Yet another obstacle

Yet another obstacle

Besides the many technological hurdles that must be overcome before a true closed loop insulin delivery system can come to market, a new barrier is emerging that could prevent such a system from reaching the market and it has nothing to do with the FDA.  This new barrier is really not new to Diabetic Investor readers as we noted before cost will be a significant hurdle to overcome.

Although not directly related to diabetes yesterday the Journal of the American Medical Association published a study which indicated doctors are often too quick to use a common $20,000 procedure to treat patients suffering from coronary artery disease.  According to an article published in today’s Wall Street Journal; “The results, published in the Journal of the American Medical Association Tuesday, come amid rising concern about the overuse of big ticket medical technology. Such concerns are rising not only in cardiology, but in other major specialties as state and federal governments and health insurers seek to contain health-care costs.” (Highlighting added by Diabetic Investor)

As Diabetic Investor noted last week insulin pump therapy as it stands today while very effective is also very expensive and getting even more expensive. Looking over the current conventional pump systems offered by Medtronic (NYSE:MDT) or Animas, a unit of Johnson and Johnson (NYSE:JNJ), insulin pump therapy isn’t cheap. Although insulin pump systems are widely reimbursed today’s systems carry a hefty price tag of $7,000+ and annual supply costs of $2,500+. When you add in the cost of sensors for the continuous glucose monitoring systems that communicate with these systems which cost approximately $80 per sensor for the Dexcom (NASDAQ:DXCM) or $42 for the Medtronic sensor, this adds another $4,000 to $5,000 to the annual cost. (This is based on 7 day usage for Dexcom sensors and 3 day usage for Medtronic sensors)

The real question looking forward for a true closed loop system is; will insurance companies actually provide reimbursement for a system that will not only carry a hefty first year price tag but an equally hefty ongoing cost.  While it is true insulin pump therapy is effective, it is also true that numerous studies have shown that patients can achieve similar outcomes following multiple daily injection (MDI) therapy, a much cheaper alternative. This is why Diabetic Investor has maintained that insulin pump therapy is more of a lifestyle choice.

The simple fact is while there is a subset of patients who would benefit from a true closed loop insulin delivery system, Diabetic Investor remains unconvinced this group is large enough to support a profitable ongoing business. Besides the cost for the hardware and annual supplies, Diabetic Investor would anticipate that customer support costs would be higher for these patients given the complexity of such a system.  Customer support for conventional pump patients is already high; we could only imagine what these costs would be for patients using a closed loop system.

The bottom line here is that millions are being spent to develop a system that when looked at realistically has limited commercial potential. While the many companies and organizations involved with this project would beg to defer, in the real world advanced technology can only exist under two scenarios – either the system is priced high enough to insure profitability or the company is willing to accept loses.

Diabetic Investor has long questioned many aspects of this quest for a true closed loop insulin delivery system. In many respects this quest is the perfect example of how too many companies have become fascinated with developing ever more sophisticated technology rather than improving existing technologies making them more patient friendly and less prone to malfunctions.  Diabetic Investor is not against a closed loop system we just believe before all this money is spent that there are more pressing priorities which will improve the lives of patients in the near term.  The reality is a closed loop system is still several years away and patients need better systems today.

Diabetic Investor also fears that this quest for a closed loop system will take on mythical proportions not unlike what has occurred with another mythical quest, the development of non-invasive glucose monitor.  Thankfully the companies and organizations involved with developing a closed loop system are not like the hucksters involved with non-invasive glucose monitoring who continue to bilk investors.  While this is comforting, it is also sad. It shows what happens when some very bright people become overly fascinated with technology and forget there is real live person who one day must use this technology. A patient who wants above all else, an easy to use system that is safe to use.