12th Annual Drug Testing Industry Survey

1. Conducted by Bill Current Sponsored by: Applicant Insight Omega Laboratories OraSure Technologies USA Mobile Drug Testing 12th Annual Drug Testing Industry Survey

2. The Survey… First conducted in 1999 and presented at the SAPAA annual meeting in Long Beach, CA Over the past 12 years hundreds of companies have participated in the survey, including laboratories, third-party administrators, collectors, medical review officers, background screening companies, and consultants Some participants completed an on-line survey while others were interviewed by telephone Results were summarized by verbatim responses Averages are estimations based on ranges provided by participants

3. The Survey… The executive summary and today’s slide presentation are available from SAPAA. All proceeds from the sale of these reports go directly to SAPAA. Survey participants who took part in the interview process receive a complimentary copy of the executive summary. For additional information please contact Bill Current at 954-255-8650 or visit his website at StateDrugTestingLaws.com.

5. Participants a’TEST Consultants: Jeff Sims Acxiom: David Eades Alere: Joe Plaia Applicant Insight: Heather Britt and Melissa Ervin ASAP: Laura Dashner CannAmm: Dennis Kerns ClearStar: Todd Shoulberg Collections Plus: Tom Econome Compliance Information Systems: Eric Quilter and Kurt Bothner Comprehensive Medical: Sue Ramsden Concorde: Art Cohen DISA: Gene Perry DrugPak: David Goncalves EBI: Sandra Serrano Edge Information Management: Jeannette Shoulberg

6. Participants Florida Drug Screening: Patrick Galla Houston Medical Testing Services: Jon Vogler i3Logix: Dan DiThomas Integrity Safety & Testing Administrators: Lorri Smith LabOne: Donna Smith LexisNexis: Eric Hess Omega Laboratories: Bill Corl Orange Tree Employment Screening: Steve Mihalik OraSure Technologies: Brian Feeley Quest Diagnostics: Bob McCormick Red Planet Substance Abuse Testing: Judy Swartley Superior Training Solutions: Mac Allen Washington Drug Free: Tom Pool Workforce QA: Rick Tennant

7. Survey Format… Two Surveys: The Traditional Interview Survey The On-Line SAPAA Survey

8. Survey Format… The Interview Survey featured four main sections: State of the Industry Drug Testing Trends Brand-Name Recognition Concerns Plus: The Annual Bonus Question

9. Section 1: State of the Industry What is the state of the drug testing industry in 2011? Are drug testing sales up or down in 2011? Are background screen sales up or down in 2011? What’s the biggest difference in doing business in 2011?

10. What Is the State of the Industry in 2011? “Stable” “A tiny bit up” “It’s better” “Doing much better than last 2 years” “We’re in the black for 5 months in a row” “I have seen a big upswing” “Probably 20% or more growth [in 2011]” “First quarter was way up… flattened out in the second quarter” “Workplace testing is relatively stable… stable versus up or down” “Finally seeing light at the end of the tunnel”

11. What Is the State of the Industry in 2011? “We’ve seen an uptick but not back to where we were a few years ago” “I wouldn’t call it healthy” “There’s still a general lack of hiring” “We keep getting this rah-rah news out of Washington… but business owners aren’t buying it… saying ‘this doesn’t sound right’” “Collectors are still experiencing a bit of a flat trend” “Nothing stellar… but we’re seeing more progress” “We’ve seen a little up tick… still uncertainty”

12. What Is the State of the Industry in 2011? “Seeing increased testing from existing clients” “Tons of requests for exam management, DOT and non-DOT physicals, etc.” “We’ve seen some recovery of pre-employment testing volume… more hiring in the industries we serve” “Still high unemployment numbers, but there’s more hiring going on… people are still losing jobs” “Testing activities beyond drug testing… DNA testing, paternity testing, background checks, physical exams” “Big new thing over the last 12 months has been wellness” “Seen a significant increased demand for SAP services depending on the sector” “Increased demand for DOT-mandated testing… trucking industry is up” “We’re a different business now… we’ve changed out marketing approach. What worked before won’t work any more”

13. Are Drug Testing Sales Up or Down? “Drug testing sales are up slightly” “Up but not where they were 5 years ago” “Sales are up due to take-away business” “Increased volumes from schools only” “Drug testing sale trending up 30%... adding new clients daily” “Drug testing sales are up 35%” “Sales are up… evidence of drug use prompted some clients to do ‘base-line’ testing or ‘wall-to-wall’ testing” “Acquired a business with 70% take-away business” “Up 30% from interest in doing other types of testing… schools that do DOT are now doing non-regulated testing for prescription drugs” Non-DOT drug testing is driving the increase” “Up over last year… hopefully a sign of better times to come”

14. Are Background Check Sales Up or Down in 2011? “About the same as last year… go hand-in-hand with drug testing, so not as many background checks being done” “Background check sales are significantly up… energy sector now requiring background screens” “Tenant screening was big… but now HUD and others are challenging it” “Background screens are more important than ever because of terrorism” “Sales are up… trending 30%” “We have to address it from a competitive standpoint… still don’t fully understand that business” “Providers that just do one or the other [drug testing or background checks] will be squeezed out of the marketplace”

15. What’s the Biggest Difference In Doing Business in 2011? “Maintaining costs while gaining new business. It is a balancing act to ensure we do not overstaff or get too fat” “Doing more with less this year, where as last year we were doing less with less” “The focus is on margin” “Customer service is #1 the last two years… flexibility, willingness to customize what you do for clients or they’ll leave you in a heartbeat” Small companies now have a lot more weight… used to be bigger companies, now it’s small companies”

16. What’s the Biggest Difference In Doing Business in 2011? “It’s all about technology… that’s what is changing. It used to be about getting the test right and in a timely manner… more people putting pressure on us on the IT side” “Have to pay more attention to expenditures, cost of growth… have to spend money on technology… do I hire 3 new people or buy a computer with real capabilities and hire one expert IT person?” “Previous year’s technology investments have impacted not only our organization, but in the greater scheme, a much higher level of customer service for our clients”

17. What’s the Biggest DifferenceIn Doing Business in 2011? Other things mentioned: Switch from HR to procurement making drug testing buying decisions Adds a new layer of commoditization to an already over-commoditized product Offering alternative matrices Offering expanded panels Outsourcing back-office operations Offering electronic chain of custody… and on-line ordering More focus on the system rather than just the test Selling around employers’ fear of government regulations… health care law is making people hesitant to hire resulting in a reduction in pre-employment screening More consideration for alliances or buying partnerships to help reduce costs and remain competitive

18. Section 2: Trends in Drug Testing What is the trend in on-site testing or POCT? What is the trend in oral fluid testing? What is the trend in hair testing? What is the trend in drug test prices?

19. On-site Testing or POCT While some saw the trend flat or not increasing as fast as they thought it would several had just the opposite opinion. “It’s getting more popular year over year… curve is getting steeper” “Not cannibalizing lab-based testing as some thought it would, there’s some encroachment… but it’s creating a new activity in the market” “Some increase usage among existing clients for reasonable suspicion and post-accident testing” “Seeing more companies doing it… mostly in the health care industry” “It was dead for 3 years and now it’s starting to pick up again” Companies are starting to see the benefit to an instant result” “Up, up, up… labs are more aggressive in pushing it” “More clients asking about it—more competitors offering it”

20. Oral Fluid Testing “Lab-based oral fluid testing seems to have a lot of traction this year” “Lab-based oral fluid testing is the buzz this year again… finally!” “We see movement, although slow, but a steady increase” “There’s going to be a big shift to lab-based oral fluid testing… it’s really been dead the past couple of years, but the proposed guidelines will change that” “If you can get a company to use oral fluids they won’t go back to urine” “Selling points are attractive… observed collection, for example” “Quest will be promoting it more and that will make a difference” “We may be missing an opportunity so we’re pushing it now in our presentations” Oral fluid testing is where hair testing was 10 years ago… the science has been vetted and the numbers are there and they’re good numbers”

21. Hair Testing The workplace market appears to be stable with some industries expanding use. “There has been some increase in sales to the trucking industry… where they do it in addition to urine testing” “We’re seeing more use in the energy industry and other safety-sensitive industries like HAZMAT… mostly for pre-employment testing” “Refineries are requiring contractors to do hair testing” “Sales are about the same but we’re always pushing it for pre-employment testing”

22. Hair Testing However, the real growth appears to be coming from non-workplace markets: “Sales in the court system are growing” “We’re marketing to criminal justice attorney and D.A.s” “There’s more of a push in the criminal justice market… we get a lot of curiosity calls… they think it sounds cool” “Criminal justice is the trend… court cases, judges requiring hair tests… we’ll get 5 every day”

23. Drug Test Prices “Not seeing labs charging much more” “Labs are willing to negotiate if you use their on-line systems” “It’s still trending down” “It’s been up a little because labs have raised prices due to the expanded DOT panel” “Lab-based oral fluid testing will go down a little with Quest introducing it’s new product” “Some labs used the DOT changes as an excuse to increase their profit margins… one lab just passed on their increased cost without marking it up… if they can do that why can’t the other labs?” “Our prices are high… don’t know how they could be higher”

24. Drug Test Prices “See no changes with labs… collection prices are going through the roof” “Collection sites are hiking their prices for urine and hair” “For observed collections the collection sites are almost gouging us on the price… $50 and higher” “We’ve seen an increase in collection fees… more than ever seen… outrageous… two increases in one year from the large network providers” “One company tried to increase our price by $8.00… we wont’ go for that”

25. Section 3: Brand Name Recognition Laboratories Oral Fluid Testing On-Site or POCT Urine Hair Testing

26. Brand Name Recognition: Laboratories

27. Brand Name Recognition: Oral Fluid Testing

28. Brand Name Recognition: Hair Testing

29. Brand Name Recognition: On-Site/POCT Urine

30. Section 4: Concerns Unstable economy Public attitude toward drug abuse… legalization of illicit drugs Medical marijuana laws Low-ball pricing from background screening companies Are we testing for the right drugs?… new drug trends What do we do about prescription drugs? Lack of institutional knowledge within the industry Drug testing cheating… synthetic urine (“we’re only as good as the quality of our tests”) A lack of ethics in the drug testing industry… making a sale comes above ethics

31. Bonus Question: DTAB and Lab-Based Oral Fluid Testing We had a split decision with a slight majority indicating that they believe the Drug Testing Advisory Board will recommend lab-based oral fluid testing be added to the federal guidelines. How soon? Most of those who believe it will happen say it will be some time in 2012. Less than half said they believe that DOT will someday permit lab-based oral fluid testing. There was a near-unanimous opinion expressed toward DTAB recommending the use of electronic chain of custody.

32. Bill Current Can Be Reached… By calling 954-255-8650 By emailing bill@billcurrent.com By visiting this website: StateDrugTestingLaws.com