It’s a big tent

It’s a big tent

Reading Diabetic Investor some may get the impression that only companies located in Silicon Valley are in the interconnected diabetes management (IDM) market. Or perhaps we should rephrase that and say some may get the impression that these companies are the only ones that matter. However, it would be a big mistake to think that Google, Apple, Facebook and Amazon are the only companies who have the vision and capabilities to be major players in this space. Take a look at few items;

According to MobiHealthNews digital health companies raised $149 million in July and July is traditionally a slow month.

Phillips has entered the interconnected market with five new devices all of which have been approved by the FDA.

In a sign that interconnected devices and the data they generate have truly arrived we are beginning to see more articles on the legal issues with these devices and the data they generate.

Now it’s easy to understand why all the interest in IDM as diabetes continues to grow at epidemic rates across the globe. Diabetes is not just a major health issue it is also huge economic issue. The bottom line here is truly the bottom line as patients with better outcomes avoid many of the costly complications associated with poorly controlled diabetes.

Corresponding with the diabetes epidemic is the growth in the smartphone market. Phones which have basically become another appendage attached to our bodies 24x7x365.  Think for a moment when was the last time you went 24 hours without interacting with your smartphone. Let’s face facts smartphones have become a part of our daily lives.

Therefore, it seems to make perfect sense that a patient’s smartphone would become the central hub of their diabetes management system. Not only can this device collect and retransmit data, it’s a device a patient WANTS to have with them, a device that the PATIENT believes they cannot be without.

The most amazing aspect of this push towards IDM is the speed at which this market is developing. How companies are staking out their respective territories. In the old day’s diabetes device companies lived under the mantra of one size fits all. No thought was given to how Type 1 patients manage their diabetes differently than Type 2 patients. Or how a 55-year-old patient manages versus a 30 or 65-year-old patient.

Just by way of example the Phillips system isn’t all that impressive, it’s not particularly way cool or whiz bang. Phillips though is differentiating their system by the fact it is FDA recognized. Phillips is clearly targeting that segment of patients who may be skeptical of any device not recognized by the FDA. Patients who need some prodding from their physician to use these devices. Physicians who also may be more comfortable with devices that are FDA recognized.

Others in this category are also segmenting their offerings. As we have noted many times insulin using patients were and really are the primary target for IDM. However, non-insulin patients also need help and the newcomers to this space not only recognize this fact but are also well aware this is by far the largest group of patients. Simply put it would be foolish from a business perspective to ignore this huge patient population. This would be like developing systems that only work with an iPhone which ignores phones which use the Android operating platform, which by the way just happens the most prevalent smartphone operating system.

Now before we condemn the old guard for ignoring this huge market it’s important to understand why they ignored it. Given the way systems were paid for non-insulin patients just weren’t profitable. Based on the cost of acquiring a patient it made better sense to target insulin using patients. Just using blood glucose monitoring as an example, insulin using patients made perfect sense as they actually test their glucose on a regular basis. Or put another way they actually used the product.

Today with reimbursement transitioning from fee for service to outcomes based all patients have become a potential profit center. This in turn is also changing the way systems are being sold transitioning from buying individual pieces of the system to monthly fees which cover all the pieces of the system. The shave club for men concept is quickly becoming the standard.

We hate to be redundant but diabetes management is now all about systems, all about transforming data into patient relevant, patient actionable information. It almost immaterial which hardware is used to gather and transmit all this data. Nor does it really matter which piece of hardware delivers insulin. What matters is getting the patient engaged with their diabetes management, helping them to more effectively manage their diabetes which in turn should lead to better outcomes, which is now where the money is made.

This is just another reason the old guard is at somewhat of a disadvantage here as they have grown up in one environment, built their franchises around this environment and now that environment is being turned upside down. This is like asking Peyton Manning a classic drop back quarterback to become Cam Newton a more mobile quarterback more suited for todays game. Just as Peyton Manning could not overnight change his DNA, how he played the position his entire career the old guard cannot simply change overnight. Whether old guard retires, as Peyton has after a long and distinguished career, is the $64-dollar question.

Another huge issue facing the old guard is even if they decide to buy what they do not have. Even if they try and change, the question we have is after being doing business one way for so long can they break completely from the past. As quite frankly that’s what must be done if they are to have any chance at all.

Perhaps the best way to think of this is to look at the Chicago Cubs, who after more than century of losing decided it was time to win. This was not an easy transition and it did not happen overnight. Their fans had to endure some brutal years while the organization rebuilt their farm system, drafted and developed young talent. Realizing that young talent alone would not take them to the promised land they went out spent some money for talented free agents and now are in serious contention to make it to the World Series. Simply put the Cubs did not try to change the environment, they adapted to it. This transition was not easy and it does not guarantee a trip to the promised land. However, given the results so far it is no longer a dream either.

One last item which does not favor the old guard, attitude. While tech companies are used to 6-month product cycles, designing consumer friendly products; where change is not just a constant but it is encouraged. The old guard is used to the lengthy FDA approval process, adverse to change which is often viewed as career killer rather than a tool for advancement. While tech companies almost encourage dissent from their team in attempt to become better, at the old guard its almost the exact opposite approach.

The biggest difference between the new and old is how they look at the future, the old guard almost seems to dread the future and the unknowns the future brings with it. While the tech companies view the future with optimism and promise. They do not see things as they are but as they want them to be.