Processing Your Payment

Please do not leave this page until complete. This can take a few moments.

October 4, 2012

The Hair Doesn't Lie - Psychemedics Sails On Drug Detection

Photo/Emily Micucci Psychemedics CEO Raymond Kubacki runs the drug-testing company from its Acton headquarters.
Photo/Emily Micucci Psychemedics’ headquarters is tucked away in Nagog Park, an office park in Acton.

Applying to work for a Fortune 500 company? The odds are pretty good that you'll be subject to drug testing before hire. And there's a decent chance that Acton-based Psychemedics Corp. will conduct the test.

Psychemedics specializes in highly-sensitive hair tests that determine if a potential employee uses drugs. Its patented test, which has been cleared by the U.S. Food and Drug Administration (FDA), includes five screening assays. CEO Raymond C. Kubacki Jr. said in an interview that they are the most sensitive on the market, making them the drug test of choice for about 10 percent of Fortune 500 companies.

"Because of our patents, and because not all hair testing is the same, we have a very significant proprietary position, so we've been able to be very successful," Kubacki said during an interview at the company's Acton offices.

Psychemedics entered the market in 1987 when its founders, Annette and Werner Baumgartner, unveiled their first patented test to customers. The company recently received a new patent, developed by the company's research and development team, keeping it on the cutting edge of the drug testing business. Today, clients include big names like General Motors, BMW, Kraft Foods, and Sunoco, to name a few.

The Psychemedics test is not only more sensitive than other hair tests, according to Kubacki. It's also superior to urinalysis, which detects illicit drugs for a matter of days – a little longer for marijuana – compared to months for the Psychemedics test. And, hair testing is a less intrusive way to test for drugs, Kubacki said.

"It's a lot less embarrassing and demeaning than providing a urine sample," Kubacki said.

Sales On The Rise

Recent sales success seems to back up Kubacki's claims that Psychemedics offers a product that's in demand. After sinking to $16 million in 2009, revenue has rebounded to pre-recession levels of $24 million. The company has also paid dividends to shareholders for 64 consecutive quarters. Its latest gains were reflected in its earnings for the second quarter ending June 30, which showed a 10 percent year-over-year revenue increase. For the first half of the year, Psychemedics revenue has jumped from $12.2 million in 2011 to $13.1 million in 2012 – a 7 percent increase.

Asked how the company achieved such a healthy rebound following the recession, Kubacki said management made quick decisions to counteract the effects of falling sales. Staff was reduced methodically, so as not to harm "key skills," he said. In addition the company eliminated its 401K plan and everyone took salary cuts.

Today, Psychemedics employs about 120 people, after reinstating positions lost in the recession. Most of those workers are based at the company's lab in Culver City, Calif., while the rest work in offices in Acton, Dallas, Chicago and Las Vegas. The company also has satellite offices in England and Brazil.

Now that Psychemedics is sailing along, it's looking for ways to grow. Though it's had a good run in recent years, the company is still relatively small. Kubacki estimated its market share is less than 10 percent. He said the company is working on taking a bigger piece of the pie, which is currently dominated by competitors like New Jersey-based Quest Diagnostics and North Carolina-based LabCorp.

Kubacki thinks prospects are good. He said more companies are opting to screen potential hires today than ever before.

"All the discussion today is about more testing, not less," Kubacki said.

Drug Testing To Boost The Bottom Line

Backing up that statement was Tracy Burns, director of the Northeast Human Resources Association based in Waltham. Compared to 10 years ago, employer drug testing is more prevalent, according to Burns, and it has spread across industries, from manufacturing and construction to health care, retail, and financial services.

Historically, drug testing was used to avoid workplace injuries and bad hiring decisions, Burns said, but now it's more about employers' bottom line.

"The bigger driver today is the cost associated with substance abuse in the workplace – nearly $100 billion a year related to healthcare, absenteeism – not to mention the level of disruption that can be caused by an unproductive employee," Burns said in an e-mail.

A September 2011 report issued by the Society for Human Resource Management, an international professional organization, found that drug testing is a common and effective tool for managing those drug-related cost drivers.

Fifty-seven percent of firms surveyed reported they conduct drug tests on all job candidates, while just one quarter reported using no drug testing program at all. Fewer firms reported high absenteeism rates if they drug tested job candidates, with nine percent reporting absenteeism rates of 15 percent prior to a program being implemented, compared to four percent afterward. And nearly a fifth of firms surveyed reported increased productivity after employing a drug testing program.

But just because testing is more common doesn't mean companies should proceed without caution, Burns said. She said the laws regarding drug testing employees are usually left up to the states, but in most situations, it is lawful to screen an applicant once a job offer is made.

Tests can usually be administered to existing employees if there is reasonable suspicion of drug abuse, and the same goes for employees involved in serious on-the-job accidents where drug abuse is suspected. But it's better to be safe than sorry, when it comes to drug testing, Burns said.

"My best advice is, before you finalize any policy, that you have an employment lawyer review it," she said.

Kubacki believes drug testing is a tool that does more than protect the bottom line. He said it is reduces the number of drug users who apply for jobs at companies that test, and in some cases motivates people not to use drugs in order to find employment.

"You want to deter people from using drugs, and the job is important to people," he said. n

Sign up for Enews

WBJ Web Partners


Order a PDF