Strange going’s on at Insulet

Strange going’s on at Insulet

According to the OmniPod website:

“Abbott Diabetes Care received FDA clearance for its NEW FreeStyle Test Strips. New and improved FreeStyle Blood Glucose Test Strips are intended to be used with FreeStyle (also know as FreeStyle 3 and FreeStyle 5), FreeStyle Freedom® and FreeStyle Flash® blood glucose meters only.

Insulet is awaiting clearance from the FDA for the use of the new FreeStyle® test strips in the OmniPod PDM.

Please continue to use your current FreeStyle® test strips until Insulet obtains FDA clearance.”

What’s truly amazing here is that Insulet (NASDAQ:PODD) for whatever reason has not received FDA approval. This is even more amazing given that the new FreeStyle strip was approved last June. What’s more troubling here is a supply issue, for obvious reasons Abbott (NYSE:ABT) is no longer shipping the “old” FreeStyle test strip. There is also the question of what happens when an existing OmniPod users uses the “new” test strip with the PDM. Considering it is Insulet’s responsibility to get the new strip approved for use with the PDM, one has to wonder how they allowed such a situation to happen.

Of greater concern are reports coming from existing OmniPod users that the company is sending replacement pods without first obtaining the patients authorization. This unauthorized shipment of replacement pods allows the company to bill the patient’s insurance provider and book the revenue. This matches other reports Diabetic Investor has been hearing that the company is having some major issues hitting their sales numbers. As we previously reported the company is also facing some serious quality issues which have hurt sales.

All this comes after the company spent $63 million to acquire a DME, a move which the company claimed would increase sales and enhance revenues. While no one other than Insulet believed this to be true, it seems as though these new sales are not materializing and that this deal is exactly what Diabetic Investor said it was; a diversionary tactic to take investor attention away from poor pod sales.

Given this set of circumstances Diabetic Investor is beginning to wonder if the company stands a chance of receiving FDA approval for their new pod. While Diabetic Investor does not know of any reason why the new pod should not be approved, the fact that the company is still awaiting approval for the new test strip, an event they knew was coming and should have been prepared for, calls into question management’s capabilities to deal effectively with the FDA.  Everyone knows that the FDA is not an easy agency to deal however management cannot continually blame the FDA for every problem.

Let’s look at this another way, if a relatively unknown company like TelCare can get their glucose monitor through the FDA in just five months, how is it that a company that has been around for ten years and has had extensive dealings with the FDA, cannot get a test strip approved for use with their PDM. Did management not understand that Abbott would be phasing out the old FreeStyle strip? Did they not believe that patients would naturally assume that the new strip worked with the PDM? And why, for heaven’s sake, did they wait so long to inform their patients that they should not use the new strip when this issue was brought to the company’s attention months ago.  One also to wonder, why the company only posted this notice on their web site and did not directly contact their patients through the mail, email or by phone?

Think of the poor patient who walks into his local pharmacy to pick up more test strips, unaware that the new strips are not supposed to be used with the PDM. Even if the patient was aware it’s equally possible that even if the patient asked for the old strip the pharmacy may not have any of the old strips in stock. What does the patient do then?

This whole scenario points to a much broader problem which rests squarely on the shoulders of management. The test strip fiasco shows a complete lack of understanding for the needs of their patients. The quality issues are equally contemptible and further reinforce their uncaring attitude towards their patients. These quality issues also show they lack common sense. As we noted before as innovative as the OmniPod is, patient’s will not chose a system they know to be unreliable. Yes, it’s great to be wireless but its better when the damn thing works. Given the choice of an unreliable wireless system or a reliable conventional insulin pump, reliability wins. Insulin pump therapy is intensive enough as it is and the patient should not add worrying about whether their pod will fail or not to their already long list of concerns.

And if these issues weren’t enough the company adds insult to injury by shipping replacement pods, which the patient did not order, in desperate attempt to hit their quarterly sales number. Are these people so out of touch with reality that they believed the patient would not notice they did not order these supplies? This is not like a BGM company dumping test strips on a wholesaler to make their quarterly number, this is an insulin pump company dumping supplies, supplies which the patient has to pay for, on unsuspecting patients without first receiving the patient’s permission.

The bottom line here is the company has no one but themselves to blame for the problems they themselves have created. Their contempt for their existing patients is obvious and their lack of concern over the situation explains why they are not getting new patients. It’s been said more than once that any idiot can make an insulin pump but it takes real talent to run an insulin pump company. Right now at Insulet it looks like the inmates are running the asylum. This is no way to run an insulin pump company and quite frankly the Insulet management team should be ashamed of themselves.