What happens when …..

What happens when …..

Last year Lilly sold $2.8 Billion worth of Humalog, while Novo Nordisk sold $2.6 Billion of Novolog. Yet Lilly sold $4.1 Billion worth of Trulicity while Novo’s GLP-1 franchise which includes Victoza and Ozempic had combined sales of $4.9 Billion. Throw in sales of Basaglar $1.1 Billion and $3 Billion for Novo’s long acting insulin’s and a picture emerges. A picture which says while these companies may be known for insulin however they are no longer insulin first companies. A fact that will only get reinforced when we have multiple short acting biosimilars on the market.

Just in case anyone was wondering Sanofi sold almost $2 Billion worth of Lantus last year. Which sounds good until you consider that the year before they sold $2.3 Billion and at one time achieved almost $7 billion in sales.

The insulin market now fully commoditized has become a volume game, the fight is no longer over price/rebates the fight has fully shifted to formulary position. Lilly and Novo will use price/rebates to gain or keep formulary status but they both know they can peacefully coexist as long as neither goes nuclear. An option they could be forced into once the short acting biosimilars arrive.

As we noted yesterday this is the reason Lilly and Novo will give away for free their connected insulin pens and/or connected disposable insulin pen cap covers. Both Lilly and Novo have the scale to manufacture these devices economically which combined with their expected shelf life allow them to provide them for free. They are also well aware that payors aren’t going to pay anyway so why get into a fight they cannot win. Each will transform their respective insulin franchises into insulin delivery franchises that offer complete turnkey insulin dosing options.

It should be obvious but the app that collects all the data and includes the insulin dosing algorithm will also be free.

At this point it remains to be seen if either company will seek a portion of the revenue generated by sensor sales. We’re sure they’d like a piece of the sensor pie but on the flip side these systems won’t function without the sensor. Throw in the fact that patients will demand these systems work any FDA approved sensor we doubt either Lilly or Novo will be able to force either Dexcom or Abbott into sharing a portion of their sensor revenue which is directly related to these systems.

It should also be noted Lilly and Novo have another reason not to be too demanding as Dexcom and Abbott could turn on them and sell a Tyler of their own. Something that is very doable with the coming of biosimilar short acting on the way plus the plethora of connected pens/connected disposable insulin pen cap covers.

Not to get off track but there is nothing preventing Tandem, Medtronic and Insulet from also partnering with a biosimilar insulin company. We have long maintained that all the insulin pump companies should sell pre-filled reservoirs or in the case of Insulet pre-filled pods. At minimum all three should consider selling insulin cartridges which make filling the reservoir/pod more patient friendly. Anyone who has filled a reservoir or pod using an old-fashioned vial of insulin and then making sure there are no bubbles appreciates exactly why any system which came pre-filled or with cartridges would be a major hit. Novo has this with the Ypsomed insulin pump but never took this pre-filled cartridge concept beyond Ypsomed.

The fact is the arrival of biosimilar short acting could have major disruptions beyond destroying the pricing dynamic. Unlike Lilly who’s Basaglar is a biosimilar version of Lantus, Novo has been forced to lower the prices for their branded long-acting insulin’s. Think of what would happen should the makers of biosimilar short acting insulin partner not just with the insulin pump companies but also Dexcom and Abbott.

The fact is when it comes to insulin delivery these days it’s not which insulin is used rather which insulin delivery system is used. To be blunter it’s not even how the insulin is delivered but the quality/reliability/accuracy of the sensor combined with the sophistication of the insulin dosing algorithm. We’ve said it before and will say it again whether it’s an insulin pump, connected pen or connected disposable insulin pen cap cover these are commodities. Semi-smart devices which do what the insulin dosing algorithm tells them to do.

To fully appreciate the validity of what we are saying consider this, the Medtronic 670G would achieve similar results to Tandem’s Control IQ IF it also worked with the Dexcom sensor and had a less conservative insulin dosing algorithm. Put the Medtronic sensor with the Tandem Control IQ and the results would be what we see with the 670G great when the sensor works, lousy when the sensor doesn’t. It does not matter if the patient has Humalog or Novolog in their 670G or Control IQ, as long as the sensor and algorithm function properly the system will deliver excellent results.

We could make a very strong argument this same dynamic applies to a Tyler. Does it really matter which connected pen or connected disposable insulin pen cap cover is used? As long as the device sends the correct reading to the app that’s all that matters.

The fact is all the players, the insulin companies, insulin pump companies, connected pen/connected disposable insulin pen cap cover companies and CGM companies could see their business models dramatically altered by the arrival of biosimilar short acting insulin. With over $5 Billion in sales at stake we think Lilly and Novo will find a way to work with these players rather than compete with them. Not to mention the nearly $6 Billion at stake in the long acting market.

Insulin may have fully commoditized but the real impact of this commodization will be felt with the arrival of biosimilar short acting insulin. Hence the reason GLP-1’s now come first for Lilly and Novo. They know that even if the play their cards perfectly they can still lose the hand. There are just too many variables and they no longer have the biggest stake of chips at the table.

The entire diabetes industry will feel the impact here and we’re not sure that’s a bad thing. As Thomas Jefferson once said; “I hold it that a little rebellion now and then is a good thing”.