Taking a bite out of the Apple
Once again Apple is holding their developers conference and once again everyone is speculating what they will do when it comes to digital health. This leader of way cool whiz bang has only dipped their toes into the water and so far has yet to make the deep dive into the digital health pool. This reminds us of their strategy in diabetes an area they have sniffed around but never quite committed to. It has become somewhat of parole game guessing what Apple will do and since we like games we thought we’d chime in with our thoughts on the subject.
Will Apple replicate what Google has done with Onduo?
They could as they are very public about their relationship with Dexcom and while Dexcom and Verily we’re once partners and still work closely together there is nothing standing in the way should Apple wish to acquire Dexcom. However we do not see the company forming a company like Onduo nor do we see them making any acquisitions in this space either.
Will they come out with their own non-invasive Apple Watch CGM?
NO NO and NO and we do not care how much money they have. Apple has traveled down this path and failed already. They have a relationship with Dexcom which works well for both companies and they really don’t want to have their Apple Watch regulated by the FDA which is exactly what would happen if the technical hurdles were overcome.
Is it possible they will find an alternate use for CGM which would not require the FDA to regulate the Apple Watch?
You can almost count on this one as CGM is not just for diabetes. Right this very moment there are companies which are transforming CGM into a training tool for elite athletes and a weight loss tool for just about anyone. This is where Apple can make some serious money and would not necessarily require FDA approval. While accuracy is a huge issue when managing diabetes it’s less of an issue when CGM is used outside of diabetes.
Now we are not an expert on non-invasive CGM technology our understanding from speaking with the experts is getting consistently accurate data. This is one reason we have yet to see a non-invasive CGM succeed however when not used for managing diabetes this accuracy issue becomes less of a concern. Given the increasing sophistication of algorithms our guess is these less accurate CGM’s would work just fine for athletic performance or weight loss.
Apple can go about this in one of two ways, they could buy Dexcom, own the best CGM and play in all the CGM markets diabetes being just one of many. Or they could buy a Dexcom wannabe and reconfigure the technology away from diabetes. We have long stated that the many Dexcom wannabes are making a major mistake by playing on Dexcom’s home turf and would be much better off playing in the non-diabetes field. Let Dexcom and Abbott own the diabetes CGM world the non-diabetes world is much bigger and much more lucrative.
Is Apple making a mistake by not making a deeper dive into digital health?
We don’t think so as Apple wants to be in areas that generate a consistent reliable increasing revenue stream that supplements their sales of devices. The problem with digital health or digital diabetes anyway is that this world even as new as it is has begun to transform from a monthly per patient fee model to an outcomes-based revenue model. This is a much less predictable revenue model even though it may be more lucrative in the end.
It also requires a substantial upfront investment as any company that moves towards outcomes based must bear the ongoing costs of managing patients plus bears the burden of hitting the outcomes metrics. This is the direct opposite of how Livongo does business as once they get an employee onto their platform they get paid regardless of whether that patient achieves better outcomes or not. Livongo’s burden is to get employees onto their platform and then keep them on it.
Should a company like Onduo convert to an outcomes-based model this would make life very uneasy for the folks at Livongo as both companies do basically the same thing the same way using slightly different technology. Onduo could walk into an employer and state they only pay IF outcomes are achieved, while Livongo walks in and says you pay when your employees sign up. The company will pay under either option the question is when and how much. All things being equal, and they never are, we think employers will prefer the outcomes-based option as it carries no ongoing costs and they can reserve against a future possible cost.
This is not the sandbox Apple wants to play in. They would rather have an Apple Watch which tracks glucose but is not used for diabetes management but for weight loss. They can build a suite of apps around this premium version of the Apple Watch. Apps which can then offer premium options for a small fee which Apple collects. This is the gift that keeps on giving.
Quite frankly the company could if they wanted to become a major player in diabetes with their existing technology. Anyone with an iPhone, Apple Watch or both knows these devices collect a tremendous amount of data which can and usually is shared with Apple Health. Glucose data is collected there as is steps taken, miles run, heart rate, etc. Should they chose to do so Apple could take all this data throw it into a way cool whiz bang algorithm and help someone with diabetes better manage it.
They could, if they choose to do so, also build a suite of apps which could in turn charge a small fee and the cash register begins to ring. Cha Ching!
We suspect the smart people at Apple are aware of this, perhaps not. But the fact is they really don’t need to develop anything new to become a major player in digital diabetes or digital health for that matter. Apple is many things but stupid isn’t among them and their resistance to entering digital health in a big way just might be sending a message to all those who see digital health as the answer to every health issue on the planet. The question is anyone listening.
