Welcome back to the real world

Welcome back to the real world

It seems like every day Diabetic Investor is learning about another mobile app or whiz bang way cool device that is supposed to help patients more effectively manage their diabetes.  Many of these new way cool whiz bang devices offer promise but that promise comes with a fairly hefty price tag. Diabetic Investor is aware of one all-in-one glucose monitoring system which comes with mobile/cloud connectivity where the company seems to believe patients will pay $200 for the device. Another which is developing an insulin pen which uses Bluetooth technology to communicate with a mobile app, a pen which would cost the patient nearly $150.

Now $200 for a way cool glucose meter or $150 for a whiz bang insulin pen may not seem like much until one considers the findings of survey by Towers Watson which basically discovered what most already know; namely that patients are bearing an increasing share of their health care costs. Whether it’s through higher deductibles, rising co-payments or paying a higher share of the health insurance premium employers are shifting more this cost to their employees. According to the survey, workers this year are paying about $100 more a month in medical costs than three years ago.

Keep in mind that patients with diabetes already spend more than the average patient.  According to the American Diabetes Association (ADA), diabetics incur on average $13,700 per year in medical expenses, more than half ($7,900) of which is spent directly on treatment of diabetes and its complications.

Still Diabetic Investor isn’t surprised there are several companies who seem to believe that patients will willingly pay for these way cool whiz bang devices with their own money. That patients will see the many benefits of these way cool whiz bang devices and believe that yes they should spend their hard earned money to buy them. What these companies seem to ignore is that until recently glucose meters were given away for free and most insulin pens were covered by a patient’s health plan. While $200 or $150 is not a king’s ransom it’s light years away from what the patient is used to.

Perhaps the biggest mistake of all is these companies ignore history and haven’t learned from mistakes by other who tried this approach only to fail. Take the way cool iBGStar from Sanofi (NYSE:SNY), remember the iBGStar that way cool whiz bang glucose monitor that attached to the way cool very popular iPhone. A device that worked with a way cool mobile app that when used as intended could have helped patients better manage their diabetes; a device that Sanofi believed that patients would pay $100 for just because it worked their iPhone.

Well where is the iBGStar today?

While it’s true that you cannot blame the failure of the iBGStar just on the cost of the device but there is no question that cost was a contributing factor in its demise. The fact is patients just didn’t see the value in paying $100 for a device they normally got for free. They didn’t see the value of having their glucose readings tracked on their iPhones. They didn’t see the value of having the ability to share their glucose readings with their healthcare team at a touch of a button.

Yes there will always a small minority of patients who can afford the latest greatest piece of new technology. But this isn’t true for the vast majority of patients. A prime example of this can be seen in the continuous glucose monitoring (CGM) market. In the early days of this market Diabetic Investor keep hearing that patients would incur the additional cost of these systems because they would value the information they provided. Yet it wasn’t until the reimbursement environment for CGM changed that the market began to blossom.  Yes the information provided by a CGM is extraordinarily valuable and there is no question this information can and does help patients more effectively manage their diabetes. Still the market would not be where it is today had reimbursement not improved.

This is one reason Diabetic Investor has always been skeptical that a true closed loop insulin delivery system would be commercially successful. There is no question that a true artificial pancreas would be a major improvement but this system even by conservative estimates will cost north of $10,000. While part of this substantial cost may be reimbursed we seriously doubt it will be enough for such a system to be widely adapted. For anyone who doesn’t believe cost is factor just ask any patient who’s switching to insulin pump therapy where even with insurance many patients pay thousands of dollars to get started and hundreds more to stay on a pump. Although cost is not the only reason it is, like the iBGStar, a factor in why more patients aren’t using an insulin pump. They just don’t want to pay the freight even though insulin pump therapy is very effective.

As much as it pains many of the companies developing these way cool whiz bang devices diabetes is a business. That the just because a device can help a patient more effectively manage their diabetes that doesn’t necessarily mean they will pay for this privilege. When it comes to diabetes there are two worlds, the theoretical world and the real world. In the theoretical world cost is not taken into consideration in the real world cost is a huge consideration.  While it would be nice if cost wasn’t factor it also naïve to believe it’s not a factor. The simple fact is most patients live in the real world and far too many of these companies don’t.