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How Will CGM’s Success Impact Conventional Glucose Monitors?

david_kliffGuest Post by David Kliff, Diabetic Investor

The FDA approved Dexcom’s request for a non-adjunctive claim this week. It looks like a bad situation for conventional glucose monitors, and believe it or not is about to get worse. Here’s why:

The most frequent testers are insulin pump patients, followed by patients following multiple daily injection (MDI) therapy. Although insulin pump patients make up less than 5% of the diabetes patient population, they account for almost 20% of all test strips used. On average, insulin pump patients test their glucose levels 6 times each day. Add in MDI patients who test on average four times each day, and it’s easy to see why conventional BGM systems are in a death spiral.

The fact is CGM usage is increasing with both insulin pump patients and MDI patients. Let’s look at some quick back of the napkin math. Let’s assume for a moment that there are approximately 1 million patients using an insulin pump, of which 30% also use a CGM. With a non-adjunctive claim these patients would no longer have to confirm a CGM reading prior to dosing. Therefore, these patients would go from using 6 strips per day to just two for calibration purposes. That’s 1.2 million test strips PER DAY taken out by CGM.

But the carnage does not stop there. Let’s say there are another million patients following MDI and 20% of these patients use a CGM. That takes another 400,000 test strips PER DAY out of the system.

Had enough yet? Sorry but it gets even worse. Think about what happens when Dexcom/Google launches their disposable system — a system which will just increase CGM usage among insulin using patients. GLP-1 usage is also increasing — a therapy which does not require glucose monitoring.

CGM usage will continue to increase taking even more strips out of the system. GLP-1 usage will continue to increase meaning new strips will not enter the system.

Additionally, prices for test strips continue to contract. Competitive bidding is not going away either.

So this is great news for Dexcom and Medtronic, the two leaders in CGM. Oh and did I mention that everyone wants to be in CGM, so these systems will just continue to get better.

What’s the fastest way to head down the tubes, gain an increasing share of a declining market that has the added benefit of price contraction. Is it any wonder that Abbott and Roche have tried to follow Bayer’s lead and get out of this market?

But wait, what about all those way-cool whiz-bang cloud-enabled systems:  won’t they save the day? Not in a million years. Not only is this segment of the BGM market commoditizing and running into the same pricing pressures as old fashioned non-cloud enabled systems, they too will be replaced by CGM. The fact is CGM is getting cheaper, provides better overall data, and, when disposable systems get here, will be widely adopted.

All these systems have proved so far is that interconnected diabetes management works PROVIDED there is enough data to analyze. Given that the average testing frequency remains less than 2 tests per day, all this whiz-bang way-cool technology has done nothing to change that. I hate to point out the obvious, but it does no good to message a patient when there isn’t enough data to analyze.

It’s also obvious that patients who are not currently testing won’t change their behavior without some additional stimuli, and better outcomes is not a stimulus that works. If the majority of patients actually wanted better outcomes, I wouldn’t be in this situation in the first place, as they would be testing as they should. We hate to be redundant, but even with all this way-cool whiz-bang technology the average patient still does not understand what these numbers mean and has no idea what to do with them. When it comes to non-insulin patients or patients using Lantus plus orals, there is no action step taken because of these readings.

For years conventional BGM manufacturers knew that insulin-using patients were the geese laying the golden eggs. They also knew that while it would be nice to pick up non-insulin patients, chasing them really wasn’t cost effective. Now that CGM has arrived, these same insulin using patients who once drove the conventional BGM market are moving more aggressively to CGM. Simply put, these geese have flown the coup and landed squarely in the laps of Dexcom and Medtronic.

Although I anticipate some very bad results for Abbott and Roche it will be interesting to see how or even if they will attempt to spin the results. Our guess is Abbott will tout the FreeStyle Libre while Roche will avoid the subject altogether. However, in my opinion the Libre isn’t financially viable and is unlikely to receive FDA approval. Even if it did, it would come to market well behind the existing systems, and even worse, will be made obsolete when the disposable systems get here. Time will tell how these companies deal with the changing market.