BGM – Consumer product or medical device
Long ago Diabetic Investor took the position that blood glucose monitors had made the transition from a medical device market to a consumer product market. Today it’s commonplace to see television commercials for meters as BGM companies seek to establish brand name awareness. With competition intensifying it should come as no surprise that Abbott (NYSE:ABT) has taken the next step in consumer marketing, namely the use of coupons. Long a staple in the consumer product market, the use of coupons is a relatively new tactic by a major BGM company.
While Diabetic Investor has not been kind to many of Abbott’s efforts, we see the use of coupons as a wise move. The fact of the matter is in the eyes of the patient all meters do basically the same thing and it really doesn’t matter which meter they use. With many private insurers and employers looking to shift a greater portion of costs to the patient we are quickly reaching the point where the patients co-pay may actually be higher than the cost of a box of test strips. As Diabetic Investor pointed out last week there is even talk, foolish as it may be, that non-insulin using patients really don’t need to test that often.
Abbott has correctly read the market and realizes that if they are to continue to gain share they must step out of the box and employ non-traditional marketing tactics.
With BD (NYSE:BDX) exiting the market and all the major players chasing after the 4 million or so insulin using patients who test more frequently the door it makes perfect sense to target that largest and fastest growing segment of the diabetes market, non-insulin using type 2 patients. Although these patients typically test less frequently than insulin using patients they out number insulin users by almost a three to one margin. Any company that successfully penetrates this market will have a major advantage.
Consider that according to the American Diabetes Association (ADA) there are nearly 15 million diagnosed patients in the United States. Most industry observers, including Diabetic Investor, estimate there are approximately 4 million patients using insulin which leaves nearly 11 million non-insulin patients. Add in the 41 million Americans that the Department of Health and Human Services estimates have pre-diabetes and you have a large untapped market. Any company that captures just 5% of this market that translates into over 2.5 million patients. Should these patients fall into the conventional testing pattern of just two tests per day, that’s an additional 5 million test strips per day or nearly 2 billion test strips used ANNUALLY.
Diabetic Investor has never understood why meter companies haven’t been more aggressive in their efforts to reach this market. While it is true they do not test as frequently as insulin using patients simple math tells you that by capturing a small percentage of this market will have a major impact on a company’s bottom line. Given that the domestic BGM market is growing at less than 10% annually it would seem logical that BGM companies would look to explore ways to increase meter usage in under penetrated markets.
Abbott’s move to non-traditional marketing tactics should serve as wake up call to the entire industry.