The Hype Machine

The Hype Machine

Having been around for more than a few years Diabetic Investor has witnessed our fair share of hype. Just as we always say when it comes to this wacky world it’s easier to steal money with good PowerPoint presentation than it is with a gun, it is also true that many fall for the hype. That its far easier to sell the sizzle than it is to eat the steak. Let’s face facts we now live in a social media driven world where many believe that because something is posted on Facebook or Twitter it must be true.

This phenomenon is very alive in the interconnected diabetes management (IDM) space. A space full of companies who are very liberal when it comes to the facts. Now before we go any further let’s make a few things clear. Yes, in theory IDM works. That when patients do gather data and this data is then transmitted to the cloud where it is then analyzed and recommendations are transmitted back to the patient better outcomes can happen. The fact is IDM is no different than what used to be called disease management. Nor is it any different than good old fashioned patient education.

For years, Diabetic Investor would get on our soapbox and extoll the virtues of patient education. We would correctly note that there are hundreds of studies which prove that patient education is the most effective tool at producing better patient outcomes. Educated patients not only monitor their glucose levels more frequently they also are more compliant with their therapy regimen.

We often lamented that companies in this wacky world talked a good game about patient education but rarely did they put their money where their big mouths where. Now there was a time when this was understandable as the BGM market was growing at double digit rates and money was falling from the sky. Simply put there was no business rational for investing in patient education.

All of this changed when the BGM began commoditizing, prices began falling and competitive bidding came to be. All of a sudden, the market was contracting, usage was declining and prices continued to fall. Rather than combat this with investing in patient education and showing how education improves outcomes these companies capitulated and began downsizing. Simply put the major BGM companies threw in the towel and surrendered to market forces they believed could not be changed. Or put another way they tried to make the best of a very bad situation.

As technology developed, as smartphones became commonplace and the cloud became the place to be a new twist on an old story emerged. This new twist is what we now call IDM. A plethora of companies popped up claiming that all this new whiz bang way cool technology could forever change diabetes management. That thanks to all this way cool whiz bang technology patients would have the help they need instantly.

Now never mind that none of these companies could solve an age-old problem, that is how to turn all this data into patient relevant, patient actionable information. Nor could they solve another age-old problem getting these patients to actually monitor their glucose regularly so there was data to analyze. Still the hype machine was in full gear and many extolled the virtues of this way cool whiz bang very unproven technology. Needless to say, investors who aren’t known for doing much in the way of due diligence fell for the hype and invested millions in these companies.

We have now reached the point where you can’t swing a dead cat without hitting a company that isn’t in IDM. Yep everyone and we mean everyone now claims to have the latest greatest whiz bang way cool cloud enabled technology. These diabetes eco-systems are being hailed as the greatest thing to hit diabetes management since the discovery of insulin. That finally thanks to technology all this data will be turned into patient relevant, patient actionable information.

What’s ironic here is how the all the IDM companies are falling into the same trap that doomed disease management. Back in the day when disease management was all the rage we noted that biggest obstacle facing disease management was that the savings generated by these programs could be directly linked to keeping insulin using patients out of the emergency room. We noted back then that it was foolish for a company to pay for these programs beyond their insulin using patient population. A population which was easy to identify and generated most the costs savings.

Let’s stop here and point out what should be obvious but often missed, IDM has NOTHING to do with better patient outcomes. IDM has everything to do with MONEY, who makes it and who saves it. Which in this case are large self-insured companies. There is a mountain of data which says that these companies will save thousands of dollars ANNUALLY if their employees with diabetes achieve better outcomes. There is more data that notes these same employees will be more productive when their diabetes is under control as they will not be missing work going to see the doctor.

However just as disease management was doomed by their focus on insulin using patients so too will all these IDM companies. Companies who seem to forget there are millions of patients who don’t use insulin but also could use some help. But these companies also have another problem; advanced technology most notable continuous glucose monitoring. Systems which not only deliver better data but also systems that solve the biggest problem of all; getting patients to monitor their glucose levels.

In the very near future CGM will be extraordinarily patient friend and very affordable. In the future, a patient will simply slap on a CGM which won’t need to be calibrated which will deliver data to the cloud. No more finger sticks, no more having to carry around a meter, test strips and a lancing device. Nope in the future CGM will slap it on, turn it on and forget about it. Even better they will very accurate to boot.

This is what investors are missing, that all this whiz bang way cool technology is really old school technology. Technology that is quickly becoming obsolete. Yet all these IDM companies are trying to dress up this old technology as way cool whiz bang. Just as the disease management companies of yesteryear they are selling the sizzle, the promise of what could be. That although the savings largely come from insulin using patients these savings will magically materialize with non-insulin patients too.

Is there any hard data that proves this claim? Nope. Are there any clinical studies that prove this? Nope. Are these claims backed up by lots of “self-reported” empirical beliefs? Absolutely. Diabetic Investor has spent a great of time reading and rereading the press releases from IDM companies which tout the benefits of their particular mouse trap. Yet we cannot find one that has any hard-clinical data that proves they can translate the results seen with insulin using patients to non-insulin patients. There is belief that this is true but no real independent data that backs up this claim. Sure, there is lots of “self-reported” data but independent clinical data, nope.

This makes us wonder why these companies continue to raise money. Why when this market is commoditizing just as the conventional BGM market commoditized are they receiving these lofty valuations. Why when the technology they base their systems on will be replaced by newer and better technology they continue to receive so much attention and money.

Part of the reason we suspect is that besides over-hyping and quite frankly exaggerating results they sell more sizzle. Besides dressing up old technology as new these companies also play up the fact they have a very different sales model. Nope instead of relying on conventional reimbursement universally these companies tout their shave club for men pricing scheme. That patients will pay a monthly fee, get all the test strips they need, delivered right to their door plus great coaching. That somehow this will get these patients to do something they didn’t do under the old reimbursement model and test their glucose on a regular basis. That this way cool whiz bang old technology combined with coaching will make them care about their diabetes management.

Now we hate to be redundant but what patients with diabetes want more than anything is NOT to have diabetes in the first place. They want diabetes management to be part of their daily routine and not to run their already hectic and complex lives. As we have said diabetes management is a job, a job which isn’t always easy and requires lots of heavy lifting. Also, as we have said many times even when this job is done well there are no outward rewards for the patient.

What’s laughable here is that even if we added up all the patients that were using these way cool whiz bang over-hyped IDM systems it would amount to fly on an elephant’s ass. None of these companies have proven that they can achieve scale, that they can bring their way cool whiz bang over-hyped systems to the mases. Yep they all have way cool web sites, neat apps and lots of Facebook and Twitter posts. But what they don’t have and will be difficult to achieve is scale and scale is critical when it comes to a mundane thing like making money.

Now what these companies will say is that they aren’t just making money from the monthly user fees bit also by producing better patient outcomes. That sure sounds nice until you look at how they would be paid and what defines better outcomes. Again, the low hanging fruit the biggest savings to an employer or payor is keeping patients out of the hospital.  And which patients end up in the hospital most frequently? None other than insulin using patients.

But let’s give these companies some unearned credit and say they are compensated for lowering HbA1c. Will someone please explain how they will verify these results? Does this not require a doctor visit and lab test? And just how often will these tests be run? Quarterly, Semi-Annually or Annually. And does this reliance on HbA1c not ignore glycemic variability? Is it not true that diabetes experts are now expanding their definition what constitutes good control to include glycemic variability? Are we not finally reaching the point where HbA1c is recognized as an incomplete marker for measuring control? Oh, and should we mention that the CGM the technology which is making conventional BGM obsolete provides this information.

We hate to state the obvious but when it comes to patients with diabetes the goal for payors and employers is to manage them as cheaply as possible. Again, we hate to be redundant but payors could care less about outcomes and care all about money. Employers may feel somewhat differently but they too care about money which is why many are beginning to question all these fancy health and wellness programs they have paid for these past few years.  These programs were instituted as cost savings programs but many employers are questioning whether there is a true return on their investment.

The real story here is not what IDM can or might do. The real story here is like so many other areas of diabetes IDM is selling the hype, not the reality. They are hoping that investors overlook many of the very real and very difficult obstacles facing these companies. That investors will be fascinated by all the way cool whiz bang toys, the fancy apps and the promise of what could be.  That investors will confuse Facebook and Twitter posts with hard independent clinical data. And given the history of this space they have reason to believe that investors will do exactly that.

As Momma Kliff used to say; “People just love to believe in the promise of tomorrow. It’ so much easier to have hope than to see reality.”