Diabetes Drug Cost Set To Soar

Diabetes Drug Cost Set To Soar

According to a report released today by Medco Health Solutions (NYSE:MHS) spending on diabetes drug could rise 70% by 2009. The report found that diabetes treatments trailed only cholesterol medications in total prescription spending growth in 2006. Robert Epstein, Medco Chief Medical Officer, stated “Diabetes and, in particular, type 2 diabetes, is becoming much more prevalent among people of all ages.”

According to data from IMS Health, U. S. sales of diabetes drugs reached $9.8 billion in 2005.

Sadly all this money isn’t yielding better outcomes for the growing diabetes patient population. As billions are being spent the fact remains that nearly two thirds of patients are not adequately controlling their diabetes. This fact also points to an even bigger problem facing the U S healthcare economy; the growing cost poorly controlled patients are incurring to deal with the many complications that set in for poorly controlled patients. Diabetes is already the fifth leading cause of death in the US and since 1987 the death rate due to diabetes has increased by 45 percent, while the death rates due to heart disease, stroke, and cancer have declined.

The situation is likely to get even worse as the population of people with pre-diabetes is growing as well. According to the Center for Disease Control there are 51 million Americans with pre-diabetes.

While these sad statistics are bad news to the millions who suffer from diabetes and the millions more that will soon join them, pharmaceutical and medical device companies are jumping for joy. Back 10 years ago when Diabetic Investor first came on the scene there were handful of companies that had diabetes as a focal point. Today nearly every major pharma company has made diabetes a priority. Medical device companies centered on diabetes are growing like weeds. The fact of the matter is the diabetes epidemic touches nearly every sector of economy and has broad implications for companies in retailing, disease management, insurance and media.

Looking towards to the future Diabetic Investor sees companies who focus on patient friendly approaches as the likely winners. This is one reason we see the long-acting version of Byetta from Amylin (NASDAQ:AMLN) as a paradigm shifting event in the treatment of diabetes. Likely to hit the market sometime in 2009 or 2010, over-worked and under-staffed physicians would have an easy to use, effective therapy that is taken just once-a –week.

The diabetes epidemic will also make companies like PolyMedica (NASDAQ:PLMD) even more valuable. Already the dominate player in the Medicare market, the company is well positioned to take advantage of the growing ranks of Baby Boomers who are hitting 60.

Novo Nordisk (NYSE:NVO) is another beneficiary. Besides a strong presence in the US, Diabetic Investor cannot think of another company in a better position globally. The diabetes epidemic is not just a US problem it is a global problem.

The prospects for the many devices companies aren’t as clear. Although the diabetes population is soaring the market for blood glucose monitoring systems is growing in the low to mid single digit range. The winners here are likely to be companies that can provide consumer friendly products who operate efficiently. The government is already moving towards competitive bidding and pricing pressure continues to intensifying.

Unfortunately Diabetic Investor cannot find one company that is set to make the move into what could be the biggest market of all, diabetes education. Some would say that disease management companies are in the best position here. However, disease management in its present form is too expensive and the cost savings generated from diabetes disease management falls disproportionately on poorly controlled type 1 patients. While it is well known that patients who receive even a little education produce better outcomes over the long term, the cost savings for employers is less clear. Why pay for disease management for your entire patient population when the majority of savings comes from an identifiable smaller percentage of patients?

Looking towards to the future Diabetic Investor believes diabetes education will be dominated by the many media companies entering the diabetes market. Supported by advertising dollars from the growing ranks of companies looking to reach this huge market, diabetes media can provide the education that is so desperately needed and do so cost effectively. Dlife already airs a cable television show dedicated to diabetes and there are thousands of web sites and blogs devoted to diabetes. The key here will be achieving the size, scale and reach that advertisers covet.

Should diabetes education continue to be pushed to the back burner, two things are clear. First, the spending estimates from today’s report are understated. And second, with all the billions being spent on drugs and devices another statistic won’t change – the high percentage of poorly controlled patients. It’s time for someone to step up to the plate.

David Kliff
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