Lots of finger pointing

Lots of finger pointing

Recently there have been several thought provoking posts/articles on the “high” cost of insulin, a subject we have touched upon several times. There is also a move afoot in the insulin pump community as pushback against exclusive contracting deals such as the deal Medtronic (NYSE: MDT) signed with UnitedHealth Care. Looking over these two movements we find several commonalities none more glaring than there is lots of finger pointing going on here. Lots of complaining, lots of pontificating but little in the way of substantive solutions.

Yes, the diabetes blogging community is mortified, shocked and really pissed off. How can it be that insulin cost so much? Let’s blame the insulin companies who in response blame health insurance companies who in turn blame Congress who in turn ….

The same goes for exclusive contracting deals, something which is actually commonplace when it comes to diabetes devices. How can payors do this, they are limiting patient choice, they are stifling innovation. The companies who don’t have these deals say they would NEVER sign such a contract.

Now we hate to bring up those pesky facts but before all these people get themselves into a lather let’s turn back the clocks of time for a little history lesson. Way back in the day there was a time when selling conventional blood glucose monitors was a VERY good business. The market was growing at double digit rates and margins were beyond obscene. Literally these companies were making strips for pennies and selling them for dollars.

What were the bloggers up in arms back then; the “high” cost of test strips. Yes, the evil empire back then was all the BGM companies. And not surprisingly many of the complaints were the same; the “high” cost of test strips was the reason patients did not test frequently and ultimately not achieving better outcomes. Never mind there was no actual factual evidence to support these claims, not unlike the claims being made today that the “high” cost of insulin is adversely impacting outcomes.  Nope never a group to let facts get in the way something had to be done.

And who better to get something done then our friends in Congress, yep let’s get the government to solve the problem. Along comes competitive bidding, a move made not because of the complaints rather because Congress wanted to save money. Although competitive bidding did not by itself create the disaster now seen in BGM it was the straw that broke the camels back. A $6 billion global market is now a $4 billion global market and soon will be a $1 billion global market.

The funny thing is even after competitive bidding the price patients paid for their test strips didn’t go down and in many cases actually went up. Why? Rising co-payments. Health plans with high deductibles. Does this sound familiar? It should as it’s the same reason why insulin prices are rising.

Now let’s be clear here no one in their right mind would claim that the “high” cost of insulin does not hurt patients. Anyone without coverage or with a high deductible plan pays a very heavy price for the drug that keeps them alive. However, blaming insulin companies for this, making them the evil empire is like blaming the weatherman who projected a sunny day and then it rains. Put more simply what an insulin company charges a payor for insulin is just one of many factors that go into the cost of insulin, what the patient actually pays out of pocket.

Now let’s look at these evil exclusive contracts, those contacts which stifle innovation and also hurt patients. These type of contracts aren’t the domain of insulin pump companies but were common with BGM companies too. Did this stop innovation in BGM? We think not even as this market sinks into the abyss companies continue to enter this market. Does anyone see Livongo, OneDrop, Telcare, iHealth, or My Dario complaining about exclusive contracting? Or are they doing their best to build a better mouse trap, trying to build something better?

The same goes for the insulin pump world. Even though Medtronic owns about 70% of the insulin pump market did this stop Tandem (NASDAQ: TNDM), Insulet (NASDAQ: PODD), Animas, a unit of Johnson and Johnson (NYSE: JNJ) and Bigfoot? Are they not trying to build a better mouse trap? Would these companies not want to be in the same position as Medtronic and have the ability to sign exclusive contracts? Did they not have the ability to go too United and beat the deal Medtronic put on the table?

The most disturbing thing here is that none of these complainers or finger pointers offer solutions. Any idiot can complain about a problem and many do. But if something is to get done how about some suggestions other than let government solve the problem. Something that went really well with competitive bidding.

How about actually acknowledging the facts instead of ignoring them.

What the patient pays out of pocket for their diabetes supplies is a complex equation consisting of multiple factors. This is not a simple math problem this is a complex algebra problem. A problem that won’t be solved by complaining or finger pointing.

Diabetic Investor for one does not pretend to have the answer, and we’re not afraid to state that fact. This is an extraordinarily complex problem which if it’s to be solved will require multiple players, often with competing interest, to play nicely together. We’d say the government could help but given the hyper-partisan nature of Congress this seems unlikely. And quite frankly given their track record our belief is government is part of the problem.

The one thing we won’t do is complain or point fingers as this is the easy way out. This is like people who don’t vote and then complain about government. We don’t know the answers either but this will not stop us from listening, exploring and investigating.  As Momma Kliff used to say; “Just because a problem is complex doesn’t mean there isn’t a solution. Perhaps it means people are looking in the wrong places. That maybe it’s time for a new approach. The one thing that won’t work, which is a waste of time and energy is complaining. It’s easy to do but accomplishes nothing.”