This is getting exciting

This is getting exciting

“Consider that 33% of surveyed consumers who purchased a wearable technology device more than a year ago now say they no longer use the device at all, or use it infrequently. Price, privacy, security and the lack of “actionable” and inconsistent information from such devices are among consumers’ main apprehensions with the bourgeoning category.” This statement comes from a report on the Drug Store News web site and references a report by PricewaterhouseCoopers entitled “Consumer Intelligence Series – The Wearable Future report,” a U.S. research project released Tuesday that surveyed 1,000 consumers.

While the report revealed several interesting tidbits the phrase that caught our attention most was “lack of actionable and inconsistent information” as a reason that consumers stopped using a wearable device. Coming from the wacky world of diabetes devices and considering what we wrote earlier today this statement also applies to why patients don’t monitor their glucose as frequently as they should and is a major reason why the conventional BGM market is circling the bowl. The statement should also send a very clear and very loud message to all the newcomers in this space, a message which that should not be ignored.

Looking into the future nearly everyone agrees that interconnected diabetes management (IDM) will go beyond just tracking glucose levels or how much insulin a patient uses. In the future IDM will also track a patient’s activity, weight, how well they sleep, etc. Data that will be gathered either with a wearable device, smartphone or both.  Stored in the cloud this data will be analyzed by the patients’ healthcare team, health insurance provider, pharmacy or employer who in turn will provide feedback to the patient so they can more effectively manage their diabetes. In its ultimate form IDM can provide the patient with a personalized diabetes management regimen that is customized to the unique needs of the patient. No more one size fits all diabetes management, no more treatment to failure, no more take metformin and call me in the morning attitude.

Diabetic Investor anticipates as IDM takes hold and evolves there will be a plethora of programs for patients with diabetes. As we noted yesterday the needs of a Type 1 vary greatly for a non-insulin using Type 2. It’s also true that all Type 1’s should not be managed the same nor should all Type 2’s. Over the past few years numerous studies have shown that there should be different definitions of good control for different patient groups, for example studies have concluded that for seniors striving for an HbA1c of 7% or less may carry more risk than benefit.

We further anticipate that employers will be a driving force more quickly adopting IDM. Again as we have noted in the past with healthcare costs continuing to rise employers see IDM as a tool that can drive costs lower. However before there can wide spread adoption of IDM employers will have some hurdles to overcome. As the report notes;

“Consumers have not yet embraced wearable health technology in large numbers, but they’re interested. More than 80% of consumers said an important benefit of wearable technology is its potential to make health care more convenient. Companies hoping to exploit this nascent interest will have to create affordable products offering greater value for both users and their healthcare partners;

Consumers do not want to pay much for their wearable devices. They would rather be paid to use them. Companies — especially insurers and healthcare providers — are offering incentives for use may gain traction. HRI’s report found that 68% of consumers would wear employer-provided wearables streaming anonymous data to an information pool in exchange for break on their insurance premiums. Moreover, consumers are more willing to try wearable technology provided by their primary care doctor’s office than they are from any other brand or category;

While employers and health company executives expect wearables to provide valuable insights, few consumers are interested in using wearables to share health data with friends and family, and, citing concerns about privacy, consumers trust their personal physicians most with their health data. Therefore, companies should ensure privacy policies are crystal clear. Physicians already have the trust of consumers, and healthcare organizations have expertise in protecting personal health information. Consumers will want to see those high standards applied to health wearables data, especially as they become integrated into electronic medical records; and

Consumers may need a human touch to help them choose a device and its associated apps. An “apps formulary” of apps vetted by medical teams (and available in a virtual apps pharmacy) could help consumers wade through the thousands of health apps and devices.”

Recently Diabetic Investor had a meeting with a seasoned diabetes device executive who noted that in the future device companies must change their philosophies, that they must do more than just sell stuff and transform themselves into a provider of patient solutions. The fact is the diabetes device market is a commodity market that the differences between devices are minor and prices continue to erode.  The prospects that IDM can change this are very real, provided companies transform themselves. IDM won’t stop continued price erosion but can provide new sources of revenue.

Think of it this way as outcomes based reimbursement takes hold it’s possible even likely that payors or employers would incentivize device companies, pay them a bonus for each employee who reaches good control, hits predetermined health metrics or other measurable goals i.e. number of steps each day, pounds lost, etc. This where the newcomers to this market have a strategic advantage unencumbered from being solely dependent on the sale of disposables as their main source of revenue they can thrive in this new patient solutions environment.

Diabetic Investor can envision the day when a device company breaks completely from the old model charging a fee for each patient. That the patient will be provided all the tools they need for “free”.  Additional revenues will be generated from bonuses that are directly linked to improved outcomes. A hidden benefit for the device company under this model is that it lessens the possibility that the patient will switch to a competing device. This is not exactly the lease versus buy model but similar as the patient would automatically receive new versions of the device as they become available. This like smartphones users who automatically receive new versions of the phones operating system, the user has the option of upgrading or sticking with what they have.

There is no question that diabetes management is transforming that IDM will play an important role in this transformation. Yet the transformation will not be limited to the tools patients use but how these tools are paid for and where revenue is generated. This is another reason Diabetic Investor does not see IDM just changing the device side but also the drug side. A device/drug partnership is very doable as drug companies could use this new model to sell more drugs and keep competing drugs from gaining traction in the market. Just as the device market has turned into a commodity market so too is the diabetes drug market moving in that direction.

This fact makes for some very intriguing possibilities as we could see a drug company like Lilly (NYSE:LLY) who has a full complement of diabetes therapies partnering with a device company like Dexcom (NASDAQ:DXCM) or perhaps Roche who has a full line of diabetes devices. These hook-ups actually stand a better chance as a company like Lilly well-grounded in diabetes will likely feel more comfortable working with someone from the old guard rather than a newcomer. The way Lilly may see it is while the newcomer has innovative tools yet they lack diabetes experience.

Frankly Diabetic Investor for the first time in recent memory is actually very excited about the future of diabetes management, not because of a new drug, new device or ground breaking research. We’re excited because the market is transforming and forces outside of diabetes are driving this change.