Medtronic Update
This morning Medtronic (NYSE:MDT) stated that they should have a semi-closed loop insulin pump system ready mid to late 2008. The company also stated they have completed enrolment for their STAR 3 trial which will compare insulin pump therapy to multiple daily injection therapy.
More importantly the company reiterated their already stated position that they will vigorously defend their extensive patent portfolio. While it goes largely unnoticed in the insulin pump market the strength of a company’s patent portfolio is just as important as their existing technology. Besides controlling nearly 70% of the insulin pump market, Medtronic has the largest patent portfolio in the insulin pump area. Diabetic Investor brings this point up as Medtronic’s competition in this market has another obstacle to overcome. Evidence of just how strong this patent portfolio is came when Roche made the decision not to challenge Medtronic’s patent on putting the bolus calculator on their Spirit pump. This same issue forced Smiths into a settlement with Medtronic and has crippled Smiths ability to compete in the insulin pump market.
Looking forward Diabetic Investor believes Medtronic is misreading the market. While we have no doubts that if successful a closed loop system will make insulin pump therapy more patient friendly. However with increased concern over the rising cost of pump therapy one has to wonder whether or not an advanced system will receive reimbursement. This is the reason for the Star 3 trial, Medtronic wants to demonstrate a clear therapeutic benefit to pump therapy. Yet even if the trial comes back with positive results market dynamics could make these results mute.
Diabetic Investor sees the insulin pump market moving towards the lease versus buy pricing model. Currently insurance companies are paying $4,000+ to get a patient started on pump therapy, annually pump patients spend another $1,700 on disposables. The rub here is rarely will that patient stay with insurance company long enough so they can effectively amortize the cost of pump therapy. The last thing an insurance company wants is to spend $4,000+ to get the patient started then have that same patient leave the plan a year or two later. The key to future growth in this market isn’t tied to advancements in technology as it is to effective pricing.
David Kliff
Publisher
Diabetic Investor
www.diabeticinvestor.com
www.davesrunfordiabetes.blogspot.com
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