Next steps

Next steps

After reading our post yesterday on Dexcom (NASDAQ:DXCM) receiving FDA approval for their SHARE device which transmits data from a Dexcom receiver to a smartphone an incredibly smart reader had the following question:

“So there is a lot of smart phone/tech integration going on in the diabetes world.  Does any company actually “win” from this integration or will consumers just expect this integration and it will be another commoditized feature?”

A truly excellent question and just by luck Diabetic Investor has an equally excellent answer. Yes it is very likely as move closer and closer to interconnected diabetes management (IDM) that connectivity between diabetes devices and smartphones will become somewhat of a commodity, in that devices without connectivity will be the exception. This transformation is already underway as just about every new diabetes device has smartphone connectivity.

It also true in the future patients will expect smartphone connectivity; that when given the choice between a connected or non-connected device they will choose the connected device. We also see payors encouraging patients to use connected devices as they can then more closely monitor their patients with diabetes.  Diabetic Investor actually wouldn’t be shocked to see payors increase co-payments for non-connected devices as a method to get patients on IDM.

The market will evolve even further with companies designing devices targeted at sub-segments of the diabetes market. A perfect example of this is a company called GreatCall who has partnered with the Rite Aid pharmacy chain. GreatCall makes smartphones targeted at seniors, smartphones that come pre-loaded with the Rite Aid app.  According to story on the Drug Store News web site;

“GreatCall’s active aging services include:

  • 5Star service – U.S.-based NAED Certified Response agents use the phone’s GPS and information provided in the user’s personal profile, to confirm the user’s location and effectively evaluate the situation. Agents provide the connection to whichever emergency services are required, from medication questions to emergency dispatch services;
  • Urgent Care provides 24/7 unlimited access to speak with registered nurses or board certified doctors anytime, anywhere without having to travel to a doctor’s office or make a copayment;
  • MedCoach medication reminder app enables users to easily follow medication schedules as prescribed by their doctors;
  • The GreatCall Link app gives family caregivers peace of mind by providing both critical information in an urgent situation and snapshots of normal daily activities. Friends and family who download the Link app to their smartphone will receive an alert when the user of a GreatCall device contacts a 5Star agent in an emergency, including the date, time of call and type of help provided. In addition, the app provides information on daily events such as current locations, power status, and a list of activities to ensure that daily routines are normal and the device is charged and in use;
  • Brain Games improve cognitive functions, improve memory and sharpen focus while providing fun; and
  • Check-in Calls are friendly, automated calls that can be scheduled to check in on a family member, providing peace of mind.”

It would foolish not to believe that in the future IDM will come in different forms for different patient segments.  The fact is patients with Type 1 diabetes have much different concerns than Type 2 non-insulin using patients. Both patient groups will benefit from IDM they will just use it differently.

This now leads to the critical part of the question namely will there be any winners here.  The answer is yes, any company who can transform data into knowledge will be a winner. As we have been stating with regularity payors are moving away from the fee for service reimbursement model and moving toward an outcome based model. IDM is just a tool that when used as intended can help a patient achieve better outcomes.

IDM by itself will NOT produce better outcomes, IDM combined with an educated patient leads to knowledge which in turn produces better patient outcomes. This is an extraordinarily important point as far too many people believe that advanced technology like IDM ALONE produces better patient outcomes. Nothing could be further from the truth. Go out and read any of the many studies done on IDM and universally better outcomes come not from the data alone rather data combined with education.

This is why Diabetic Investor believes it could one of the many newcomers to this space who could emerge as a winner. It’s also the reason we don’t see the old guard doing all that well as they would need to transform themselves from institutions used to selling stuff to ones that provide patient solutions. As much as the old guard talks about providing patient solutions all they really care about is selling more stuff. The newcomers see things differently as they are selling solutions and the stuff is just a tool to help patients achieve better overall outcomes.

In the future the big money winners will be any company who can bring these two worlds together; a company who can produce the stuff cheaply while offering proven patient solutions that lead to better patient outcomes.  We say this because while the old guard likes to complain about shrinking margins the fact is there is still money to be made in BGM provided a company’s costs and goals are properly aligned. We also say this because payors while moving towards outcomes based reimbursement aren’t there just yet and still pay, albeit at lower rates, for things like test strips.

Perhaps the most exciting aspect of all this is how the newcomers to the wacky world of diabetes have the opportunity to transform it.  And we’re not just talking about tech companies like Apple, Google, Facebook, Samsung and the like. Yes they will be part of the transformation but won’t be leading it. They have the technical part down but Diabetic Investor has yet to see any of these large tech companies grasp the concept of combining data and education. To date they fallen into the same trap as the old guard as they have fallen in love with whiz bang technology and have forgotten it’s how that technology is used that really matters. They see that outcomes based reimbursement is coming but aren’t structured to benefit as payors make the transition. Strangely here is where the old guard and more knowledgeable newcomers have an advantage as they can play in old sandbox while the new one is being built.

As Dexcom proved yesterday while the FDA can be difficult to work with the agency isn’t opposed to new ideas they just need time to understand and adapt to new ideas.  Right now Diabetic Investor isn’t sure how large tech companies will deal with this; yes they have the money to influence change however we’re not sure they understand that it takes more than money to make change happen.  That sometimes it’s better to work within the existing system no matter how broken it may be because when it comes to government agencies change comes slowly, if it all. As we noted yesterday this is just one more reason we admire Dexcom as they put up while most everyone else in diabetes devices are just complaining and should just shut up.

The key here really is to understand that IDM by itself will NOT produce any winners that it will become a commodity in the future. The winners will be any company who can transform data into knowledge and they only way that happens is engaging and educating the patient. The most important thing of all is to remember that IDM is a tool, just as BGM is tool, used to gather and transmit data. That the data by itself will not produce better outcomes just as regular glucose monitoring by itself does not produce better outcomes. It’s when data combined with an educated engaged patient leads to knowledge which then leads to better outcomes. In its simplest form it’s not the tool itself but how the tool is used that matters.