Insurers Back New Diabetes Devices

Companies that make continuous glucose monitors to help diabetics manage their blood sugar will see an upturn in demand for the devices in the next few years as more private insurers agree to pay for them.

Medtronic Inc, DexCom Inc and Abbott Laboratories, a recent entrant to the market, make the devices, which allow diabetics to keep a tight watch on their blood glucose levels. But until recently, lack of widespread insurance coverage had limited their appeal, and most diabetics continue to use finger-stick meters to test themselves.

"There's an aching need for these technologies," says Aaron Kowalski, research director at the Juvenile Diabetes Research Foundation. "It's incredible, the demand. But there are obstacles to people getting this technology,"

Those barriers are starting to lift as more insurers recognise the benefits of the devices, company executives and analysts say.

In June 2008, US health insurer Aetna Inc became the second national plan to issue a formal policy providing coverage for continuous glucose monitors in certain circumstances. That followed a similar decision in April by WellPoint Inc, the largest US health insurer by membership. Other large health insurers are expected to follow suit.

"You are seeing the clinical community and now the insurance companies say, OK, this should be the standard of care, and this should be covered," says William Blair & Co analyst Ben Andrew.

REDUCING RISKS FOR DIABETICS

Tight blood sugar control reduces the risk of long-term complications from diabetes such as blindness, kidney failure, heart disease or amputation.

Continuous glucose monitors provide blood sugar readings every few minutes via a wire-like sensor inserted under the skin, alerting patients when their glucose levels are headed toward a potentially dangerous spike or dip.

The monitors cost about $500 to $1,000, and the disposable sensors, which must be replaced every few days, cost about $250 to $350 for a month's supply.

The technology also moves diabetes treatment a step closer to the so-called artificial pancreas that researchers hope someday will automatically regulate a diabetic's blood sugar, eliminating the need for both insulin injections and multiple daily finger pricks to test glucose levels.

Most national insurers will come out with policies covering continuous glucose meters over the next six to 12 months, or risk being at a competitive disadvantage, Andrew predicts.

A large study by the Juvenile Diabetes Research Foundation comparing continuous glucose monitors to finger sticks is expected to serve as a catalyst for more insurer reimbursement decisions. The foundation said it is analysing six-month data from the study and will release results "as quickly as possible".

A BURGEONING MARKET

As insurance coverage improves, so will sales of the devices.

"We think the market's going to accelerate as we get broader coverage in 2008 and really pick up speed in 2009 and 2010," Andrew says.

Chris O'Connell, president of Medtronic's diabetes division, agrees that the diabetes market is in the early stages of a "technology revolution".

"There is a large market opportunity out there, because there are a large number of people who need better glucose control, and the penetration of our products is still very low," he says.

He sees a steady increase in use of continuous glucose monitors over the next two to five years and predicts sales will eventually surpass those of insulin pumps.

ADOPTING NEW TECHNOLOGY

Medtronic sells two versions of the continuous monitor – one called the Paradigm, which is combined with an insulin pump to provide a steady stream of insulin, and a stand-alone monitor called the Guardian.

DexCom and Abbott are partnering with pump manufacturer Insulet Corp to offer their own integrated pump-monitor devices.

About 24 million Americans have diabetes, with Type 1 accounting for 5–10% of diagnosed cases. Continuous glucose monitors would most benefit Type 1 diabetics, whose bodies have stopped producing insulin, as well as Type 2 diabetics who require insulin shots.

Mimi Pham, an analyst with JMP Securities, estimates more than 20,000 diabetics in the US are currently using continuous glucose monitors. In a recent JMP survey of 360 diabetics who use insulin pumps, 90% said they were interested in wearing continuous glucose monitors, suggesting there is a large market opportunity for the devices, Pham says.

But slow adoption of the technology has weighed on shares of DexCom, which have lost nearly three quarters of their value since peaking above $26 in 2006.

If manufacturers are to keep up with the market, they must meet the demand of their consumers. Taking on production of continuous glucose monitors, therefore, seems to be the only way forward for those supplying technology to diabetics, and it seems that insurers are finally catching on to this idea.