There was a time whenever we wrote about the insulin pump market the post would contain the following statement;
The insulin pump market is not large enough nor is it growing fast enough to support all the existing players let alone the many who want to enter the market.
This statement is still true today although we have seen evidence recently that growth has gone beyond the low to mid-single digits to the low to mid double digits. Insulet with their pay as you go pharmacy benefit model deserves a great deal of credit for making this happen. The growth we have seen at Tandem comes more from the troubles at Medtronic then it does organic growth in the market.
This is why we were somewhat surprised yesterday when Tandem stated they believed insulin pump market penetration would reach 50% in the Type 1 population in 3 to 5 years up from the current 30% penetration. While we have no doubt that when the Control IQ gets here (and don’t worry it will get here soon) it will be a major hit. We also have no doubt that when the Horizon from Insulet gets here it too will do very well. There is no question in our mind that these sensor augmented system which work with the Dexcom sensor will make insulin pump therapy much easier for the patient.
However one thing hasn’t changed all that much in that this is still all about money and payors still control the keys to the kingdom. And there is no question in our mind that payors will favor Tyler once he gets here for the simple reason Tyler is cheaper than all the new way cool whiz bang systems being developed. The fact that Insulet’s pay as you go pharmacy benefit model has been so successful proves this point. We hate to put on our captain obvious outfit (and quite frankly we don’t look all that great in spandex), but payors don’t care about outcomes they care about money.
This is not to say that the insulin pump market will regress falling back to mid to low single digit growth rates, rather this spike we have seen recently will flatten somewhat when Tyler gets here. The only way this changes would be if Tandem followed Insulet’s lead and adopted a pay as you go model. The other option of course would be to adopt an at-risk model getting paid for verifiable outcomes. A model which could also be used by any of the insulin companies when they come out with their versions of Tyler.
We hate to burst anyone’s bubble, but money not ease of use is the reason insulin pump market penetration hasn’t budged much in the last 20 years. Insulet is about the only insulin pump company who has awakened to this fact and is the best positioned of three major insulin pump companies to deal with Tyler. Tandem for their part should not be condemned for not changing their revenue model as up until now there has been no compelling reason to do so. However with Tyler coming it would be in their best interest to begin looking into alternate revenue models.
Should they fail to do so they risk making the same mistakes that is costing Medtronic. The empire is not crumbling just because of a crappy sensor, poor customer service, poor pump design and failure to listen to the patient population. No Medtronic’s biggest failure was believing the dynamics of the insulin market would not change, that things would be as they are forever. And as Momma Kliff used to say forever is a pretty long time so best be sure you have an alternate plan just in case.
With the Control IQ Tandem has the opportunity to build their installed base creating the ability to change their revenue model. Failure to do so puts at risk their long-term future for they won’t be the only insulin pump company with a hybrid closed loop insulin delivery system that works as designed. Competition will come along with a better mouse trap and to gain market adoption will offer alternate pricing models. We know this change won’t be easy but better to begin the process now before it is forced upon them.