What Google Can and Cannot Do

What Google Can and Cannot Do

As more high tech companies like Google, Apple and Samsung get involved in this wacky world the more excited everyone becomes. It’s as if these companies bring with them some sort of magical powers and will forever change the diabetes landscape. This has been very evident since Google has become more public about their previously secret now public Life Sciences unit. A unit which by all accounts is very focused on the diabetes space.

First word came that Google was working with Novartis (NYSE:NVS) on contact lenses that could measure glucose. Next the company partnered with Dexcom (NASDAQ:DXCM) the leader in continuous glucose monitoring. That was followed by a partnership with Sanofi (NYSE:SNY). Yes ladies and gentleman, Google is now officially a member of this wacky world.

Now before we go on we want to make clear that we view the entrance of Google and their high-tech brethren into this wacky world as a positive event. These companies will bring a fresh perspective, accomplished people and tons of capital. However before everyone gets too excited some perspective is needed as there certain things these high tech companies cannot do no matter how accomplished they are, how brilliant their people are or how much money they have.

It’s important to remember that when it comes to diabetes devices these devices are still regulated by the FDA and that is not going away. This does not mean that Google cannot develop better more patient friendly devices, rather whatever they develop must still go through the regulatory process no matter how cool it is. This does not mean these way cool whiz bang devices won’t be approved rather they will not be seen anytime soon. The diabetes device area does not have a 6 month product cycle like that of a smartphone.

Once through the FDA these whiz bang way cool devices have even more hurdles to overcome not the least of which being getting placed on formulary and reimbursed by payors. This is no easy task and even with partners established in the diabetes device space there is no guarantee payors will do what these companies want. We’ve said it before and we’ll say it again the diabetes market is as much about money as it is way cool whiz bang drugs or devices.

This bring up another significant hurdle, the market these way cool whiz bang devices will be entering. Again as we have said before the market for diabetes drugs and devices has become ultra-competitive as companies battle for critical market share. The diabetes device and drug markets have commoditized making price as important, if not more so, than performance. Even if a product is way cool and truly innovative it will face stiff competition from entrenched well established competitors. Competitors who will do whatever they need to in an attempt to remain relevant.

But the hurdles don’t stop as once developed, once though the FDA, once on formulary and reimbursed these way cool whiz bang drug and devices must be adopted by patients. The physicians who treat these patients, the Certified Diabetes Educators who advise these patients must also be convinced these way cool whiz bang new tools should be used by the patient. Ask anyone who has brought to market a new drug or device and if honest they will state emphatically this is not an easy task.

The simple fact is the diabetes market has transformed itself over the years. As the diabetes epidemic exploded so did the number of companies seeking to enter this market. Today this market is saturated with me-too copycat drugs and devices. This has given payors an enormous amount of power as they can control critical market share via formulary position. The harsh realty here is that the diabetes market as it continues to transform has several structural hurdles that these high-tech newcomers cannot solve with whiz bang way cool new tools.

There is no question Google, Apple and the like will have a major impact on this market and Diabetic Investor sees this impact being positive. However this impact will not be immediate and it likely will be years until it can be fully measured. The simple fact is no matter how much everyone would like it to be different this is still a highly regulated ultra-competitive market which brings with it structural demands that won’t be solved with way cool whiz bang drugs or devices.