A small bit of sunshine through the clouds

A small bit of sunshine through the clouds

This past Tuesday the FDA warned healthcare professionals and patients with diabetes to stop using Shasta Technologies’ GenStrip blood glucose test strips due to the risk of inaccurate results. This move follows a warning letter issued by the FDA on April 8th which cited 11 violations of good manufacturing practices, including lack of evidence of robust and efficient corrective and preventive action procedures, inadequate complaint handling and design control procedures, and insufficient qualification of suppliers. The letter states; “Without an assurance of an adequate quality system, the FDA believes that the strips could report incorrect blood glucose levels”.

This has to come as good news for Johnson and Johnson (NYSE:JNJ) as the GenStrip test strips are used with JNJ’s glucose meters. As previously reported JNJ and Shasta are involved in a nasty court fight, a fight which until this news seemed to be going Shasta’s way.

Diabetic Investor also sees broader implications of this move by the FDA for those who’ve been clamoring for the presence of generic test strips in the marketplace. The proponents of generic test strips basically believe that test strips cost too much and the presence of generic strips would lower the financial burden for patients with diabetes. A belief not held by Diabetic Investor as only a fraction of patients pay cash for their test strips. Yes it is true that co-payments for test strips have been increasing still the vast majority of patients aren’t overly burdened by these increases.

The same proponents of generic test strips have also been clamoring for not just cheaper test strips but test strips which are more accurate. This comes at a time when competitive bidding has cut Medicare reimbursement rates by over 70% a move which is being followed by private payors. Should these proponents get their wish, something which could become a reality as the FDA is seriously considering tougher accuracy standards, it would increase strip manufacturing costs at time when reimbursement rates for strips are falling.

One aspect these proponents ignore in their quest for cheaper, more accurate test strips is patient safety. The simple fact many of the companies who’ve stepped in to provide cheaper test strips are operating on razor thin margins and in attempt to make money have cut back on areas such as quality control. The harsh reality is that it really doesn’t matter how cheap test strips are if the damn things don’t work. Inaccurate readings are nothing to sneeze at either in particular for insulin using patients who need this information to properly dose their insulin.

Honestly Diabetic Investor isn’t surprised by the FDA’s action nor are we surprised that in effort to be profitable that Shasta cut corners.  This is the current dismal state of the conventional glucose monitoring market; a market which has fully transformed itself into a commodity market where the ONLY thing that matters is price. A market where in spite of this fact the FDA and some so-called patient advocates seek to increase manufacturing costs by requiring strips to be more accurate.

A move by the way that Diabetic Investor sees as unnecessary, yes more accurate strips would be nice but it’s not a must have especially when you balance the cost of making this happen versus the so-called benefit of making it happen. The fact is should the proposed accuracy standards become a reality expect even more FDA actions.  Look for the larger more established players to move even further away from this space, look for more cheap imports or generics. These cheap imports and generics better be VERY cheap as patients will likely be replacing defective strips with ones that actually work, that is if they can find cheap strips that actually do work.