Why IDM stands a chance
Diabetic Investor has long believed that for interconnected diabetes management (IDM) to become the standard of care the world must switch from fee for service reimbursement to outcomes based reimbursement. Simply put when outcomes really matter IDM will matter.
The fact is in today’s world where most large employers are self-insured outcomes already matter. According to several studies an employer will save approximately $2,500 in healthcare costs for every 1% reduction in HbA1c. The savings are even higher when the A1c say starts at 10 and then drops to 9,8 and so on. Additionally given that average male employee misses 9 days of work due to their diabetes and 11 days for female employees, employers see better diabetes management as a productivity enhancement tool.
Given this set of circumstances we were not surprised by a report published by Goldman Sachs which stated that digital health could save the US healthcare system more than $300 BILLION, “more than $200 billion from remote patient monitoring of these conditions alone.” The report goes onto to state a commercial opportunity of roughly $15 billion for remote patient monitoring, $12 billion for telehealth, and $6 billion for behavior modification.
Now we all know with numbers like that we’re going to see our fair share of wacky deals. Apple, Google, Samsung, Qualcomm and the rest of the tech world are already heavily invested in this space and their appetite for deals is far from satisfied. It’s also known that traditional diabetes tech companies such as Medtronic (NYSE:MDT), Johnson and Johnson (NYSE:JNJ), and Dexcom (NASDAQ:DXCM) are becoming more active in this space. The same can be said regarding drug companies who see IDM improving therapy compliance and therefore improving sales.
The fact is the dominos are already beginning to fall and it’s no longer a question of if IDM will become the standard of care but when. This is very good news for some the smaller companies such as TelCare and Livongo who have systems that fit well into a broader IDM portfolio.
Now before everyone gets overly excited here it’s not quite time yet to pop the cork on that bottle of champagne. The simple fact is Diabetic Investor anticipates a shake out of sorts in the IDM world. A shake out which will be driven not just by technology but who’s using the technology. This is not unlike what happened in the mobile phone world which is now dominated by two operating systems Apple and Android. As promising as IDM is standards will need to be developed so that IDM systems can work across platforms.
Still there is no stopping the momentum of IDM and the sooner the old guard jumps on the IDM bandwagon the better. It may not be time to pop the cork but that bottle of champagne should be in the frig getting chilled. This is going to be one wild ride.