As if the BGM market needs more issues

As if the BGM market needs more issues

According to a report by Rabobank’s Food and Agribusiness Research division, the share of private-label brands and products will double to 50% by 2025. The report’s author Sebastiaan Schreijen noted that national brands and smaller, secondary brands (referred to as “A” and “B” brands, respectively) will prompt an intense price competition and therefore will cause the private-label market to become chock-full of higher-quality “B”-brand products at lower prices.

This report just confirms what’s already taking place with glucose monitors as retailers such as Walgreens, CVS and Rite Aid have already begun cutting back on the shelf space devoted to branded offerings and placing a greater emphasis on their store branded offerings made by Nipro Diagnostics. These offerings provide the same functionality and quality as the branded offerings just as a much lower price point. Additionally retailers realize that they not only make more money with their store branded offerings but that their customers identify more closely with their brand than the monitor brand.

This greater emphasis on store branded offerings places the name brand companies in a precious situation. Already caught in the pricing meat grinder companies like Roche, LifeScan, Bayer and Abbott (NYSE:ABT) have had to resort to costly co-pay equalization programs to remain competitive. While the goals of these programs are admirable they just further confirm that monitors are basically a commodity and reinforces in the patients mind that it really doesn’t matter which system they use.

Although it has taken longer than Diabetic Investor expected we are quickly reaching the point where patients no longer ask which system is best or which is covered by their insurance, rather which system is cheapest. With a greater percentage of their healthcare costs being transferred to the patient and patients watching every dollar they spend common sense tells us that this increased emphasis on store branded products is yet another nail in the branded products coffin.

The simple fact is the branded companies even with all their recent cost cutting cannot play in the low cost world. This further reinforces Diabetic Investor belief that it’s no longer a matter of if there will be further consolidation but when it comes and who will buy or merge with whom. It also reinforces the important role that insulin using patients will play in the future. The stark reality no branded company can survive without capturing a high percentage of insulin using patients.

Diabetic Investor further believes that with new more interactive systems coming to market, where a monitor does more than just deliver a test result will just make things even more difficult for the branded companies.

The bottom line here is while the Fat Lady isn’t singing yet, she’s warming up in the bullpen and it’s no longer a question of if she will sing but when and for whom.