what I do for recreation.

RITHOLTZ: Sounds like fun. Our final two questions starting with, what sort of advice would you give a recent college grad who is interested in a career in either medicine or genetics?

STROM: Well, I would say that there’s been a sea change from — in just the past 10 years, in genetics, and it’s going to be in medicine too, and that is you need to understand informatics. When I was even at Quest Diagnostics, my expertise was in what we call wet work. It was in making assays, you know, making methods to detect things and doing it in a better way. We talked about that a little earlier.

Now, pretty much everything goes on the DNA sequencer, on the next generation sequencers, and so the wet work is almost irrelevant. But what isn’t irrelevant is the analysis of the tremendous, the humongous amount of data that comes off those sequencers. And so, I would say to someone who wants to go into genetic, you have to get a handle on the informatics, whether or not you need to be, you know, a computer major, or whether or not you need to be a programmer, that I don’t know. But you need to be able to, because the computer folks don’t know the medicine. And you need to know where the weaknesses are in the computer algorithms, or else you’re going to start, you know, being led off on blind out.

So that would be my advice to anyone who’s getting into modern medicine is to understand the informatics, understand how these algorithms work, understand where their strengths are, where their weaknesses are, or even become involved in the analysis, because it’s incredibly powerful. I mean, there’s an algorithm that basically looks at sales of Kleenex in pharmacies that predicts flu epidemics better than anything else. It’s the same kind of algorithm that they use to map the craters of the moon.

So you know, this is — you know, we live in an age where, basically, privacy is gone. But the other side of it is, there is so much data out there that could be used for good. You know, people are always worried about how it could be used for the bad. But you know, people are listening to our phone conversations. They’re paying attention to what we buy. You know, that’s the negative part.

But on the other hand, I just turned on my computer and on Google, there was something that I wanted. You know, it was like, I don’t think I had it. You know, how did the algorithm know that this would be something that I would be looking for? Because it wasn’t obvious, and yet there it was. So it can be used for good as well as for bad. And so, I think that, yes, there is reason for concerns about privacy. I would also say that the kids today, they don’t care about privacy, right? They put everything out in Facebook as soon as it happens. So maybe we’re moving into a different era.

RITHOLTZ: Quite interesting. And our final question, what do you know about the world of genetics and testing and medicine today that you wish you knew 40 years ago when you were first getting started?

STROM: I guess what I’d say is one of the most important things that I’ve learned is unintended consequences. So I lived through the original Medicare guidance when the diagnostic-related groups were formed. So this was in probably the ‘70s or ‘80s, probably in the ‘80s. And basically, the way that medicine was reimbursed was changed irrevocably.

So hospitals were paid not by what was done to a patient or for a patient, they were paid a single amount based on the diagnosis of that patient when they entered the hospital. So you would get the same amount of money for admitting patients with Down syndrome and for pneumonia, whether or not you did $200,000 worth of work on them, or whether you did $20 worth of work on them. So that changed medicine incredibly. You’d say, “Well, you know, Medicare was Medicare.” But then, you know, the insurance companies use Medicare as a model, and that irrevocably altered the way medicine was practiced.

The other thing about those Medicare regulations is they had better reimbursement for procedures. So specialties, which did a lot of procedures, colonoscopies, cardiac catheterizations became more powerful, because the reimbursement was better. And basically, you could make more money. In that era, the general practitioners, the pediatricians, you know, all got less reimbursement and it became harder for them to make a living. Then all of a sudden, somebody says, “Well, these primary care people are not doing well.” So then they changed reimbursement to favor primary care. And that again, you know, changes the equation.

So I guess what I would say is be careful when you legislate anything that has to do with medicine. I don’t know if I would become a physician if I were a young person today. It’s much harder. So you know, let me tell you what, you know, one way that costs are being controlled in medicine is with scheduling. So our hospital was purchased by another hospital. They introduce a scheduling program. Well, I noticed that they were going to schedule me 15 minutes to see every patient. I said, “Wait a second, I’m a geneticist. I can spend an hour with the patient. I can spend, you know, an hour and a half with the patient.” They said, “Gosh.” They said, “You know, if you do that, then your patients are going to be waiting in the waiting room. They’re not going to be happy.”

So, you know, a simple thing like a scheduling program from someone who, you know, has done an analysis and says that, ‘You know, we want doctors to see patients every 15 minutes and get a 10-minute break for coffee,” and that sort of thing has made, you know, being a doctor, being a physician, less enjoyable. You have less freedom. Your people are feeling more like they’re just employees than they have a vocation.

RITHOLTZ: Really quite interesting. Thanks, Bob, for being so generous with your time. We have been speaking with Dr. Buck Strom. He is the CEO and founder of Liquid Diagnostics. If you enjoy this conversation, well, be sure to check out any of the previous 400 such discussions we’ve had. You can find those at iTunes, Spotify, or wherever you regularly get your podcasts.

We love your comments, feedback, and suggestions. Write to us at Sign up for my daily reading list at Follow me on Twitter @ritholtz. I would be remiss if I did not thank the crack staff who helps put these conversations together each week. Mohamad Rimawi is my audio engineer. Paris Wald is my producer. Sean Russo is my director of Research. Atika Valbrun is our project manager.

I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.





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