While this story does not speak directly to connectivity, it is interesting in light of alternative business strategies in a number of evolving medical device markets. Forbes profiles glucose monitoring vendor Home Diagnostics in light of recent market changes. Home Diagnostics markets their glucose monitors and consumables co-branded with drug stores, supermarkets, mass merchandisers, distributors and mail-order companies.
The company is shopping an IPO with half of the shares offered coming from existing stockholders. Vendors like Home Diagnostics are seen to be pressured on one side by less expensive Asian imports and the other by fancy new continuous glucose monitors from Medtronic, DexCom, and others. There are currently 5 continuous glucose monitoring systems with FDA approval (1 from DexCom, 1 from Cygnus, and 3 from Medtronic). With new technology on the horizon, traditional finger prick glucose testing is becoming a commodity market where manufacturing costs and efficiencies of the distribution channel are critical. Here's how Forbes sees it:
the company is likely to be squeezed by advances in the field that
eliminate the need to prick a finger to check glucose levels. This will
make the company's equipment obsolete, undercutting its price. At the
same time, the company's old style monitors will be pressured by
cheaper Asian imports. This looks like an all-but-guaranteed formula to
Continuous glucose monitoring solutions have yet to receive reimbursement from payors. Vendors of these advanced solutions will have to demonstrate that their additional costs will save payors money elsewhere. My guess is that clinical studies will find a subset of diabetics who truly benefit from continuous versus period monitoring - how big this segment becomes will spell the fate for vendors like DexCom and Cygnus. In any event, the traditional approach to glucose monitoring will continue for many years to come, and market winners will have to depend on good business strategy and execution to win in the market.
co-branding strategy extends its reach, sales are up, and net income is
rising. But there is nothing to distinguish the company's technology
from the competition. The next generation of monitors will depress
prices for the equipment Home Diagnostics now makes, and the company
has no plans--and apparently lacks the means--to leapfrog the
innovators and gain market share. Over the long haul, it's difficult to
see how Home Diagnostics will produce the strong growth that makes IPOs
Next generation (continuous) monitors will only depress prices after they receive reimbursement, and maybe not even then. Competition will come from competitors who can out market and/or out manufacture and distribute Home Diagnostics. Choosing not to follow others with continuous monitoring solutions is a very viable business strategy.
Will wireless sensor based systems transform medical device markets? Maybe, but there are many factors to take into account, besides the existence of new wireless products.