Timing Is Everything

Timing Is Everything

Way back in the day, before the impact of competitive bidding, the blood glucose monitoring market was pretty simple.  The market was growing at double digit rates, reimbursements rates allowed for obscene margins and the FDA was a minor annoyance. For a while it seemed that anytime a company came out with a new and improved offering sales skyrocketed. These new products were given away for free by the boatload as BGM companies knew they would more than make up for this cost with the profits made by the continual sale of test strips.

Needless to say times have changed and the BGM market is on now on the verge of collapse. Competitive bidding, although not the sole cause of the demise, was the final nail in the conventional BGM coffin. Today cost containment is the order of the day as every major BGM player has instituted dramatic downsizing in a last ditch effort to maintain profitability. Meters are no longer given away for free and innovation has come to a halt.

Still as bad as things are for this market there are companies who believe they can build a better mouse trap. Not surprisingly many of these newcomers are hanging their hats on the new world of interconnected diabetes management (IDM). Diabetic Investor has seen several of these products and does believe that one day IDM will become the standard of care. The only problem is even with all the whiz bang way cool features these new products have, it will be next to impossible for any of these newcomers to make any money.

Now we know that making a profit may seem like a minor point to some, but it happens to be a major issue with Diabetic Investor. The simple fact is these way cool whiz bang new products are very expensive to make and will be more expensive to market. And did we mention that the FDA which was once just a minor annoyance has now become one big pain in the rear. That this agency seems to be doing everything they can to stifle innovation, forcing many of these newcomers to head overseas to market their new way cool whiz bang products.

Many of these newcomers operate under the illusion, or perhaps we should say delusion, that they will be able to build significant share oversees while the FDA reviews these way cool whiz bang products here at home. That sounds good and looks great on a PowerPoint presentation until one considers the level of competition oversees and lack of market depth. There is a very simple reason everyone wants to be in the North American market, that’s where the money is. To paraphrase that great song New York, New York “if you can it here you can make it anywhere.”

Diabetic Investor also it believes it’s just a matter of time before overseas markets become just as problematic as the North American market, for one simple reason – diabetes continues to grow at epidemic rates and costs are spiraling out of control. Already countries like Germany have taken steps to contain costs and others are likely to follow. Quite frankly it does not matter which market a company operates in the universal theme when it comes to reimbursement rates for BGM products is cost containment.

Still these newcomers remain optimistic that their particular way cool whiz bang product will somehow buck this trend and succeed. That somehow they will be able to navigate the treacherous waters, even though many have never sailed before. They seem to believe they will make up for this lack of experience and market knowledge with products that they believe are way cool. The reality however is that while many of these products are way cool and whiz bang, they really aren’t revolutionary rather evolutionary. In essence they are building a better, more expensive mouse trap when the market is happy with the current and much cheaper mouse trap.

Listen Diabetic Investor loves the passion and innovation these newcomers bring to the market. Excuse the play on words here but there is no question new blood is needed in the BGM market.  However, as much as we admire their spirit we cannot ignore the realities of the market. As the old saying goes timing is everything. Being realistic as good as many of these products are, they couldn’t have picked a worse time to come to market.  Put even more bluntly the good old days for BGM are gone forever and will never return. The party is over, the only question is who will be the last to leave the room and turn off the lights.