Wrong is wrong
Before we even get started today this is going to be post you can share and we honestly hope you do share it. Ok now onto business.
Yesterday Diabetic Investor learned that some Medtronic (NYSE: MDT)sales reps are using material written by Diabetic Investor as sales material. They have done this in two ways via email or printing out past posts and giving them to patients. Not surprisingly the material they are using is about Tandem (NASDAQ: TNDM) and their shaky future. Now before any further let’s get a few things straight;
1. We are not claiming that these reps violated our copyright, we believe that to be true we just can’t prove it, yet. Just as we are giving permission to share this post we have done this in the past and have done so with posts on Tandem.
2. We have nothing against the t: slim the problems at Tandem are not product related the problems at Tandem are financial and there continues to be a very strong chance they will be forced to shut down. Patients have a right to know the truth Tandem wasn’t telling the truth which is why we allowed subscribers to share posts on the company. Patients have the right to know the truth.
3. WE ARE IN NO WAY ENDORSING ANY MEDTRONIC INSULIN PUMP.
4. What these reps are doing is not just classless and morally repugnant it could well be illegal as we do not believe Diabetic Investor has been approved by the Medtronic compliance department as marketing material. Wonder how the FDA would feel about this should they find out?
5. WE DO NOT BELIEVE ANYONE IN A POSITION OF AUTHORITY KNEW ABOUT THIS BEHAVIOR. Sales reps are a resourceful bunch and there is no way the company can monitor what they say, what they hand out to patients, etc. Let’s face facts as we weren’t born yesterday sales reps will do almost anything to get a sale and reps sometimes do go rogue. This problem is not unique to Medtronic and unfortunately common.
6. It should be obvious that we have contacted the company at the highest levels and requested that this practice stop and stop immediately. We further emphasized that all reps should be instructed that this type of behavior will not be tolerated.
Were we pissed off when this situation was brought to our attention, pissed off would be a vast understatement. Were we shocked by this behavior, unfortunately no. We know the shenanigans that go on in the field and are not naïve to what sales reps do. Did it surprise us that Medtronic reps did this, again no. Whether the company wants to acknowledge it or not their sales force does not have a great reputation. We are aware of physician’s office who have banned Medtronic reps entirely. We don’t blame management per se for this problem as sometimes reps can behave like children.
The real question is why would any rep do this and the answer is simple reps make money when they sell pumps and as noted earlier will do almost anything to make a sale. Just to be clear we are in no way saying this boorish behavior is endemic throughout the Medtronic sales team, but there are more than a handful of reps who will stop at nothing to get a sale.
The reality is management could put a stop to all this by doing one simple thing; change the way they compensate their field sales force. Let’s be honest here while reps don’t like to hear this they aren’t sale reps they are order takers. Let’s look at some pesky facts here;
A. Medtronic owns the insulin pump market and will soon command a market share of over 80%
B. The Medtronic pump is number one on almost every formulary.
C. With the demise of Animas, we are now down to just three insulin pump choices and with the way things are going at Tandem we will soon be down to just two choices.
D. Patients who are considering insulin pump therapy or switching from one pump to another are a proactive bunch with the majority using the internet as the primary source of information when it comes to selecting a system. Typically, their first call is to their health insurance provider to see which systems are covered then their next step is to the internet. Yes, some will sit with reps, but the majority do their own research. The reality is patient blogs and Facebook groups have a greater influence on which system is selected than a rep or even the patient’s physician.
What’s even crazier here is Medtronic would save a ton of money if they made this change, if they changed the metrics on how reps are compensated. This is not like the old days when pump therapy was in its infancy. Today everyone knows the benefits of pump therapy and given Medtronic’s monopoly combined with current market dynamics they will get the sale more often than not. Simply put Medtronic is going to win anyway and there is no reason for this bad behavior. No reason that is if the company would take the incentive for bad behavior.
Let’s be clear here as we know the toughest job in diabetes device sales is being an insulin pump rep. We know of no other reps that get calls in the middle of the night to solve a problem. And the majority of these reps are GREAT people dedicated to helping patients. However, given how they are compensated it does not surprise us that some will go off the reservation and do anything, so they can make more money. Reps aren’t stupid and if there is one thing they are very good at is figuring out how to maximize their compensation.
Recently we have written much as to how companies must change. Yesterday we talked about this from a customer service perspective. The same goes for how sales reps are compensated as this area needs to change as well. The problem is change is difficult and takes time, but change is needed.
Perhaps the best way to describe this is to look at how cars are sold today. In the old days people went to a dealership, found a car they liked and then haggled with the sales person to get the best price. Car salespeople were paid a nice commission for each car they sold which naturally created for some shenanigans. Today thanks to technology the consumer is not only better informed but doesn’t even need to visit a dealership or meet with the sales person the entire process can be done online.
So, what have dealerships done, they adapted they changed. This is what Medtronic should be doing, they should be changing and adapting. As we noted earlier they have a commanding presence in the market which is about to get more commanding. Insulin pump consumers are embracing the internet and doing their own research. There is no logical reason not to make this change.
And we’ll give them one more reason to change, their dominance in the insulin pump market is not safe. As we noted many times even with the demise of Animas and the coming demise of Tandem, Medtronic is vulnerable. Crazy you say, crazy that a company with an almost 80% market share could be vulnerable. Well at one-time Yahoo was the most popular internet search engine. America Online (AOL) was at one time the most popular web site. Anyone remember Xerox or IBM? How many people do you see walking around and talking on a Motorola flip-phone? These are all examples of companies that at one time had dominate market positions only to see that dominance fad away.
As we have noted with the coming of “smart” insulin pens/CGM/App systems which produce pump like outcomes at a much cheaper price will hurt insulin pump usage. New companies like Lilly (NYSE: LLY) are entering the insulin pump market and could turn the pump world side down as their pump is means to sell more insulin. Think of what would happen if someone went wild and went 100%v at risk with payors providing the pump and all the supplies for FREE and then getting paid based on outcomes alone. Crazy, maybe but not as crazy as it might seem.
The reality is Medtronic may be swimming in whiskey today, but that whiskey could produce on hell of a hangover if they aren’t careful. So, take the first step and take away any incentive a rep would have to act like an ass.