Time for a little history

Time for a little history

Considering all the chirping going on in the diabetes community about the Medtronic (NYSE: MDT) UnitedHealthCare deal we thought we might provide a historical perspective. As we noted everyone seems to be in a tither believing that patients won’t have choices and innovation will be stifled. Although we think we’ve done a decent job of debunking these misguided beliefs nothing like a little history lesson to drive home the point.

Way back in the day and yes this is way back, Roche, yes, Roche was kicking some serious booty in the conventional glucose monitoring space. They had the hottest product going, the Accu-Chek Comfort Curve, and owned the number one market position. LifeScan, a unit of Johnson and Johnson (NYSE: JNJ) was barely within spitting distance of Roche and Abbott (NYSE: ABT) was getting set to acquire Therasense.

Fast forward to today and LifeScan is number one by a large margin. So what happened, why the reversal of fortunes and how is this related to the Medtronic United deal.

First off this reversal of fortunes was not because LifeScan had better products than everyone else. Nor can this reversal of fortune can be directly attributed to the many mistakes made by Roche and Abbott. Yes, these mistakes contributed to the problem but they are not solely responsible.

Basically what happened was LifeScan went out and bought up formulary position. Imagine that, the company went to payors and said “hey we’ll give you a better deal if you put our meters in the number one formulary position.” Crazy as it may sound payors went along with this proposition and thought it was a good idea to save a few bucks. Even crazier Roche and Abbott decided against matching the deal LifeScan offered, they crunched the numbers and made a business decision.

Along comes competitive bidding and LifeScan realizes that scale will be more important than ever. So they go back to payors and revise their offer this time around they not only want the number one spot on formulary they also want an exclusive deal. In effect they want the payor to convert all their non-LifeScan patients to a LifeScan product. And guess what? Yep the payors went along with this deal again and again they saved a few bucks along the way. Only difference this time around Roche and Abbott couldn’t afford to compete and become content to pick up the scraps.

Has patient choice been limited in the glucose monitoring space because of these deals? Hardly.

Has any of the BGM companies gone under because of these deals. Not Yet.

Have these deals prevented new products from reaching the market? Nope.

Did LifeScan, Roche, Abbott or any other BGM company defund their research and development projects? No – yes they did cut R&D budgets but R&D is still going on.

Are patients complaining about the lack of BGM options? Not really.

Did bloggers, patient advocates and the rest of the diabetes community bitch and moan that the deals made by LifeScan we’re limiting patient choice and stifling innovation? If they did I don’t recall and had they bitched and moaned they would have been as wrong then as they are wrong today.

Basically LifeScan decided to compete, they looked at the market correctly analyzed where it was going and ultimately decided to play hardball. They then doubled down when competitive bidding came along, crunched the numbers again and used their status as the number one player to their advantage. Simply put LifeScan put up while Roche and Abbott were shutting up.

Yes, we know things like facts get in the way of good fantasy but that’s exactly what’s happening here. This belief that this one deal will devastate the insulin pump market is crazy, ludicrous, nutty, stupid – pick your adjective.

Is this belief based on any facts whatsoever? No

Do the people who are complaining have any idea what they talking about? Nope.

Are they reacting emotionally rather than looking at how things really work? This is likely as they are an emotional bunch.

Do they have a right to bitch and moan? Absolutely this is America after all next to baseball bitching and moaning is our national pastime.

The reality here is nothing in this wacky world is that unique or not without precedent. Exclusive deals are nothing new. Nor should it surprise anyone that companies compete and sometimes play hardball. Yet, even with exclusive deals and hardball business tactics patient choice hasn’t been limited nor has innovation come to a halt. The simple fact is the diabetes market is huge and growing at epidemic rates.

The reality is any company that wants to compete in this growing market will use whatever means necessary if they are serious about winning. Bringing innovative new products to market is part of this as is crunching the numbers.

So we have some free advice to everyone who’s been bitching and moaning, go ahead do your bitching, do your moaning as it won’t change a damn thing but it does make for some great copy. Thanks