Lots of questions, not too many answers

Lots of questions, not too many answers

It would be a fair statement that the feeling or pulse at this most recent ADA conference is somewhat subdued. It’s as if everyone is waking up to the fact that the diabetes sector is going through yet another transition and this time it’s not for the better. The device world, conventional blood glucose monitoring in particular, is the most sanguine. While some are shocked that Abbott (NYSE:ABT) and Bayer are not exhibiting here, many are not as this is just one more piece of evidence that the BGM market has fully transformed into a commodity market.

Yet much of yesterday’s discussion centered on whether or not BGM can be saved and how it could be done. Everyone knows that Bayer, Roche and Abbott are shopping their diabetes device units and that buyers are few and far between. Frankly there aren’t many groups that want to spend billions to enter this declining market. Still there was some speculation that perhaps a behemoth, GE perhaps- yes the same GE who invested and lost $8 million in now defunct C8 Medisensors (when will these people learn) – who would come along buy up the competition and give Johnson and Johnson (NYSE:JNJ) a run for their money.

While such a roll-up would give the company the scale necessary to compete, the big problems is deciding which platform to adopt as the primary platform. This is perhaps the most overlooked aspect of the BGM market, test strips are not interchangeable between platforms. Even if GE bought Bayer, Abbott and Roche given the pricing dynamics of the market about the only way they could make any money would be to adopt one platform and then convert patients from the others. Not a bad idea when markets are expanding and reimbursement rates favorable but an awful strategy when markets are contracting and reimbursements are falling dramatically.

The simple truth here is JNJ has a huge opportunity to expand their market share if they are willing to become aggressive. With their major competitors acting like a dog chasing its tail, the opportunity exists to take away share. Everyone knows it’s just a matter of time before private insurers adopt Medicare reimbursement rates for test strips, this is inevitable. This means that scale is more important than ever if any company has any hope of making any money in conventional BGM.

Looking ahead five years one has to wonder if there will be any BGM companies exhibiting at the ADA conference.

In other news one also has to wonder how the folks at Novo Nordisk (NYSE:NVO) feel about their Victoza spokesperson Paula Deen, who once again is at the center of controversy as she admitted publicly that she has used the N-word and told racially insensitive jokes.  Already Ms. Deen has been canned by the Food Network, which makes one wonder whether Novo will be the next company to cut ties with her. Call us crazy but it doesn’t seem like a good idea to stand behind Ms. Deen especially when one considers that impact diabetes has in the African-American community. Still this is the wacky world of diabetes where anything can and usually does happen.