Winning the game – Diabetic Investor

Winning the game

In the diabetes device world the maxim is can you make it, support it and get it paid for. In the digital diabetes management world the maxim is all about patients. The platform with the most patients ultimately wins the game. It really does not matter how these platforms make money whether it’s a reoccurring revenue model or pay for performance. Given this maxim it makes sense that the second part of the maxim be patient access, the platform with access to the most patients stands a greater chance of getting these patients onto their platform.

When Livongo began operating the company consistently highlighted the number of clients they signed up. These clients were NOT individuals with diabetes but companies. Once signed up with a client Livongo would then have access to employees who they hoped would sign up for their platform and become members. Livongo would then charge the client a per member per month fee. Analyst reasoned as Livongo signed up more clients they would by default sign up more members. Simply put they had access to a greater number of potential members with each client they signed up.

While this was a reasonable assumption what analysts did not see or failed to recognize was many of Livongo’s competitors had access to a far greater number of patients. They believed that the Livongo platform was unique which in fact it is not. Like so many the fell in love with the whiz bang way cool rather than understanding the basic blocking and tackling of having a commercially successful digital diabetes management platform.

This is the reason we have consistently stated that Teladoc vastly overpaid for Livongo. That had Teladoc truly been interested in making money they could have easily acquired LifeScan a company who not only had all the same tools as Livongo but had something Livongo didn’t have, patients and lots of them. Yes Livongo had some clients but in effect Teladoc chose to build a patient base rather than buy one.

Teladoc is not the only company who chose to build rather than buy as Verily back in the day when Onduo was just starting also passed on LifeScan.

Given that the platform with the most patients wins the game one would think that someone would come along and want to own the over 20 million patients LifeScan has. Keep in mind these are real patients who have diabetes they are NOT possible patients with diabetes.

Another group of Livongo competitors also has access to millions of REAL patients with diabetes, patients who are already indirectly connected to their digital diabetes management platform. Forgotten in this space are three very large well established well capitalized competitors who also want to make money from digital diabetes management. CVS, Walgreens and UnitedHealthcare all have digital diabetes management platforms and all three have access to millions of REAL patients with diabetes. All three also have indirect existing connections to these patients.

During their latest earnings call CVS stated;

“As we noted last quarter we launched our next-generation Transform Diabetes Care program designed to improve health outcomes for many Americans living with the condition. Of the 34 million with diabetes nationwide, 1.5 million are Aetna members, over eight million Caremark members, along with 5.5 million customers who fill diabetes prescriptions at a CVS Pharmacy.”

In their earnings call Walgreens noted;

“myWalgreens will be heavily focused on health and well-being with content, services and offers specifically curated to each member. All of our 100 million existing loyalty members will have the opportunity to convert their current points balance to Walgreens Cash while seamlessly switching to the new program.”

UnitedHealthcare stated;

“Our growing therapeutics capacities are positively impacting the management of chronic diseases. With the introduction of Level2, a digital therapy developed to improve the lives of the 30 million people with Type 2 diabetes, we are helping patients move toward remission of the disease.Level2 uniquely measures signals and applies artificial intelligence, engaging people and producing better health outcomes.”

At last count United had approximately 45 MILLION covered lives worldwide.

Now it stands to reason in this race to capture as many patients as possible companies who already have established patient bases have a huge advantage over one’s who must build their patient base. Going back to when BGM was growing at double digit rates we used to say it’s much easier and more cost effective to buy patients then it is to build a patient base. This also applies to digital diabetes management. Which is another reason we could not understand why Teladoc paid $18.5 Billion for Livongo diluted their existing stakeholders and still had to spend more money to build a patient base.

It’s time to understand that the digital diabetes management space is still in its infancy. That Teladoc/Livongo may be getting all the attention but that does not mean they do not have existing competitors who stand a far better chance at winning the race. These competitors may not be whiz bang way cool, but they have access to millions of REAL patients which in this game is way more important than whiz bang way cool.

Digital diabetes management is no different than any other segment of the diabetes market. It’s not and never will be about whiz bang way cool it’s all about patients and the company with the most patients ultimately wins the game.

Author: wpadmin

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