Guest Post by David Kliff, Guest Writer – Publisher
As problems for Tandem continue, and with Johnson & Johnson abandoning the insulin pump market, it’s beginning to dawn on some people that we soon could live in a world with just two insulin pump companies – Medtronic and Insulet. [Editor’s Note: Johnson & Johnson reached out to us with the following information: “Animas continues to manufacture, deliver and support its products and provide the service our patients expect. We remain committed to our patients, and we intend to honor our warranty and do not anticipate any interruptions to patients’ pump therapy. If patients or potential patients have any concerns, they can contact Animas online or at 1-877-YES-PUMP.”]
Ok, to be fair, Roche also has a pump, but their market presence is lacking. Also, to be fair, Bigfoot is working on a system, but it isn’t here yet. Plus, there is growing belief that patients can achieve optimum control using a CGM smart insulin pen system.
Given where things stand today, the real possibility exists that when it comes to insulin pumps, patient choice will be very limited. This was a fear expressed by many when Medtronic signed an exclusive deal with UnitedHealthcare. Yet this agreement is not the cause of limited patient choice. Poor strategy is the real reason, as both Tandem and J&J have made mistakes that have put them in their current positions.
Now, I will not list these mistakes as it serves no useful purpose; there is no need to go backward. What I will do, however, is offer a path forward for any company that is bold enough to take on Medtronic. Keep in mind that Diabetic Investor has been covering Medtronic since it was known as MiniMed and no one, and I mean no one, has come close to giving them a run for their money – EVER. The insulin pump landscape is littered with companies that have tried and failed to dethrone Medtronic.
Before I offer this path forward, let’s acknowledge the realities of the insulin pump market – a market that I have consistently stated is not large enough nor growing fast enough to support all the companies that play in this sandbox. Let’s be honest. As it stands today, Medtronic owns this market and, given what’s going on, will only get bigger. Medtronic is like the New England Patriots in that they are the company many loathe, but they continue to win.
Let’s further acknowledge that each of their competitors has issues of their own. Tandem has the best patient interface yet loses money on every system they sell; not exactly a sound business model. Animas, J&J’s pump unit, has a nice installed base, but the technology is old and tired. The OmniPod from Insulet may be the only wireless/tubeless system, but this advantage is mitigated as pods are still too expensive to manufacture.
Yet this is just the tip of the iceberg because, beside the issues, these companies also have outside factors that create obstacles. Keep in mind the goal of any therapy regimen is to produce better patient outcomes. While there is no question that insulin pump therapy does this, so too does multiple daily injection (MDI) therapy. We have long maintained that insulin pump therapy is not a better option therapeutically. Rather, it’s a lifestyle choice. Any patient following intensive insulin therapy has a choice to inject themselves multiple times each day or have a pump continuously infuse insulin into their bodies.
With the advent of CGM and smart insulin pens, a strong argument can be made that optimal control can be achieved as effectively as a pump but cheaper. Let’s face facts: Cost is a huge obstacle to greater pump adoption and the cost factor cannot be ignored. The same algorithms that are used with pumps can be used with a CGM/smart pen system without the huge upfront cost and hefty continuing cost of pump supplies. Remember the goal is outcomes, and payers, given the choice, prefer systems that achieve optimal outcomes at the lowest possible cost.
A hurdle that will never be overcome by any company, not even Medtronic, is the fact that some patients just don’t want to be attached to a machine that delivers a lethal drug. Insulin pumps, after all, are medical devices and medical devices can and do malfunction.
Ok, so we now have the lay of the land. Let’s hit the path forward. The way I see it, a company needs three things to take on Medtronic – vision, capital (tons of it), and cojones, BIG ONES. The first step, and this why capital is critical, is buy them all – Tandem, Animas and Insulet. Next, eliminate duplicate functions. Then convert all the Tandem patients to the Animas Vibe.
Now here is where the vision thing comes in. Blow up the existing pricing model and move towards the “shave club for men” model. But don’t stop there. Add in value-based contracting. Keep in mind under this pricing model, patients would be, if they want, automatically upgraded when a new platform comes out. Remember the goal is to keep them on the platform and not convert to a Medtronic platform.
Yet the vision doesn’t end with pricing. It extends to the future too. Take the best of each system and come up with a new platform. Take the Tandem patient interface, their undeveloped sport platform, and make this the new conventional system. Convert all the systems so they can be run by a smartphone, thus eliminating the need for the expensive PDM that runs the OmniPod. To shave additional cost off the OmniPod, redesign the pod.
Now this is where cojones come in. Don’t just buy all the pump companies, but also GO BIG and buy Dexcom too. Every system should have the ability to communicate with the Dexcom sensor. Sensor augmented is the future and Dexcom has the best sensor, hands down. Add in their Band-Aid sensor and this platform offers a distinct price advantage over the 670G from Medtronic.
Let’s stop for a moment and think of what has been built here. Although this new company would still lag behind Medtronic when it comes to installed users, it would have the scale necessary to compete effectively. Additionally, after all the duplicate functions have been eliminated, its cost structure would allow it to compete. Keep in mind that to compete with Medtronic, a company needs to bring a gun to a knife fight. Medtronic will not roll over and play dead. They will do whatever it takes to protect their annuity. Listen, when it comes to the insulin pump market, it’s guerilla warfare.
Take a deep breath. Here comes the reason HUGE cojones are needed. For this strategy to work, timing is critical. With Tandem floundering, Animas adrift, and Insulet running in place, Medtronic has lots of open field running ahead of them. They have the hottest thing in insulin pumps with the much ballyhooed 670G. Without breaking a sweat, they are likely to pick up 80% of Tandem’s installed base when they officially go under. This will only make the already high hurdles only higher if someone wants to dethrone the champs.
One last thing, and this I cannot stress enough, when it comes to diabetes devices, talent trumps technology and sadly talent is in short supply these days. It’s fair to state that the lack of talent has contributed to the dismal state all of Medtronic’s competitors find themselves in. I’ve said it before and will say it again, anyone can build an insulin pump. That’s the easy part. The real test comes in running an insulin pump company. Talent was something MiniMed had in abundance and it’s no accident that Dexcom, now the premier example of how a diabetes device company should be run, is full of MiniMed alumni.
Listen, I didn’t say this path forward would be easy. It won’t be; not by a long shot. However, if something isn’t done and done soon, patient choice will be severely limited. Not because Medtronic is invincible, but because of the mistakes made by its competitors. For as much as the Patriots won the game, it is also true that the Falcons choked. They had a huge lead. Had they executed it, the Falcons would have had a parade instead of the Patriots.
Looking back, all of Medtronic’s competitors at one time or another had the opportunity to take substantial share away from the company. Yet just as the Falcons couldn’t execute, neither could the competitors. This lack of execution is now coming home to roost.
If anyone wants to take on Medtronic, they would be advised to take the advice Momma Kliff used to give: “When someone is kicking you in the tuchus (yep it’s Yiddish, so look it up on Google) kick them back in the cojones.”