A new era?

A new era?

A few events happened today which could when looked back upon could be seen as the dawning of a new era in diabetes. This morning Lilly (NYSE: LLY) noted that their biosimilar long-acting insulin Basaglar is now commercially available in the United States. This is also the day when patients can begin placing orders for the One Drop diabetes management system. While not connected the two events signal a shift in diabetes on multiple levels.

Let’s look at Basaglar first as there is no question this is the more significant event. Even before the drug was launched it was having a major impact. Lilly knew the diabetes drug market was commoditizing that it wasn’t about performance it was about price. They understood that Basaglar didn’t have to be better than Lantus, Toujeo, Levemir or Tresiba it just had to be on par with them only cheaper.  Lilly got it right as Basaglar has become the de-facto long-acting insulin preferred by payers.

This fact has had serious repercussions at Sanofi (NYSE: SNY) and Novo Nordisk (NYSE: NVO). Sanofi just decimated their diabetes sales force while Novo has begun their own round of cost cutting. Additionally, Novo is completely reexamining how they pursue new compounds. They understand that the days of developing me-too copycat drugs that are only incrementally better than what’s already available just won’t cut it anymore. That for a new compound to stand any chance it must be innovative. This is a seismic shift for Novo.

This is also the reason that we see Novo remaining a major player in diabetes while we see Sanofi continuing to struggle. Put simply Novo will be able to transform themselves Sanofi will not and yes, it is that simple.

The availability of the One Drop is significant for different reasons. First let us say that there is nothing wrong with the One Drop, the problem is not with the system rather the market it plays in. Will patients pay out of pocket almost $500 per year? The quick answer is some will but most won’t. As way cool and as whiz bang as this system is without broad formulary access it is unlikely that One Drop will be commercially successful.

Although One Drop would never publicly admit it their strategy is an old one, if we build it someone will buy it. This is the same strategy used by LifeScan, Medisense and Therasense. It’s also the same strategy used by AgaMatrix and Livongo. In the case of LifeScan, Medisense and Therasense it worked and so far for AgaMatrix and Livongo it hasn’t. Given that Telcare was bought for just one times sales we wouldn’t classify this as a win more like a draw.

It’s ironic that just one day after Johnson and Johnson (NYSE: JNJ) announced that their interconnected system was approved by the FDA One Drop becomes available. The main difference between these two systems is that the JNJ system is reimbursed and from what we can tell the One Drop system isn’t. Other than that, they basically do the same thing the same way. We found it interesting that we could not find any mention of insurance coverage on the One Drop web site. Talk about being really different.

Now we won’t go into our normal rant about how the conventional glucose monitoring market is dying a slow and painful death. How CGM will become the standard for glucose measurement in the future. All we will add is that all the conventional players could give away their systems for FREE and this wouldn’t change a damn thing.

The biggest difference between Basaglar and One Drop is that Basaglar is aligned for the future, One Drop is not. Basaglar saves payers money, One Drop costs patients money. Basaglar does the job while saving money, One Drop does the job while costing money. Folks this is the diabetes world we now live in, as we say regularly this wacky world often comes down to money, who makes it, who saves it and who spends it.