A Revolution?

Yesterday we noted that Roche was getting set to launch their Solo patch pump. We also noted that there are a host of companies also jumping into the insulin pump pool. Yes, everyone seems to believe they have built a better mouse trap. Each time an insulin pump newbie enters this highly competitive market they state they will do something that has never been done before; increase pump usage for insulin using Type 2 patients.

Now never mind that no one and we mean no one not even mighty Medtronic has been able to do this. Still this hasn’t stopped people from trying. Nearly every insulin pump newbie believes they can make insulin pump therapy easier, easy enough so that anyone can do it.

Looking at insulin pump technology today we can certainly understand why these companies feel this way. Combine any insulin pump with an accurate CGM and insulin dosing algorithm and yes insulin pump therapy is easier than ever before. We would even go as far and state in about 18 months to 2 years insulin therapy will be 100X easier than it is today.

Thanks to CGM and insulin dosing algorithms much of the heavy lifting that used to be done by the patient will be taken off their shoulders. We can envision the day when an insulin patient will no longer need to count carbs. Concepts such as time to action, duration of action and insulin to carb ratios will become a thing of the past.

Anyone who has seen the data provided by Medtronic for their sensor augmented systems or the data from Tandem for their coming closed loop system knows this to be the case. There is no question in our mind that we are on the cusp of a major improvement to insulin pump therapy.

By extension this same technology will also enhance insulin therapy for patients who do not use an insulin pump. When Tyler arrives – (Tyler is our term for a “smart” insulin pen – CGM – app – insulin delivery system) patients following multiple daily injection (MDI) therapy will have it easier than ever provided of course they do what the system tells them to do.

So, let’s look at this in terms of markets – most people estimate there are approximately 1 million or so insulin pump patients around the globe. The majority of whom reside here in America. By contrast there are approximately 4 million patients following MDI therapy in America alone and another million or so using insulin plus orals. It is also well known that Type 2 patients outnumber Type 1’s by about a 10 to 1 margin.

At first glance looking at these numbers it makes perfect sense for these insulin pump newbies to go after insulin using Type 2 patients. However, what they don’t seem to understand is that the patient doesn’t always get to choose which insulin delivery system they use. For years everyone has known how effective insulin pump therapy is but still only 30% of Type 1’s use a pump and this number hasn’t changed substantially over the years even with the many improvements to insulin pumps. Therefore, there must other reasons why patients who must have insulin don’t use an insulin pump.

Once again this isn’t about which insulin delivery system is best this is about money. Yes, there are other reasons why patients won’t use a pump – they don’t want to be hooked up to a machine – they don’t to have something attached to their body, etc. However, cost is the biggest factor as to why more patients don’t use an insulin pump. Insulet was the first and so far, only insulin pump company that attempted to make pump therapy cheaper. Rather than have payors pay a large upfront cost Insulet offered a lower start up cost. Yet this lower startup cost quickly dissolved when payors discovered that over time the OmniPod system cost about the same as a conventional tethered pump.

The reality is no one will ever find a cheaper method to deliver insulin than an old-fashioned syringe. Insulin pens are next on the cost totem pole followed by insulin pumps.

What this means basically for all the insulin pump newbies is that about the only way they can establish any scale at all is to give their system away for free. To follow the model once used by BGM companies who gave away the meter for free and made all their money from the continual sale of test strips. But this model is tougher to follow in the new world of insulin delivery where sensor augmented systems are becoming the norm. Whether it’s a pump or a Tyler none of these systems function without sensor data.

Here is where things get just a little crazy as some of these insulin pump newbies are considering going all in and going 100% at risk and only getting paid based on patient outcomes. In essence they would provide all the hardware for free only making money IF these patients achieve certain metrics i.e. time in range or average mean glucose. In a way Medtronic has become the first company to head down this path as they are now guaranteeing payors that patients using their systems will avoid costly emergency room visits.

Even with this guarantee which really costs Medtronic nothing, the company is still making money from the sale of the pump and continual sale of pump supplies. But what would happen if a company went over the wall and gave away the insulin delivery system – it could be a pump or a Tyler- for free and ONLY made money based on patient outcomes. Needless to say, this requires not just guts but big bucks as whoever is so bold will be spending a ton of money upfront not to mention all the support costs that go along with insulin delivery systems.

Looking at all the insulin pump newbies about the only company who could afford such a bold strategy would be Onduo – the partnership between Sanofi and Google. Onduo now has a pump, they also have a relationship with Dexcom and Sanofi has a relationship with Common Sensing who makes a “smart” insulin pen. But what OnDuo has that no one else does is bucks, that is if Google wants to spend them.

So far Google and Sanofi have each invested $250 million into Onduo which is basically being run as a startup. However, should they go big and go 100% at risk their initial investment will look like chump change compared to what they will need to spend. An investment that COULD pay off depending on what payors are willing to pay for verifiable outcomes. That’s the $64 question here as no one knows what if the payoff for outcomes will be worth this huge investment.

We suspect payors would jump at the chance if offered this type of deal. In the eyes of the payor this is almost a win win as they would know what their cost would be IF the system works and does produce better outcomes. Quite frankly the payor has everything to gain from such a contract and not much to lose as let’s be honest payors could care less which insulin delivery system a patient uses all they care about is their cost.

Will Google and Sanofi make such a bold move? While Google can easily afford the investment will Sanofi be willing to pony up? While we don’t know the answers to these questions we sure hope they try as this would turn the insulin delivery space upside down. To paraphrase Thomas Jefferson a revolution every now and then isn’t a bad thing.