The Battle Intensifies
It’s not shocking with the ADA conference coming up that the diabetes new flow is increasing. Yes it seems that everyone wants a piece of the diabetes pie, sugar free of course. While the conference will cover the latest news on the drugs in the medicine cabinet and the toys in the toy chest others are looking at the practical day to day realities of diabetes.
What caught our attention this morning was announcement from CVS. According to an AP story;
“CVS Health is pushing deeper into health services with plans to add dietitians, medical equipment and space for the occasional yoga class to 1,500 stores over the next few years.
The drugstore chain that quit selling tobacco several years ago said Tuesday it will expand a store model it recently tested. Its HealthHub stores will have about twice as much space devoted to health care as other locations and will aim to help people with chronic conditions like diabetes.”
What’s shaping up here is an intense battle for which model is best for helping patients more effectively manage their diabetes. Billions are at stake and the winner stands to reap millions in profits. The question is which model will yield the best results. On the one hand companies like Google and Amazon are pursuing a digital model. On the flip side companies like CVS and Walgreens are pursuing a more direct approach.
Given the plethora of toys that now communicate with a patient’s smartphone, which is becoming the hub of a patient’s healthcare, there are many who see this digital approach as the future. This approach also bodes well for a company like Livongo which is about to hit the capital markets with their IPO. The digital option also fits well into the future of how patients will pay for their diabetes management. As we have said the days of pay as you go are slowly fading away and in the future diabetes management will convert to a monthly subscription model.
Yet a strong argument can also be made for the direct approach as patients with diabetes are frequent visitors to their local pharmacy. Rather than rely on digital alone CVS and Walgreens can offer a patient one on one counseling along with the many blood tests used to monitor their diabetes management. CVS and Walgreens don’t just want these patients refilling their prescriptions at their retail locations they also covet all the other items these patients buy when they come in. To CVS and Walgreens it’s all about increasing the size of that shopping cart.
Indirectly helping the direct approach is the conversion of many toys from a Durable Medical Benefit to a pharmacy benefit. As we have noted in the past companies like Abbott, Dexcom and Insulet not just see the pharmacy benefit as way to increase their installed user base bit also as a cost saving measure as patient support transfer to the retailer. Just by way of example for Insulet this model is very attractive from another perspective as the retailer can also train the patient therefore transferring that cost from Insulet to the retailer.
Walgreens for their part seems to want it both ways as they have signed a partnership with Google.
There are several reasons why this battle for the patient is intensifying not the least of which is the continued growth in the number of patients with diabetes. Retailers are also scared to death of what will happen when Amazon becomes not just a seller of Tide but also starts delivering drugs directly to the patient. Everyone also wants to please the payors who are looking at more value-based pay for performance contracts. We long contended that outcomes-based reimbursement is coming, and these value-based contracts are the beginning of this transformation.
Another wild card here is what Apple may or may not do. So far Apple has played on the fringes of the wacky world. However with their huge bundle of cash and active desire to find new revenue sources the monthly subscription model fits perfectly into their quest. Just as Amazon and Google for that matter can acquire their way into the pharmacy space so too can Apple. Amazon also can use their acquisition of Whole Foods and have both a digital and direct approach.
We suspect that both approaches will yield success and that it will not be a winner take all approach. Even better the beneficiaries of this battle will be patients as outcomes will finally matter financially. Patients will get more help as the provider will get paid more if the patient achieves better control. All the possible providers digital, direct or combination will have skin in the game.
As we get ready to head to that beautiful city by the Bay it’s becoming more obvious that the companies which are driving change will not officially be attending the conference. They will be there all right just not “officially.” These change agents understand as we do that while we can always use better drugs and devices what we have today is just fine if used properly. That this isn’t about the toys in the toy chest or the drugs in the medicine cabinet. This is all about the patient taking ownership of their diabetes management.