Dividing up the pie

Dividing up the pie

This morning Walgreens announced they were expanding customer access to MDLIVE. According to a company issued press release; “Walgreens, in collaboration with MDLIVE, today announced an expansion of the Walgreens mobile app, offering MDLive’s telehealth services to users in 20 additional states, now totaling 25, as well as the launch of an updated telehealth experience within the app, providing better functionality and integration.”

The release goes onto to state; “Additionally, the company announced the launch of the Walgreens Connect app, which allows Walgreens Balance Rewards members who own a Well at Walgreens connected premium brand blood glucose meter or blood pressure wrist monitor to earn points for taking daily measurements. The Walgreens Connect app guides the user to select the device to pair, connect to the device, sync data and earn Balance Rewards points in three easy steps. The data is seamlessly captured and transmitted to the cloud via the 2net™ Platform and 2net Mobile solutions from Qualcomm Life, a wholly-owned subsidiary of Qualcomm Incorporated. Walgreens rewards 20 points per day for taking a blood pressure measurement and 20 points per day for blood glucose measurements.”

This expansion of the MDLIVE service and the incentivization of glucose monitoring is just one more example of the emergence of interconnected diabetes management (IDM). It also shows how the landscape is changing in the highly competitive glucose monitoring market.  Perhaps not so obvious is what this tells us about how the reimbursement pie for the treatment of patients with diabetes is changing. Once the sole domain of primary care physicians and endocrinologists, retail pharmacy chains such as Walgreens now want a piece of that reimbursement pie.

With the emergence of services like MDLIVE combined with IDM it is now possible to manage patients with diabetes virtually. Add in the fact that Walgreens and CVS are expanding the number of in-store clinics it is also possible for these retailers to capture even more reimbursement dollars by performing the lab work that goes along with diabetes management. While we don’t envision physician visits to be completely eliminated, at least not yet, the number of these visit will likely decline as more patients move to virtual management.

The fact is while managing diabetes is not easy, for the vast majority of patients it’s not that complex either. Given that Walgreens and CVS have easy and regular access to these patients some would even argue that can more effectively manage their diabetes.  This is possible because of advanced technology which not only gathers patient data but combines this data with analytics allowing for effective virtual management. The way we see it there really isn’t a compelling reason for a patient with diabetes to physically meet with a patient, that the same functions performed by a physician in the office can be done virtually.

Now that payors are also reimbursing for email consults and other forms of virtual patient interaction, Walgreens and CVS can leverage their scale here too. Even with the consolidation of physicians’ offices they cannot match the reach of a Walgreens or CVS. The one area where physicians maintain a competitive advantage are the more complex patients mostly Type 1’s following intensive insulin therapy but even with this group it’s just a matter of time before virtual management becomes the norm.

The missing piece of the IDM puzzle has always been who gets paid for the heavy lifting. Who would look at the data generated by the patient combined with their therapy regimen and make adjustments when needed. Simply put who would get paid for services once the exclusive domain of the patient’s physician. Well thanks to IDM combined with advanced data analytics the role that used to be played by the physician is being replaced by technology. Physicians will still play a role but more of that role will be done virtually and at a lower per consult cost.

Yet let’s not stop at how this transformation will impact the physician but extend to device and drug companies. The incentivization of data gathering gives Walgreens and CVS tremendous leverage putting increased pressure on the makers of devices. It’s no accident that the two glucose monitors that currently work with the new Walgreens Connect app are their own store branded meter made by Nipro and the iHealth meter.  It’s possible even likely that Walgreens would demand that major players like LifeScan adapt their meters to work with this platform. Walgreens could also go a step further and demand LifeScan pay to the preferred meter used with the app.

Afraid of losing valuable market share points LifeScan would have little choice but to capitulate to these demands or risk losing share. Just as payors control the keys to the kingdom today through formulary placement, in the future these keys may shift to Walgreens and CVS given the influence and frequency of contact they have with their customers. Reimbursement for BGM may not be great but it’s better for Walgreens and CVS when a patient uses their store branded meter than it is when they use a LifeScan or other branded offering.

The simple fact is the dynamics of healthcare are changing. That everyone is looking for ways to lower healthcare costs. Looking at diabetes management specifically technology has now made it possible to lower costs without adversely impacting care. The only question looking forward is how this reimbursement pie will be divided, who will get the large slices and who will get mere crumbs left behind.