The numbers don’t tell the whole story
This morning iData Research, issued a
report that states “the U.S. market for diabetes drugs, devices and monitoring
systems will reach over $55 billion by 2016, tripling in value. The market for
insulin will grow over 18% in 2009, while continuous glucose monitoring systems
will see growth of 48%.” According to Dr. Kamran Zamanian, CEO of iData “The
diabetes diagnosis and blood glucose monitoring markets are seeing rapid growth
as more Type 2 diabetes patients are diagnosed each year. Revenues in the
insulin and oral antidiabetic drug markets are increasing at rates
approximately double the rate of growth of the diagnosed diabetic
population.”
According to the report of the 28 million
patients in US, 24% were undiagnosed. iData expects this high level of undiagnosed
patients will fall as more insurance companies reimburse for diabetic
screening.
While Diabetic Investor is sure iData is a
fine firm, we have to wonder what planet they live on. Frankly we’ve seen
reports like this before all based on the same premise; that the market for
diabetes drugs, devices and monitoring system will benefit from the epidemic
growth rate of diabetes. The natural assumption is that as the number of
patients with diabetes increases so too will the sales of drugs and devices. The
only problem is, like most assumption, there just that, assumptions.
The reality is the blood glucose monitoring
(BGM) is in a world of hurt and the epidemic growth rate of diabetes will do little
to change this fact. Sure it would great if type 2 or should we say non-insulin
patients found religion and started monitoring their glucose levels on a
regular basis, but the this just isn’t happening. The BGM market has become a
battle for the insulin using patient who needs the information provided by the
monitor so they can properly dose their insulin. What this means is that the
battle for supremacy in BGM comes down to the 4.5 million patients using
insulin.
One just might think that one day people
would understand that no matter how hard anyone tries Type 2 non-insulin using
patients just don’t monitor their glucose levels regularly. This fact has not
changed when monitors were given away for free and monitoring became more
patient friendly. Alternate site testing which was supposed to increase average
testing frequency was a nice improvement but overall testing frequency hasn’t increased
since this improvement was introduced.
Diabetic Investor has said it a thousand
times and will say it once again; non-insulin using patients will not regularly
monitor their glucose levels until they understand what the test results mean
and how they can use those results. The fact that there have been numerous
studies that have shown that even when these patients do monitor on a regular
basis improved outcomes do not follow hasn’t helped either. As we have said on
numerous occasions testing frequency would remain low even if the test was completely
non-invasive and totally pain free. People don’t perform any task if they don’t
see a personal benefit from performing that task.
Insurance companies which according to
iData will increase reimbursement for diabetic screening are the same insurance
companies which are raising co-payments for testing supplies, namely test
strips. These same insurance companies along with the government are moving towards
a system where they will no longer reimburse non-insulin patients for their testing
supplies.
How anyone could see a bright future for
the BGM market is beyond Diabetic Investor. As we have seen over the past few
years growth has slowed from mid-double digits to virtually no growth and even
negative growth. Just as an example Roche which used to command the number one
position in BGM here in the US has seen their market share fall from 29% to
just slightly above 20%. Monitors are no longer being given away for free and
all the major companies have made major cuts to sales, marketing and research
and development expenses. The government has already cut reimbursement rates
for testing supplies and competitive bidding will force even deeper cuts.
Diabetic Investor also questions iData’s
view of the insulin market. While we do believe that insulin usage is
increasing the market faces some significant hurdles as new therapies for type
2 patients will cut into market growth. In particular Diabetic Investor sees
GLP-1 therapy the most serious threat to the insulin market. GLP-1 therapy
offers several compelling advantages over insulin therapy not the least of which
being the absence of hypoglycemia. GLP-1 therapy will soon offer another advantage
which will also cut into insulin; less frequent dosing. Awaiting approval at
the FDA are two GLP-1’s, Victoza from Novo Nordisk (NYSE:NVO) which is
administered just once a day and Byetta LAR from Amylin (NASDAQ:AMLN) which is administered
just once a week.
The one area where Diabetic Investor is in
agreement with iData is the growth in the continuous glucose monitoring (CGM) market.
CGM has a bright future and is one area where reimbursement is actually
improving. The only issue facing CGM is the same issue the insulin pump market
is currently facing, market size. Even with improving reimbursement and greater
acceptance of the value of CGM technology the overall size of the market is somewhat
limited. All along Diabetic Investor has said that the CGM market would follow
a path similar to what insulin pump market did when pumps first came onto the
market. So far this is exactly what has happened, so it will be some time
before the CGM market reaches the issues facing the insulin pump market where
there are too many companies chasing too few patients.
One area where CGM has an advantage over insulin
pumps is the hospital market. Diabetic Investor has long believed this is the
true hidden value of CGM systems. While recent data has been conflicting on the
value of CGM in a hospital, one fact remains indisputable a hospital based CGM
system enhances productivity and reduces labor costs. As more studies are done
Diabetic Investor believe it will become clearer where and where not a CGM
should be used in the hospital. Based on what has been seen so far we believe the
overall net effect will a positive for CGM.
On balance though Diabetic Investor would
say the fine folks at iData are just a tad optimistic about the future of
diabetes markets. At least they didn’t say that inhaled insulin would be a
billion dollar product, had they done that then we really would have known
where all those Exubera delivery devices went.
