What lies ahead
Let’s get right to the point and state for the record building an insulin pump, tethered or patch, is the easy part. No disrespect to any company but any idiot can build an insulin pump, and many have. This as Momma Kliff used to say is the easy part, building the damn thing.
Given that so many companies have joined the Dead Cat Club Insulin Pump division we thought it would be a public service to give them a glimpse of the future once they get their toy through the FDA and onto to the market. A market which is dominated by one player, Medtronic who commands an almost 80% share.
Just an FYI monopoly is defined as the exclusive possession or control of the supply or trade in a commodity or service. While the definition does not specifically note that controlling 80% of a market is a monopoly we feel comfortable stating that Medtronic has a monopoly when it comes to insulin pumps.
Ok let’s give these members of the Dead Cat Club Insulin Pump division a glimpse of what lies ahead AFTER they get their toy through the FDA. The next step should be obvious get the toy to be played with get it into the hands of patients. Which of course means dealing with the most accommodating people in the world, payors. Assuming of course that one of the new members does not go well off the reservation and decides to give their toy away for FREE. Something that as crazy as it sounds could and likely will happen.
But let’s get back to what surly will be a very pleasant discussion between the club member and a payor. The club member will explain in intimate detail all the way cool whiz bang features and benefits of their new toy. They will explain how user friendly it is, how it communicates with the cloud and how their algorithm is better than everyone else. The payor will sit nodding their head in agreement acknowledging that damn this is a way cool toy.
The Dead Cat Member thinking they impressed the payor is suddenly hit in the face when the payor states; “That sure is a way cool whiz bang toy and damn it is impressive. Now here is where we’re at as Medtronic is offering us this deal so if you can beat that we’ll consider adding your toy to our formulary. Now in all fairness we should tell you that even if you beat what Medtronic is offering we will go back to them and give them a chance to beat your offer. Welcome to the insulin pump business by the way.”
Let’s go back to this notion that a company can give away a pump for FREE and make money through the sale of pump supplies. That sure sounds good until you look at the cost of running an insulin pump company. That sure looks good until you consider what it costs to market the toy, then train and support the people who play with the toy. Oh, and should we mention this model doesn’t work with a patch pump as there is no supply revenue.
And as point of clarification all the coming patch pumps, CellNovo, the Solo and whatever the new one is called, are not true disposables like the OmniPod from Insulet. In an effort to lower COGS these toys do have a durable component which is used over and over. There are some people like BD who are working a fully disposable system like the OmniPod but the majority of patch pumps are what we call semi-disposable.
Anyway, let’s get back to getting the toy to be played with as this is how money is made. And let’s assume by some miracle the toy makes it onto formulary. Can you sell it and then support it and do so cheap enough so you make money too? As one ex-insulin pump executive used to say there are three things that must happen once the toy makes it through the FDA, can you make it, can you sell and support it and can you get it reimbursed and do all this and still make money.
Now let’s dispel this notion that one of the new members of the Dead Cat Club insulin pump division has discovered the magic potion for getting their toy played with by patients with Type 2 diabetes. Insulin pump technology has been around longer than we have. Insulin pump therapy is well known and very effective. Insulin pumps have gotten smarter and insulin pump therapy thanks to sensor augmented systems and insulin dosing algorithms has become more patient friendly.
Yet with all these improvements only 30% of the Type 1 population uses a pump and these people must use insulin. Now go back in the time machine or Google market penetration of insulin pumps among Type 1 patients. What you’ll find is that insulin pump usage in the Type 1 population hasn’t changed all that much. Keep in mind these patients must use insulin and insulin pump therapy is very effective.
Now change the search parameters to the % of Type 2 patients who use an insulin pump and what you’ll find, if you find anything at all is that less than 5% of this population uses an insulin pump. And like the Type 1 population this number hasn’t changed all that much over the years.
What have said over and over THE INSULIN PUMP MARKET IS NOT LARGE ENOUGH NOR IS IT GROWING FAST ENOUGH TO SUPPORT ALL THE EXISTING PLAYERS LET ALONE THE MANY WHO WANT TO ENTER THIS MARKET. AND NO THIS HAS NOT AND WILL NOT CHANGE.
Insanity is defined as the state of being seriously mentally ill; madness or extreme foolishness or irrationality – nowhere is it defined as entering the insulin pump market starting from ground zero while believing it is possible to capture enough Type 2 patients enabling the company to make a profit it should be. Just ask former members of the Dead Cat Club Insulin Pump division – JNJ – Asante – Deltec – Roche.
Will any of these facts stop the new members of the Dead Cat Club Insulin Pump division from moving forward, absolutely not. Will each one claim they have built a better mouse trap, for sure. Will any of them be here 5 years from today, unlikely.
We could be wrong and as we noted during the toy fair there is a flaw with the Death Star but as we also noted the Empire has the power to fight and will use their power to protect that goose that lays the golden eggs. This market has never been and never will be about who has the coolest toy in the toy chest, it’s about who has the most patients playing with their toy and who has the easiest path to getting more patients i.e. the strongest position formulary position.
So good luck to all the new members of the Dead Cat Club Insulin Pump division.