We need this why?
Ok there was a time when the blood glucose monitoring (BGM) market was a great market to be in. What was once a highly lucrative, growing market that produced some truly obscene margins making BGM units virtual cash cows, has transformed into a full blown commodity market where price is all that matters. These once hugely profitable units while still marginally profitable have become albatrosses around the necks of the companies that they are a part of.
Yet it continues to amaze Diabetic Investor just how stupid some BGM companies can be. While everyone else in BGM seems to have accepted the new realities of the market Abbott (NYSE:ABT) continues to live in fantasy land. Yes just today the company announced the FDA has approved of the FreeStyle Precision Neo Blood Glucose Monitoring SystemTM. Which according to a company issued press release; “is now available at a cost of between $14-$17 USD for 25 strips and a one-time fee for the meter, which ranges from $22-$28 USD. “
This same release states Abbott’s rational for entering the value segment of the meter business: “The cost of insurance premiums and employee medical claims continues to rise in the United States, which is especially challenging for people living with chronic conditions such as diabetes. For people with diagnosed diabetes, average, direct medical expenditures can reach up to $7,900 per yeari–almost as much as the annual cost of a moderate food plan at home for a family of two.”
Now we hate to burst Abbott’s bubble but the value segment of the market is just as crowded as the “premium” segment. Yet the truly funny thing is this so-called value play is not really a value. Wal Mart offers a box of 50 test strips for under $10, while iHealth sells a box of 50 for $12.50. These are just two examples but there are more. Which makes one wonder why Abbott is entering this highly competitive ultra-low margin business, just what are they hoping to accomplish other than looking like fools. Seriously the value segment of this market needs another product about as much as Serge Weinberg needs to do another interview.
Again according to the press release;
“People with diabetes depend every single day on trusted, high-quality tools to monitor their glucose levels,” said Robert Ford, senior vice president, Diabetes Care, Abbott. “This dependence makes it even more important to ensure people have affordable access to accurate, fast, and easy-to-use systems such as FreeStyle Precision Neo system. Today, more than ever, consumers have more influence on their healthcare decisions, and Abbott is focused on offering products that provide the highest standard of accuracy, and are also affordable and easily accessible over the counter.”
Now Diabetic Investor has spoken with Mr. Ford in the past and he seems like a very capable fellow. Yet we hate to say this but this Ford has produced an Edsel. Even if this segment of the market wasn’t already over-crowded the fact is this segment is not part of Abbott’s DNA, even with their reduced head count they aren’t built to play in this sandbox. We’d say this is an act of desperation, the last grasp for breathe before crying uncle, the act of a unit lacking strategy or vision but that wouldn’t be accurate. This is just flat out stupid.
Yet that’s exactly what Abbott diabetes DNA is doing some incredibly stupid things. Keep in mind that Abbott has the distinction of running not one but two major BGM acquisitions into the ground. That this is the same company who had a great continuous monitor with the Navigator and ran that into the ground too. This is the same company that did a limited rollout of the Libre a product which has already experienced two recalls and has scant chance of ever being approved here in the US. But best of all the company developed an insulin pump, had it approved by the FDA but never brought it to market. Not sure how they evaluated the return on investment for that project but knowing Abbott they will find a way to put a positive spin on it.
Seriously we really wish we were making this up, that even Abbott wouldn’t be this stupid. Sadly this is not the case. We ask again; We need this why?
