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CGM for the Less-Intensive Patient Population

Jan 5, 2019
 

Author: David Kliff, Editor, Diabetic Investor


Guest Post by David Kliff, Editor, Diabetic Investor

Although we haven’t gotten there just yet, it’s no longer a question of if type 2’s start using CGM, but when they do and how they use it. CGM is not like an insulin pump when it comes to having a finite market size. CGM is a valuable tool regardless of whether the patient uses insulin.

What’s misunderstood about CGM usage in the less intensive patient population is how they will use CGM and what it will cost. Let’s handle the cost question first, as for CGM to penetrate the less intensive market, sensors must achieve price parity with BGM. Today Medicare reimburses less than $11 for a box of 50 test strips or about 22 cents per strip; figuring 4 strips per day, that’s about a buck a day. So just for the sake of argument, I’ll cost out sensors at a buck a day.

Now, as to how CGM will be used, there are two general uses – discovery and maintenance. Physicians will prescribe CGM to discover a few things: mostly whether the patient’s medication is working. Once the optimum therapy is determined, CGM will then be used as a maintenance tool. So, let’s clear up the first misconception about CGM, as less-intensive patients aren’t going to use CGM every day. By my estimates, the less-intensive patient will use no more than 1 sensor per month. Each sensor will cost a buck a day and be worn for 14 days, so all in, revenue is $14 per sensor, or $168 per year per patient.

Here’s the good part: there are approximately 25 MILLION patients that fall into the less-intensive category. So, let’s do some simple math and say that 10% of these patients use CGM, or 2.5 MILLION patients at $168 per patient is $420 million in annual revenue. Achieve 30% penetration and that’s over a billion bucks annually. But here’s the even better part: whatever the number is, it will be a rotating group of patients.

I don’t see any less-intensive patient being as loyal to CGM as an intensive patient; quite frankly they don’t need to be. But the difference is, when one less-intensive stops using CGM, another starts using CGM. Unlike today, CGM companies won’t be focused on attracting intensive patients who are regular users of CGM. They will be courting payors and/or health plans who will use CGM to monitor their less-intensive patient population. Effectually CGM will become part of their regular care.

Although I would not make the bold claim that CGM could solve the biggest problem of all — patients taking medication as prescribed -— it does have that potential. As I have stated consistently, the biggest problem with the less-intensive patient population is ensuring they take their pills as prescribed, yet so far no one has discovered a tool that can discover whether these patients are taking their pills — that is, until CGM came along.

The very smart people who currently write the insulin dosing algorithms know this. CGM data is not just the key for insulin dosing, it’s also the key for determining how well patients are following their treatment regimen. Again, as I have stated before, there are only so many reasons why a less-intensive patient is not achieving control: either their therapy regimen isn’t working, or they aren’t taking their pills. CGM solves both problems. This is what’s so misunderstood about CGM usage in this patient population.

As we move forward in this market, I envision multiple products, each with different price points. In the less-intensive market, sensors will have one basic function: gathering data. For this patient population, there is no need for alarms or alerts; the patient will merely slap the sensor on, turn it on, and that’s it. All the analytics will be done for the patient and their physician on the patient’s smartphone. Given the simplicity of these sensors and basic functionality, combined with the fact they will be manufactured in massive scale, CGM companies can make money even at the lower price point.

In this respect, the CGM market isn’t that different from what the BGM market used to be. With massive scale, the sensors are made for pennies and sold for dollars. This is why sensor design and manufacturing processes are more important than way cool whiz bang. Or put another way, the winners here won’t be companies that have the coolest toy in the toy chest; rather it will companies that know how to run a CGM business.

While many are focused on whether less-intensive patients will use CGM, I’m focused on which company can make sensors on a massive scale. The last thing I worry about is the market developing; to me, that’s a forgone conclusion. As I stated earlier, it’s not a question of if this going to happen, but when it will happen. The key is who will be best prepared when the time comes.

The CGM train has already left the station and the path is clear: first stop, insulin pump users; next up, patients following multiple daily injection (MDI) therapy; then comes insulin plus orals; with the final stop being orals alone. So, hop on board, as this is going to be a great ride.