That pesky 30% level

Last week during JPM it was asked many times why more Type 1 patients are not using an insulin pump. Why with all this way cool whiz-bang advanced technology only 30% or so of Type 1 patients use an insulin pump. There is an abundance of clinical evidence that proves insulin pump therapy is safe and effective. Insulin pumps have been around for decades and while pumps can and do fail or malfunction for the most part they work pretty well.

Yet even with all the advancements – sensor augmented systems – low glucose suspends – hybrid closed loop – only a third of Type 1’s uses an insulin pump. The numbers are even worse for insulin using Type 2’s as less than 5% of these patients use an insulin pump. What’s more startling is these numbers really haven’t changed all that much over the past 10 years. A market which was once growing at double digit rates per quarter is now barley growing in the low single digit rates annually.

Contrary to what the insulin pump companies would like everyone to believe insulin pump therapy is not superior to multiple daily injection (MDI) therapy. For every study that shows that pumps are more effective we can find one that says MDI is just as effective. This so-called performance gap which really does not exist will completely disappear when Tyler gets here. As we keep pointing out it really doesn’t matter how the insulin is delivered, what matters is delivering it in the correct amount at the right time.

Thanks to CGM technology, all the sophisticated insulin dosing algorithms and connected insulin pens MDI therapy will soon become pretty easy. We don’t want to over hype this point, but it does bear repeating because it is true and game changing in the very near future insulin therapy will become simple for the patient as the system will do all the hard work. All the patient has to do is follow the instructions/dosing recommendation made by the system.

Tyler also has huge cost advantage over an insulin pump and it’s not just because the hardware is much cheaper than an insulin pump. While Tyler will require some patient support it’s nothing compared to the support required for an insulin pump patient. Insulin pump companies employ an army of support personal who are available 24 hours per day 365 day a year. As valuable as this service is to patients, physicians and CDE’s it is also very costly.

Another hidden cost for insulin pumps is patient training costs. While it is true that insulin pumps have become more patient friendly over the years, they are not yet slap it on turn it on devices. A patient new to insulin pump therapy must still be trained on how to insert infusion sets, fill the reservoir, priming the pump, etc. Yes, there is some training with a Tyler, but it pales in comparison to what a pump patient must learn.

Tyler also has another advantage in that it’s not worn by the patient. This cannot be understated as there are patients who do not want anything attached to their bodies or have their lives run by a machine which as we have noted can and does fail of malfunction.

Ironically these patients don’t seem to have an issue wearing a CGM. We attribute this, excuse the expression, disconnect to a few factors. First CGM insertion has become simple and painless. Sensors now last 10 or 14 days plus sensors are discreet. While some patients could care less if someone knows they are using a CGM others like the fact that sensors aren’t obvious.

This vanity factor should not be underestimated as another reason patients feel comfortable with a Tyler over an insulin pump is there is no tubing or device that can be seen. While we have never felt this way there is a large group of patients following MDI therapy who want to keep the fact, they are on insulin private. These patients will often excuse themselves from a public setting when they inject.

Now before we go any further it should be obvious that there is one insulin pump that eliminates many of the issues we have pointed out. The OmniPod from Insulet is discreet, there is no tubing and there is no infusion set to be manually inserted by the patient. An OmniPod patient simply fills the Pod with insulin, places the Pod on their body, hits a button on the PDM which automatically inserts the cannula and their off and pumping. There is no question from a patient perspective the OmniPod is pretty simple compared to a conventional wired pump.

However even with these attributes Insulet cannot escape patient training or support costs. Nor can they escape another cost faced by all the insulin pump companies, paperwork. The fact is payors hate insulin pumps but cannot avoid covering them. What payors can do and have done is make the requirements for obtaining reimbursement onerous. Ask any patient, physician, CDE or anyone who works in the physician’s office and they will tell you getting coverage for an insulin pump often requires an avalanche of paperwork. Even worse each payor has a different set of requirements.

This blizzard of paper, the time it takes to gather it all, fill out all the damn forms is another reason more physicians particularly primary care physicians also hate pumps. It should come as no surprise that 20% of the endo’s account for 80% of pump placements. These pump warehouses as we like to call them have structured their practices around pumps so they can make money even with all this damn paperwork. Not to mention all the additional demands of pesky insulin pump patients.

By the nature of the therapy insulin pump patients tend to be more actively engaged with their diabetes management. This is great unless you’re the one dealing with these patients. Although physicians would never publicly state insulin pump patients are a pain in the rear, this is not what they say in private. Anyone who does not believe we are a pesky and sometimes snarky bunch check out the insulin pump groups on Facebook or read the forums on Children with Diabetes or TuDiabetes.

We have heard rumors about some of the insulin pump wannabes offering the hardware for free, making money only from the sale of pump supplies and/or insulin. (Just as an FYI we know include sensor revenue as part of pump supply revenue as the days of non-sensor augmentation are over. It may have gone unnoticed, but Medtronic has publicly acknowledged they will be phasing out their older systems. A move which in essence will force patients to upgrade to newer systems all of which are sensor augmented. Ca Ching!) At JPM we heard Insulet talk about their move into the pharmacy a move which allows them to eliminate the upfront cost of the OmniPod with patients only worried about co-payments and not meeting deductibles.

Yet even if the hardware is given away for free and the pumps are switched to a pharmacy benefit which lowers patient out of pockets all the insulin pump still must deal with high cost of training and supporting their patients. Either that or find a way to transfer this cost to the pharmacy as well. An argument could be made that Walgreens or CVS would take on these costs as they would capture a patient which generates a steady revenue stream and is continually in the store.

This argument becomes stronger when you consider the future of insulin pump technology. The low hanging fruit in improvements will be pre-filled reservoirs (something already available with Ypsomed insulin pump) or pre-filled Pods something Insulet will eventually have. Next for conventional pumps will be more patient friendly infusion set insertion systems, something akin to what Dexcom has with the G6. It won’t be long before a patient’s smartphone will control the pump, something the folks at Tidepool is making happen.

In the future training a patient will also be easier focusing on the mundane aspects of setting up the system for the system once set up will do all the heavy lifting for the patient. Thanks to CGM and insulin dosing algorithms the patient will not have to learn or understand things like time to action, duration of action, insulin to carb ratios or carb counting. This will all be done by the system. It won’t quite be slap it on turn it, but it will be pretty damn close.

The worry of a severe hypo or hyper glycemic event will also be greatly eliminated as the system will make all the necessary adjustments to prevent these events.

A hidden benefit with these new whiz bang way cool cloud enabled systems will be diagnostics. Patient data isn’t the only data being transferred to the cloud so too will be system diagnostics. In the future it’s realistic to think of a new pre-programed pump being sent to the patient BEFORE the hardware fails or malfunctions because the diagnostics detected a problem coming down the road.

Sounds pretty cool but even with all this insulin pumps will still have a huge hurdle to overcome. Given that a Tyler will be so much cheaper all this new whiz bang way cool technology MUST be priced on par with a Tyler and that my friends will kill the insulin pump revenue model. As we state consistently the goose that lays the golden eggs for a company like Medtronic or Tandem isn’t hardware sales. The goose lays golden eggs from the continual sale of pump supplies, items made for pennies and sold for dollars.

Payors will in essence force insulin pump companies to lower their prices not just for the hardware but pump supplies as well. Payors will see that Tyler is not just cheaper than a pump but also just as effective as a pump. This will provide the payors cover when they start favoring Tyler over pumps. Something they have done before with BGM and Type 2 patients.

Way back in the day payors liberally covered test strips no matter how a patient managed their diabetes. Yet as the patient population exploded, and this cost began to rise they started changing their reimbursement policies. All of a sudden payors said insulin using patients would receive one form of reimbursement non-insulin patients another. This then morphed into reimbursement being cut off for non-insulin patients with coverage only provided to insulin using patients.

Payors were able to justify this decision as several studies came out which noted that there was no correlation between glucose monitoring and improved outcomes for non-insulin using patients. Well this exact same scenario will play out when studies come out showing that Tyler is as effective as insulin pump therapy. These studies will provide the cover payors need to justify what really is a cost decision.

Looking at the current landscape Medtronic obviously has the most to lose here as they are the least able to adapt to this changing environment even with their huge installed user base. Tandem as well will have issues. Insulet appears to be in the best position as they are the closet thing we have to a pay as you go revenue model.

Medtronic and Tandem could take a page from the Bigfoot playbook by offering a shave club for men pricing model. Basically, everything the patient needs, the hardware and supplies, would be provide for a low monthly cost. Still this cost would have to be competitive with a Tyler. Which would make one think that perhaps all the insulin pump companies might offer a Tyler of their very own, a very distinct possibility.

The good news when it comes to insulin therapy is life for insulin using patients is getting better. The bad news for insulin pump companies is life isn’t getting any easier and, in many cases, will get even harder in the future. As with most things in our wacky world this isn’t about anything else other than money – who makes it – who saves it and who spends it.