Different paths to the same destination?
Yesterday we learned that privately held Glooko raised an additional $16.5 million with a major portion of that coming from Medtronic (NYSE:MDT). According to a wide variety of media reports the $16.5 Series B round comes on top $3.5 million raised back in 2012.
Now just in case people are unfamiliar with Glooko the company describes itself as a company which sells a unified diabetes data management healthcare service, which includes Bluetooth-enabled hardware to import blood glucose readings from a range of (proprietary) glucose meters to make it easier for doctors to remotely monitor patients. Put more simply they are one of a growing population of companies jumping on the interconnected diabetes management (IDM) bandwagon.
As the company correctly points out a key difference between themselves and companies like TelCare, Livongo and iHealth is their system is not proprietary and works with existing meter platforms. The company charges users a $60 annual fee for their service who can select from three different options to upload their glucose readings to the Glooko app. A Glooko subscriber must use an intermediary device to upload their readings to the app. TelCare and Livongo does this from the meter while iHealth offers two options, a meter that attaches to a smartphone or one that transmits readings wirelessly to a smartphone. All of these systems come way cool whiz bang apps, the ability to share data, etc.
The bottom line is no matter which system a patient chooses or how it’s paid for the goal is the same, get the data to the cloud and turn these data points into actionable information which hopefully will lead to better outcomes.
To Diabetic Investor the mere existence of these companies point to another failure by the major players as quite frankly they could have systems which do the same exact thing and some do, the OneTouch VerioIQ Sync quickly comes to mind. As we noted recently what these startups get and the majors don’t is when it comes to BGM the future isn’t selling more test strips. The future is about turning this data into actionable information which leads to better outcomes because in the future outcomes will determine reimbursement.
Let’s be honest the majors Johnson and Johnson (NYSE:JNJ), Abbott (NYSE:ABT), Roche and Bayer are in quicksand slowly sinking away. Yes they may have scale and for the moment formulary position but it’s just a matter of time before they won’t have that. Should these startups be able to prove that patients using their systems achieve better outcomes the last vestiges of the BGM market will be gone. When outcomes matter payors, providers and most importantly of all patients will convert from their old systems.
This is why we’re not quite sure how long Glooko in its present form can last. According to registered users on the Healthy Outcomes web site (Healthy Outcomes incentivizes patients to become better educated about their diabetes) just 34% upload their readings to their computers and while over 60% want their meter to communicate with a smartphone however they want this done automatically, no intermediary devices. As we have noted many times what users want most of all is simplicity and the simplest way to get readings to the cloud is what TelCare, Livongo and iHealth offer.
Now let’s look at cost as we noted earlier Glooko charges $60 per year for their system and patients still pay for their strips. So far Livongo is not releasing pricing information, the current TelCare system sells for $149.95 while the iHealth Align which attaches to smartphone costs $19.95, and the wireless system is $29.95. The list price for TelCare test strips are $55.95 for a box of 50, while iHealth strips are just $12.50 for a box of 50. It should be noted that both TelCare and iHealth strips are covered by insurance.
So let’s say we have three patients one using the Glooko system, another on TelCare and third on iHealth. To make a level playing field, and yes we know it isn’t, lets also say all the patients are insulin using and all have the same insurance provider which charges a $30 co-payment for strips, not a unrealistic co-payment. Finally let’s also assume they all test 4 times per day which means they consume 1,460 strips per year or 29 boxes of 50 test strips. Under normal reimbursement policies insulin using patients would be able to refill their prescription approximately every 3 months therefore making their total c0-payment cost $120.
The annualized cost with Glooko is $180 which is greater than both TelCare and iHealth when you take into account the cost of the meter is a one-time cost and not a reoccurring cost. To even the playing field let’s assume we amortize the cost of the TelCare and iHealth system over 3 years, the annualized costs for a Telcare users is $170, $127 iHealth Align or $130 iHealth wireless. Yes we know this isn’t completely accurate or totally real world but it does show even when using an existing meter platform Glooko is not necessarily cheaper.
Think about this for a moment which matters most, using an existing platform which requires more patient interaction or using a new platform that’s more patient friendly. Which begs a second question will this battle for dominance in the IDM market come down to who has the better app, will it be a battle over who has the best software not best hardware?
Now we hate to rain on anyone’s parade here but there is only so much an app can do which begs another question will companies like Glooko, TelCare and iHealth have to hire Certified Diabetes Educators to help patients interrupt what the app is telling them or will they partner with a pharmacy chain or rely solely on the patients physician?
This is what gets lost in the quest for IDM is not how the data gets to the cloud, it’s about what happens after it gets there. If the data just sits in the cloud unacted upon then why transmit it there in the first place. If on the other hand more humans need to interact with the data helping the patient interrupt what’s in the cloud costs increase. This is why it is mission critical that all these newcomers PROVE their systems improve outcomes as with no tangible, verifiable data that shows this all this hype over IDM is just that hype.
The only way IDM ever becomes the standard of care is if it is proven that patients achieve better outcomes using it. That it actually lowers and does not increase costs. Otherwise every meter company big or small is doomed as payors will continue to demand ever lower prices. If there is one thing we have learned from competitive bidding is there are plenty companies who are perfectly happy making ultra-low-cost systems.
Frankly Diabetic Investor isn’t sure who will win this race nor do we pretend to know which path is the best path. About the only thing we know is when outcomes truly do matter anyone who cannot prove their system achieves better outcomes will be out of the race. It really is that simple no matter how way cool or whiz bang they think they are. This is not about way cool this is all about outcomes.
