It was just a matter of time
It seems only fitting that as we close out 2009 and move not only into a New Year but a new decade that the approval process for medical devices would come under scrutiny. Yesterday two published studies called into question the approval process for cardiovascular devices. Unlike drugs which undergo years of clinical trials, medical devices face a less stringent approval process. Although the studies did not mention any devices used to help manage diabetes, any changes to the approval process will surly impact the future of this market.
It may only be a coincidence but these studies come on the heels of the new healthcare reform package, a package that included new higher fees for medical device approval. Unlike the pharmaceutical industry which offered Washington nearly $80 billion of concessions as the healthcare bill was being put together, the medical device industry was not as generous. Given the amount of horse trading done to get this bill passed, it’s hardly shocking that the medical device industry is not thrilled with the bill.
Diabetic Investor believes that these two studies are just the tip of the iceberg and all device makers will face tougher approval standards in the new decade. Looking specifically at diabetes devices any new rules could have a serious impact on product innovation slowing the pace of new products coming to market. While it’s premature to pick winners and losers here as the new rules aren’t here yet, Diabetic Investor sees the biggest loser being the insulin pump market, more specifically closed-loop insulin delivery systems.
The Holy Grail of insulin delivery systems has been a closed loop insulin delivery system, a system which combines a continuous glucose monitor with an insulin pump. As we stand today there are already systems available where a CGM communicates with an insulin pump helping the patient make a more informed decision when it comes to dosing. The next step in the evolution of pump therapy would be a system that actually closes the loop and takes the patient out the decision making process. Diabetic Investor has never been a big fan of a true closed loop system as we believe that such a system has too many opportunities for failure.
We also questioned why any company would want to take on the additional liability that would accompany a true closed loop system. Additionally, with margins getting tighter by the day it doesn’t make much economic sense for companies to take on the additional patient support that would be required for a true closed system. Yet, companies like Medtronic (NYSE:MDT) continually tout their progress towards a true closed loop system falsely believing that patients would folk to a device that is likely to cost over $10,000.
Yet, insulin pumps aren’t the only diabetes devices that would likely be hurt by new approval standards. Blood glucose monitors, perhaps the simplest device used by patients, are likely to feel the effects as well. For years everyone has known that these devices have been approved although the readings produced by the monitors are not exactly accurate. Prior to the PQQ controversy, no one really paid much attention to this fact as the readings, while inaccurate, did not hurt patients. As Diabetic Investor has pointed out on several occasions there are numerous factors which go into a reading and glucose levels are only one factor in determining how much insulin a patient doses.
In an attempt to garner a strategic advantage, LifeScan a unit of Johnson and Johnson (NYSE:JNJ), has been pushing the FDA to develop tougher standards for approving glucose monitors. Already the company has embarked on a new ad campaign that touts the accuracy of their monitors. A brilliant marketing move as it puts the competition on the defensive as they have to basically prove their monitors are as accurate as LifeScan’s. However this strategy could easily backfire on the company as accuracy is something that can be compared.
This is not unlike what happened when alternate site testing first hit the market. Like any innovation in BGM it was quickly copied and now is standard throughout the industry. The same is true for fast test times. Given the tough market conditions Diabetic Investor doesn’t see the need for tougher accuracy standards as market forces will make this a reality. If anyone thinks Bayer, Roche or Abbott (NYSE:ABT) will allow LifeScan’s claims to go uncontested they haven’t been paying attention to the realities of the BGM market.
Another area that could be hit by tougher approval standards is continuous glucose monitoring systems, in particular hospital based systems. Diabetic Investor has long held this is the most promising market for CGM systems. Not only are more hospitals adopting the Portland Protocol, a hospital based system would be huge productivity enhancement. Dexcom (NASDAQ:DXCM) and their partner Edward Lifesciences (NYSE:EW) are the market leaders here but there are host of smaller less well known companies also trying to capture a piece of this market.
About the only area that might not come under close scrutiny would be insulin pens. However Diabetic Investor is aware of efforts to develop an insulin pen that communicates with a glucose monitor. Insulin pens are becoming the insulin delivery system of choice and companies are looking at ways to help the patient make more informed dosing decisions not unlike what insulin pump companies are doing with their semi-closed loop systems. With a “smart” insulin pen the real brains of the system would be in the glucose monitor which would likely contain a bolus calculator.
Even with new, tougher approval standards Diabetic Investor does not see much changing in the long term. The fact remains for all the innovation of the past decade, average testing frequency has barley improved. The same can be said for insulin pumps. There is no question that insulin pump technology has improved dramatically over the past decade, yet there are still hundreds of reports of patients not being properly trained on how to effectively use this technology.
While Diabetic Investor is not necessarily opposed to tougher standards, the FDA in typical fashion is missing the point. The real problem isn’t that glucose monitors are inaccurate or that insulin pumps experience system failures. The real problem is patients are not properly trained on how to use these devices or educated as how to use the information provided by these devices. The fact is average testing frequency will never improve with technology advancements alone, years of innovation has proved this fact. The same can be said for insulin pumps, while the technology has improved dramatically over the years there are still too many adverse events that are reported that can be directly linked to poor patient training.
The fact is any medical device, whether it’s for diabetes or any other disease, can experience problems. They are, after all, a machine and machines do fail. Additionally there is no guarantee that with better training or improved education that the patient will act any differently. However, there is one thing we know for sure, the problem isn’t how these devices are approved. The fact is until patients understand how and why to use these devices these problems will remain. A tougher approval process will only stifle innovation, hurt the many companies in the market and do nothing to help patients achieve better outcomes. Once again the FDA is missing the point but this unfortunately is all too common.