Is it a math problem?

Is it a math problem?

With the commodization of diabetes devices and drugs the question now becomes is diabetes a math problem. As we have seen with the various insulin dosing algorithms we are moving ever closer to a world where patients will have much better information and, in some cases, depending on their preferred insulin delivery system may do very little at all. The critical components for an insulin using patient are not how the insulin is delivered or even which insulin is used. The two most important elements have become an accurate and reliable CGM combined with an algorithm.

Nearly every expert we’ve spoken with agrees that it really does not matter which insulin pump or insulin pen delivers the insulin if these systems work as designed. They also agree that while there may slight differences between the insulin’s the differences ultimately don’t matter. There is universal agreement the one device that is critical and must work as designed is the CGM, this is as we have said before is the straw that stirs the drink.

Now it is also known that all the commercially available CGM’s and we’ll include the FreeStyle Libre in this group although it is not yet a true CGM, are getting closer to each other in terms of accuracy. The Libre has known issues in the lower ranges while Medtronic (NYSE: MDT) has had notable reliability issues. Dexcom (NASDAQ: DXCM) is still considered the leader in terms of accuracy and reliability. Still these differences between the systems will narrow over time.

It’s also true that the feature set of these systems will narrow. There is no question in our minds that CGM is following the BGM path. Therefore, before full commodization sets in the battle becomes more traditional, locking up formulary position.

Looking back at the BGM Johnson and Johnson (NYSE: JNJ) before they sold LifeScan knew where BGM was going, they knew BGM was commoditizing and prices were contracting so they did whatever they could to lock up formulary position. Listen even with prices contracting, reimbursement getting more difficult and usage decreasing this unit was throwing off nearly $500 million PER YEAR in free cash flow. Ultimately JNJ understood that scale was critical as scale drives manufacturing efficiencies.

The CGM world isn’t that much different as the more of these suckers you make the cheaper the per unit cost. The difference between BGM and CGM is BGM is not a critical component for the future of diabetes management and CGM is. Which begs the question will payors look beyond price when making their decisions on formulary position?

We mention this because Medtronic has just launched their standalone CGM which is targeted at patients following multiple daily injection therapy (MDI). A system which is well behind Dexcom and the Libre and while last to market the system does not have a better feature set and when looked at realistically is not even as good as the competition. So, the question becomes other than price why would a payor put this product on formulary?

Medtronic is not dim, and they are aware of the limitations of the system. They are also aware that in the eyes of the diabetes community their sensors are inferior to the competition. Although the company has improved things with their newer sensors as the old saying goes you don’t get a second chance to make a first impression and the impression in the eyes of the physicians who prescribe these system is the Dexcom is the gold standard for CGM.

Now here is where things could be different than BGM as BGM usage by non-insulin using patients was practically non-existent. Yes, these patients were told to test but the fact is the results had no value to the patient, so they didn’t test. What everyone misses with CGM is that it could have a greater impact on non-intensively managed patients than intensively managed patients. The fact is IT WILL JUST BE USED DIFFERENTLY. In a non-intensively managed patient CGM fulfills two vital functions – discovery and confirmation.

Once Dexcom’s slap it on turn it on sensor gets here a doctor can slap one a patient and armed with the data discovers a host of information. Based on the data a physician will know if the prescribed therapy regimen is working. It will also create a more open dialogue between the patient and physician as based on the data the physician will also know if the patient is taking their meds. Unlike Hba1c which is done maybe once a year for these patients CGM will become a cost-effective patient monitoring tool.

This is what we call confirmation usage as the physician will want to confirm that if changes were made these changes are working, if no changes were made the physician wants to confirm that nothing is looming on the horizon. Even better they don’t need the patient to get blood drawn. The fact is physicians don’t need as much data for non-intensively managed patient as they do with an intensively managed patient, they just need data in the first place. Something they aren’t getting today.

What have we said from the start all these way cool whiz bang algorithms become useless if they have no data to analyze. This is like asking Google maps to tell you how to get somewhere when you don’t know where your going. Data is the fuel that makes these algorithms work and algorithms aren’t just for intensively managed patients. This is what gets lost when it comes to CGM as everyone thinks that they are strictly for intensively managed patients.

The non-intensive market is ten times the size of the intensively managed market, yet no one seems to see beyond the intensively managed side. This is a big mistake for this is where the real money is.