The fat lady is warming up

The fat lady is warming up

With all the gripping going on in the glucose monitoring market an industry outsider might get the impression that this market can be saved. The fact is the seeds of this markets demise were planted long ago and are now bearing fruit. Soon Bayer will sell, or perhaps we should say dump, their diabetes device unit on Sanofi (NYSE:SNY) an event Diabetic Investor believes will lead to more deals being done as everyone scrambles to keep pace. The fact that Sanofi is willing paying Bayer about a billion and a half euros for this troubled unit, conclusively proves once and for all that in the wacky world of diabetes devices, any can and usually does happen even when this event makes no sense whatsoever.

However Sanofi isn’t’ the only company whose ponying up big bucks to become part of this market. While Panasonic may have lost out with Bayer, we would actually consider this a victory; the company still wants to play in the glucose monitoring sandbox. GE is another sucker who seems to believe they can build better mouse trap and do we need to remind anyone that Alere (NYSE:ALR) ,a company who’s been there and done that, is getting back in the game. And what does it say when the existing players, with the exception of LifeScan, can’t seem to figure out how to put peanut butter on jelly.

The common theme with most of the existing players and many of the new ones, is they are still living in the past and think they are still selling a medical device when in reality they and selling consumer device in a commodity market. They delude themselves into believing that by adding more whiz bang features, that most patients don’t use or even care about, that somehow magically they will see a dramatic improvement in sales. That somehow the market will return to double digit growth and prices, which have been declining for years, will reverse direction because they want it to.

While Diabetic Investor has documented this markets demise for some time and outlined many of the reasons why it will NEVER be what it once was, many in the business continue to live in some sort of fantasy land. They are like addicts who are in denial, unwilling to acknowledge they’re addicts and therefore incapable of having a chance at recovery. Anyone who has known someone with an addiction knows that the first step to recovery is for that person to acknowledge they have an addiction. Diabetic Investor is continually amazed that some very smart companies do some incredibly stupid things; that they are almost incapable of accepting the facts that stand before them.

Rather than acknowledge that this market has fully transformed itself into a consumer, commodity market companies continue to delude themselves into believing that if they can somehow transform these devices into some type of diabetes management system they can charge more as they are no longer just a device but a system that is actually helping the patient better manage their diabetes. Diabetic Investor has written much on the move towards interconnected diabetes management systems, which like so many things in diabetes, has as many challenges as it does opportunities. Not the least of which being getting the patient to regularly monitor their glucose, for without this data these systems are basically worthless.

The fact is this industry has never learned that the majority of patients have a chronic disease they really don’t want or understand. That these patients don’t understand what a glucose test means or how to use this data to help them better manage their diabetes. That with all the advancements in technology – alternate site testing, no coding, faster test results, smaller blood sample size – average testing frequency hasn’t changed.

This is the reason everyone is chasing the insulin using patient as these patients actually NEED this information to properly dose their insulin. Insulin using patients are also the driving force behind the development of interconnected diabetes management systems. What most BGM companies assume is that these patients will always be insulin and they will continually monitor their glucose on a regular basis. While there some validity to this belief, there is also a huge problem with it, in that, not all insulin using patients are alike.

The fact is insulin pump patients, the most frequent testers, are gravitating towards continuous glucose monitoring (CGM) systems. On the other end of the insulin spectrum are those using insulin, most likely Lantus, combined with an oral medication, which really don’t test all that much.  In the middle are the patients who follow multiple daily injection (MDI) therapy, it is this group of patients that all the BGM companies are fighting over. Diabetic Investor also sees many in this group moving towards CGM, which basically means the number of patients to be fought over keeps shrinking.

The harsh reality here is that time is not on the side of BGM companies and if they don’t start doing things differently, like yesterday, then it’s all over. What we’ll see in the future is one, perhaps two branded companies and a bunch of cheap monitors made overseas. The market will be divided into the haves and have not’s. The have’s being patients with private insurance that’s willing to reimburse for the branded system and the have not’s who are underinsured or on Medicare alone who get the cheap imports.

As we noted earlier the seeds for this markets demise were planted years ago, have taken hold and begun to grow. That no matter how obvious it is to everyone else the major BGM companies and the many newbies are incapable of thinking out of the box which will only hasten their eventual demise. Millions, actually billions, are likely to be wasted on fancy whiz bang technology that is founded on the flawed premise that patients will actually monitor their glucose regularly.

We could go on and on but the fact is the fat lady is warming up and we don’t want to miss it when she belts out her song.