Might as well

Might as well

Since we’re on somewhat of a roll today let’s take a look at yet another announcement from the glucose monitoring space. When 2016 began news came that the FDA had approved the My Dario glucose monitor for sale in the US. Now to be honest we’re not sure if we even mentioned this as quite frankly we didn’t feel this was all that newsworthy. And just to be honest we really wouldn’t be mentioning this if we weren’t rolling today. Yet the fact is My Dario is another example of just how screwed up this wacky world can get.

Now just to be clear we think the My Dario is a neat little device with an above average design. Yet to be equally clear we’re just not sure we need another way cool whiz bang interconnected glucose monitor. Think about this just for moment but does not Livongo, TelCare, iHealth, Roche, Abbott (NYSE: ABT), OneDrop, Bayer and LifeScan, a unit of Johnson and Johnson (NYSE: JNJ) all have a version of this. And yes we’re pretty sure we are leaving out some who are also in this space. Is it not also true that Dexcom (NASDAQ: DXCM) and Medtronic (NYSE: MDT) have continuous glucose monitoring system which send information to the cloud.

Is it not also true that the conventional BGM market is in the crapper? Is it not also true that reimbursement rates for test strips have fallen dramatically? Or that this has become a pure commodity market where price trumps everything else? Have we not also seen usage decrease? Is not becoming clearer each day that all these way cool whiz bang interconnected monitors all do basically the exact same thing the exact same way?

Perhaps the craziest part is money is still being thrown into this space. That millions perhaps billions have been thrown at these companies who have way cool whiz bang interconnected devices, even though no one has proved that using these devices actually improves patient outcomes. Even worse so far at least payors, the people who truly control the keys to the kingdom, remain unconvinced.

Here is the dirty secret when it comes to private payors and managing their patients with diabetes, do it as CHEAPLY as possible. And no this is not just because these are for profit companies who want to make money. This has just as much to do with the nature of their business, a business that sees a high level of patient turnover. Although we have never seen any real published data on this but based on numerous discussions with those in the industry patients on average only stay on a plan for 2 or 3 years. Payors know this which is why they don’t want to invest too much into these way cool whiz bang devices even if they do produce better patient outcomes as they will not benefit from these better outcomes.

This is also way these systems stand a better chance of being used if they are connected with a corporate wellness program as unlike payors employers who are self-insured will see not just lower healthcare costs when their employees with diabetes are managed better but will also see improvements in employee productivity. But most important of all these employers will take a longer term view PROVIDED they see some real results.

The fact is the very nature of diabetes management doesn’t help much either. The simple fact is it’s rare to see quick improvements in outcomes even when the patient starts practicing better diabetes management.

The point here is that we are not against these way cool whiz bang interconnected devices actually the opposite is true. However, looking at this market from a BUSINESS perspective it’s difficult to see how with all these companies doing the same thing basically the same can make money.

A wise device executive once said when it comes to marketing almost any product and these devices are no different there are two things that matter to the patient; do they save them time or money? Right now one could easily argue that the answer is no on both accounts. That in reality these devices increase the time they are spending managing their diabetes yet this increased effort is not being offset where patients feel it most, in their wallet.

As we have stated from day one interconnected diabetes management (IDM) has a world of potential. However even with all this potential just how many of these things do we really need? And why aren’t investors asking this same question.