The looming threat

The looming threat

We can only imagine what’s happening at the Medtronic Diabetes headquarters in sunny California. Now that Animas has surrendered, Tandem is on its last few shekels and will soon join Animas, Cozmo, Asante and Roche in the insulin pump scrapyard. Now it would not surprise us at all if there isn’t some high fiving in the hallways, some serious fist bumps and lots of Kool Aid drinking. Yes, it sure is good to go from having a monopoly to almost 90% market share.

Yes, we’re sure these good people feel pretty good, the came, they plundered and they won. They are down to just one competitor who does not have the financial resources to compete. Yep the way they likely see it, it’s nothing but smooth sailing and sunny skies ahead. Life is sure good.

As Momma Kliff used to say; “Be careful what you wish for as just when you think you’ve made it to the top, have beaten your rivals into submission and conquered a new threat appears on the horizon. A threat in the distance but getting closer every day. Now you can ignore this threat as it may never reach you, on the other hand it might be wise to pay attention. It may not seem like it now but this threat in the distance could one day overwhelm you and all of sudden you’ll go from the penthouse to the outhouse.”

Everyone seems to believe that without Animas or Tandem around payors have lost their advantage and will can no longer be able to play one company off another to extort better pricing. That may be true but instead of capitulating to whatever Medtronic wants they will just pull a different bat from the rack and use this new bat to beat Medtronic into submission.

First, they will make it even tougher for patients to get a pump, more rules more paperwork. Next, they will seek other options, options which produce pump like outcomes at a fraction of the cost of a full-blown pump. Yep we are talking about the “smart” pen/CGM/App combo who we like to call Zola, why Zola we have no idea it just sounds good. Anyway, Zola will not only cost less but will also be more patient friendly and easier to use.

Look at this way it costs upwards of $15,000 to start a patient on a new 670G. Remember it’s not just the pump but the pump, pump supplies and sensors. Then you have the ongoing cost of pump supplies and sensors which grabs another $4,000+ PER YEAR.

Zola on the flip side will cost a lot less. By our estimates a patient would need two smart pens, long-acting and short-acting each costing $400. The sensors will cost about $1 per day but let’s say its twice that. The app of course is free. Startup cost $1,530, annual cost $1,530. We are of course assuming these smart pens are replaced every year.

Ok we shall go slow here startup cost $15,000 versus $1,530. Annual cost $4000+ versus $1,530. See what we’re getting at here. Heck even a Sanofi executive can do this math and get it right.

Now some will say the pump patient will achieve better outcomes which of course is possible. But our question is will these “better” outcomes be so much better to justify the higher price tag? Does it even matter when you consider that most patients only stay with a payor for less than 3 years? Cannot algorithms be designed for pen delivery over continuous delivery? Could not an argument be made that Zola is safer than a pump, that Zola has less chance of malfunction.

Ok just a reminder start up cost $15,000 vs $1,530. Annual Costs $4,000+ vs $1,530. Is this sinking in yet?

Pump usage has stagnated for a reason and one of the reasons is cost. The fact is payors hate new pump patients or those who’s warranty is about to expire, as that means another $15,000 in start up costs. They don’t mind so much patients in the mid-warranty years as they are only on the hook for the $4,000+ annual costs. But something tells us that they sure would like to save a few bucks, that $1,530 sounds a lot better than $15,000 or $4,000+.

So, our advice to the good people in Northridge is enjoy the good times while they last. Party like there is no tomorrow as that just might be the case.