BGM A Market in Turmoil
What happens when the market you operate in experiences slower growth, intensifying pricing pressure and the prospects for greater government regulation? Yet, on the flip side the product you sell carries a hefty margin and brings in a ton of cash? Do you stick with it, tough it out and realign expenses to match this new operating environment? Or do you find a profitable way to exit the business by selling your unit before conditions get worse?
These are just some the questions facing companies in the glucose monitoring market, a market that is not limited to individual patients with diabetes but also includes units sold to hospitals. As a group these companies are struggling to come up with a strategy that matches rapidly changing market conditions. For the most part we have already seen severe cut backs in operating costs as companies have laid-off sales people, cut back on advertising and outsourced research and development. We have also seen some companies explore the possibility of selling their units, a prospect made more difficult as potential acquirers are wondering how they can do things differently in this rapidly changing environment.
The overall question is not whether market conditions will change rather how fast will these changes occur and what is the future going to look like. Will we see a market dominated by one or two players and group of smaller companies struggling for every share point? Or will the market remain fractured with companies switching market positions based on whether or not they decide to buy formulary position? Is it possible that a newcomer to the market could fundamentally alter the market and do something so out of the box, that the existing players will be caught flatfooted and unable to adapt?
Fundamentally this all really comes down to money, how much are companies willing to spend and will they receive an adequate return on investment?
Even though Diabetic Investor is not overly optimistic on the future for BGM, there are moves that can be made today that could dramatically alter strip usage and new patient adds. Or put another way, it is not too late to save BGM from the mistakes of the past.
The first thing that needs to be done is match the patient to their meter. Currently meters are marketed not by the patient’s therapy option but stressing meter features and test result accuracy. To Diabetic Investor this strategy is worn out and carries with it a fundamental flaw, which is any advancement in technology or feature added is quickly copied by the competition. This copycat approach is a major reason why this has become a commodity market and in the eyes of consumers who see little difference between systems so it really doesn’t matter which one they use.
Why not change the paradigm and market systems based on a patient’s therapy regimen. Although it should be obvious the monitoring needs of a type 2 patient using oral medications is far different than the needs of a type 1 patient on an insulin pump. While this may be obvious, this reality is largely ignored by BGM companies who seem to believe that all patients are the same regardless of how they are treating their diabetes. Even more stunning is the fact that BGM companies would not have to make major changes to their existing systems to accomplish this goal.
Take non-insulin using type 2 patients, the least frequent tester yet by far the largest group of patients with diabetes. It is also true that as a whole this is the least educated group of patients in terms understanding how to more effectively manage their diabetes. As we have noted on numerous occasions this group of patients do not understand what test results mean or how to use these results to more effectively manage their diabetes. This group carries with it another major problem, in that, even with this data there is little the patient can do when it comes to changing their therapy regimen. Or put another way, even if a patients test results were completely out of whack they cannot do anything about it and must see their physician before any change in therapy can be initiated. This is completely different than an insulin using patient who can change the amount of insulin they administer based on the results of their glucose tests.
Why not dumb things down for type 2 non-insulin patients and provide them with information they understand. Instead of having the meter deliver a numerical test results why not instead issues a color coded result – i.e. Green Yellow and Red. While not overly sophisticated, most people understand Green is good, yellow means proceed with caution and Red is not good. Common sense would tell the patient that is they are consistently in the yellow or red zone something might not be right and this would prompt a discussion with their educator or physician, who could convert the zone readings into numbers by simply downloading the readings to their computer.
Diabetic Investor would expand what AgaMatrix has done by providing a smiley face for good results and program the meters to deliver some type of patient feedback. It shouldn’t cost that much to have a meter deliver the message “Good Job” or “Great Work” when the patient is in the Green Zone. The simple fact is, patients like feedback and are more likely to test when they are rewarded with positive feedback. Even when the patient is in the yellow or red zone a message can be delivered that reinforces the fact they tested.
This is not a perfect solution and would require some readjustment as to how patients are trained, however, considering the possible up side in strip sales it’s worth the effort. While it’s generally acknowledged there are approximately 4 to 5 million patients on insulin therapy, which leaves another 19 to 21 million who do not use insulin. Should a third of these non-insulin patients, approximately 5.7 million check their levels just once a day that adds another 2 BILLION test strips to the market each year. That’s 2 BILLION test strips that aren’t being sold today.
Going all the way to the other end of the spectrum why not develop a meter for insulin-pump or multiple daily injection (MDI) patients that automatically communicates with the patients computer, just as cell phone using Bluetooth technology automatically syncs with a patients contact file. No USB cables, no wires whatsoever, just place the monitor within a few feet of the computer. This is not unlike what Bayer has done with their ContourUSB monitor that attaches to the patients computer or what AgaMatrix has done with their very patient friendly Zero-Click software.
The reality is different patients have very different needs and meters should not be developed and marketed as if they are one-size fits all devices. Given that average testing frequency hasn’t changed much in the last ten years and in that time span we have seen the introduction of alternate site testing, smaller blood samples and ultra-fast test results, it might just be time to try a different tactic. Take a page from the computer industry which now offers a wide array of systems for almost every user type. Most of these systems are based on the same platform and the buyer decides how many bells and whistles they need. Same is true for cell phones, which now come in all shapes, sizes and configurations based on how the consumer uses the device.
The simple fact is BGM companies have spent far too much time and money on developing great technology and have spent far too little time and money talking with the people who actually have to use this technology each and every day. These companies would do well to learn from experts like P&G who have made a living understanding the needs of the consumer. Does anyone seriously believe that the Tide being sold today is really that much different than the Tide sold ten years ago? Yet over that same time frame how many times has P&G introduced “new” versions of Tide based on what the consumer wants. And Diabetic Investor can’t think of a more competitive or commoditized market than laundry detergent.
The bottom line here is that BGM companies need to become smarter at how they sell their systems and spend more time and effort on understanding the real people who actually use all their great technology. Or as Charles Brower, an advertising executive once stated; “There is no such thing as “soft sell” and “hard sell.” There is only “smart sell” and “stupid sell.”