Another great partnership in the device world

Another great partnership in the device world

There’s an old saying that there are only two things certain in life; death and taxes. Well in the wacky world of diabetes devices the only thing Diabetic Investor knows for certain is that when it comes to “partnerships” between two device companies they will almost always find a way to screw up a rather simple agreement. A perfect example of this phenomenon is the partnership between Bayer and Medtronic (NYSE:MDT).

The story actually begins back when LifeScan, a unit of Johnson and Johnson (NYSE:JNJ), terminated their partnership with Medtronic for the LifeScan glucose monitor which communicated with Paradigm line of insulin pumps. At the time many wondered why LifeScan would make such a move considering that insulin pump patients test their glucose levels more than other type of patient, on average eight times per day. Even if only a fraction of the installed Medtronic patient base used the LifeScan glucose monitor that still meant some nice coin for LifeScan. Yet, LifeScan decided these extra strip sales just wasn’t worth it and now we think we know why.

As everyone knows Medtronic replaced LifeScan with Bayer, as the two companies already had an international agreement, so this agreement was revised to include the US. The system which is currently available overseas and is called the Bayer Link does the same thing as the LifeScan system did here in the US, allowed the glucose meter to communicate with the Paradigm insulin pump. A nice feature for patients as it does eliminate one step from the insulin pump process as patients don’t have to manually enter their glucose levels into the pump.

Last week Diabetic Investor received some information that indicated that the FDA had decided not to approve the Bayer Link system. When we reached out to Medtronic to see if this information was correct they noted that the system hasn’t even been submitted to the FDA so there was no way it was declined. Bayer on the other hand indicated that yes the system has been submitted to the FDA but they had not received an answer yet.

Now we don’t mean to be picky here but it would seem to make sense that Bayer and Medtronic would at minimum be communicating with each other and that Bayer would have informed Medtronic of the FDA submission. It also would seem that given how important this system could be for Bayer that they would be anxious to receive FDA approval, which begs the question with system already approved in Europe what the heck is taking so long here in the US. It’s not like the US system is that much different or that the FDA would seeking much in the way of additional testing, granted the FDA is no cake walk but this really shouldn’t be taking so long.

It’s also a little curious that Medtronic is so blasé about the subject and they are not pressing Bayer to get this thing going. Although Diabetic Investor does not know the particulars of the agreement between the two companies, it is known that LifeScan was paying Medtronic a royalty on the strips they sold and that they actually gave Medtronic an up-front payment for the privilege of working together. Not a bad deal for Medtronic and we can’t imagine that Medtronic would not extort similar terms from Bayer, who needs the sales more than LifeScan did.

Again, even if only a fraction of the installed patient user base used this system, financially it was win-win. Bayer sees greater strips sales and Medtronic sees an additional revenue stream. So here we are six months after the two companies announced their revised agreement, something that surly was in the works well before the announcement, and still no Bayer Link system is available here in the US. Now maybe Diabetic Investor has totally lost it but we would have thought that Bayer would want to get the system to the FDA as quick as possible.

As it stands today Bayer and Medtronic are missing out on a great opportunity as patients who were using the previous system have found alternate options and patients who would like this type of system have nowhere to go. Simply put, an easy sale has now become a difficult one.

Yep, this one great partnership and confirms what Diabetic Investor has been saying for years that surest way to get a small fortune is to start with a big one. Only in the wacky world of diabetes devices would this type of backward thinking not just be acceptable but standard operating procedure.