Everyone wants a piece of the pie

Everyone wants a piece of the pie

Yesterday Diabetic Investor had a discussion with a start-up company that’s developing a…wait for it … an insulin pen which …. wait for it …. communicates with the way cool ever popular iPhone. Which means that once insulin has  been dosed that information can be …wait for it… sent to the cloud where it can then be viewed by ….wait for it … the patients’ healthcare team who in turn will use this information to …wait for it …. help the patient better manage their diabetes.

Now Diabetic Investor does not want to cast any aspersions on this company or its device as if used as intended yes it could help patients more effectively manage their diabetes. However two thoughts came to mind while talking with this company; even if they can make it work will anyone pay for it and second can any interconnected diabetes management (IDM) system exist without reimbursement being tied to better patient outcomes?

Now keep in mind this isn’t the only company seeking to develop a “smart” insulin pen. Lilly (NYSE:LLY) had the Memoir insulin pen which recorded the date, time and amount of the patients last 16 insulin doses but the information was not uploaded to the cloud and the pen is no longer available here in the US. At one time Sanofi (NYSE:SNY) was said to be working on a “smart” insulin pen which would send data to the cloud but like all things Sanofi and diabetes the project remains in limbo.  Still one has to wonder whether payors who are increasingly looking to cut costs will actually reimburse for what everyone acknowledges will be a premium priced product. Would Novo Nordisk (NYSE:NVO) for example, in effort to offset the higher cost of a “smart” pen subsidize the cost or sell it at lose to get it into the hands of patients?

This is the conundrum faced by the developers of today’s smarter diabetes devices, without outcomes based reimbursement it’s difficult seeing payors providing premium reimbursement when the order of the day is cost containment.   Even with outcomes based reimbursement todays developers face another costly problem; proving that their particular whiz bang way cool device actually produces better outcomes. This means costly and time consuming clinical trials.

This is why Diabetic Investor believes if these new technologies are ever to make it into the mainstream of diabetes management companies will need to find more creative and less costly methods for proving that their particular product actually helps patients achieve better outcomes. To find an environment where outcomes matter today and not in the future, an environment where they can not only prove what they have does work but also make some money while doing it. Believe it or not this environment exists today and comes in the form of the exploding market for corporate health and wellness plans.

As we have noted in the past these programs are not just becoming more common but corporations are spending even greater sums as they see a direct line between better patient outcomes and lower employee healthcare costs. It is in this arena newcomers stand the best chance of proving what they have works.  This market also has another advantage as the old guard won’t go anywhere near it, they remain stuck in the day where formulary placement means everything. Something that will change as outcomes based reimbursement becomes more standard.

Think of it this way let’s say for example you have a corporation with 10,000 employees of which 1,000 have diabetes. Studies have shown that for every 1% decrease in HbA1c employers save an average of $1,500 per year in employee healthcare costs. The more out of control an employee is the large the annual savings. According to the American Diabetes Association (ADA) male employees with diabetes miss an average of 11 days of work due to their diabetes, 9 days for female employees. Therefore better control not only saves the employer money but produces the additional benefit of increasing employee productivity.

In this situation we could easily see an employer telling their employees who are participating in the health and wellness program that to qualify for rewards they need to use a particular glucose meter or “smart” insulin pen because they want the ability to verify that these programs are working. The fact is they can give away all the free meters they want but if the employee doesn’t use them who cares. Employers are learning from past mistakes and now want to see verifiable data that these programs are working.

To Diabetic Investor this is a win win scenario for the device companies as not only do they get there device into the hands of patients but they get paid to do what in essence is a clinical trial. Now this might not be the trial a payor wants to see but it sure is the type of data other corporations want to see.  As we have noted before we firmly believe that employers in their never ending quest to control continually rising healthcare costs will be the early adopters of IDM and help bring IDM into the mainstream.

There is no question that IDM is coming and one day will be considered the standard of care. There is also no question these systems whether it is a “smart” insulin pen or glucose meters that sends data to the cloud are ready today or will be in the not so distant future. The only remaining question is who will pay for all this way cool whiz bang technology, well if these companies are smart they’ll ditch the old model and chase the corporate market. A market which already is laser focused on outcomes and isn’t waiting around for payors to transition to outcomes based reimbursement.

The future of diabetes management is all about outcomes and that future is here today