This is what it has come to

This is what it has come to

One thing we can say about our wine drinking friends in France is when it comes to their struggling insulin franchise when all else fails sue. Yes, the folks are at Sanofi (NYSE: SNY) unable to come to grips with market realities have once again filed a lawsuit against a rival in the insulin market Novo Nordisk (NYSE: NVO). Some may recall that Sanofi also sued Lilly (NYSE: LLY) over Basaglar, a lawsuit which was eventually settled.

This time around the company is suing Novo because they claim that Novo is telling everyone that Lantus will not be available to patients here in the US. According to a story posted by Reuters yesterday;

“The complaint, filed by Sanofi US in U.S. District Court for the District of New Jersey on Dec. 23, seeks an order forcing Novo Nordisk to pay unspecified money damages and withdraw marketing materials for its drug Tresiba.

The marketing materials urge doctors and patients to switch from Sanofi’s drugs Lantus and Toujeo, used to treat diabetes, to Tresiba, according to Sanofi, because the Sanofi drugs will be “blocked” by U.S. pharmacy benefit manager CVS Caremark in January.

Sanofi said CVS is replacing the drugs with Eli Lilly’s similar, cheaper drug Basaglar on its so-called standard formulary, a list of drugs that health insurance plans cover.”

Now we hate to break the news to the management team at Sanofi but this kind of stuff happens every day in the ultra-competitive insulin market. Heck this kind of stuff happens throughout the diabetes market in general. By Sanofi’s way of thinking the lawyers at Tandem (NASDAQ: TNDM) should be suing Medtronic (NYSE: MDT) because Medtronic reps may be casually mentioning to physicians that Tandem may not be around this time next year.

One also must wonder what Sanofi expects to gain even if they win the lawsuit. What like this will somehow change the competitive dynamics of the insulin market? We think not. The die has been cast here and sadly Sanofi and to some extent Novo are the big losers.

Looking back on the year this lawsuit in a way is an example of the most significant event of the year, capitulation. And in a strange way Novo is an example here too. We have long known that the diabetes drug market has been commoditizing, that price trumped performance. That when all the drugs in a category do basically the same thing the same way this was destine to happen. However, many of the companies seemed oblivious to the facts, yes, those pesky facts again.

To their credit, Lilly was about the only major diabetes drug company who recognized where the market was headed and built their strategy based on the facts. Today Lilly is reaping the benefits for taking their heads out of the sand and seeing things as they are and not as they would like them to be.

Sanofi unfortunately just couldn’t accept reality that after years of shoving price increases down the throats of payers pay back would be a bitch. That once payers had an alternative to Lantus they would make the company pay and pay in a big way. They seriously miscalculated when they launched Toujeo over-hyping the benefit of fewer hypoglycemic events when this supposed benefit really wasn’t that much of benefit. Being Sanofi everything they touched in diabetes that wasn’t named Lantus was an utter disaster. The company eventually capitulated and began instituting a series of cost cutting moves.

Novo too eventually capitulated which was the real stunner, not because it wasn’t needed it was. Rather the stunner here was Novo’s public admission of capitulation which included the statement that they will no longer develop me-too copycat drugs. That they would seek truly innovative drugs. This is a major paradigm shift for Novo a company long known for developing premium drugs which in turn received premium reimbursement. Finally, the company awoke to the fact that those days are gone forever.

Yet this capitulation is not limited to the drug side and extends to the device side too. Johnson and Johnson (NYSE: JNJ) is the clearest example here. When it comes to devices whether its conventional glucose monitors or insulin pumps the company has thrown in the towel. Faced with one of two choices, go big or go home, the company chose the third option, do nothing.

The fundamentals of the diabetes market, drug and devices, have changed dramatically over the last few years. This does not mean however that innovation will not be rewarded, rather that this innovation must be significant. Novo’s oral GLP-1 and Intarcia’s micropump are two examples on the drug side, Dexcom’s (NASDAQ: DXCM) Band-Aid sensor an example on the device side.

We will not be so bold and state that 2017 will be a major transformational shift in the diabetes market as this transformation has been evolving. What looks to be different is attitude or perhaps acceptance is a better word. Companies are beginning to do what Lilly did years ago, see things as they are and not as they would like them to be. They are acknowledging the obvious and taking steps to restructure their units to reflect the realities of the market.

On a personal note, everyone at Diabetic Investor from Momma Kliff to our outstanding wine consultant would like to wish all a happy and healthy New Year. May 2017 bring happiness to all.